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Monday, 30 September 2013 20:00

World Entrepreneur of the Year: Overcoming Challenges

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Monte Carlo has seen a lot of risk takers in its day, but not many have been like those who attended the recent EY World Entrepreneur Of The Year conference. These risk takers may use the term “gamble” every now and then, but they more often use their willingness to take a risk as a way to overcome the challenges of running a business.

The collection of the world’s most accomplished entrepreneurs at the conference were innovators, futurists, turnaround specialists and problem solvers.

From this highly qualified group of leaders comes some quality insights into rising above the challenges that could have blocked the success they envisioned for themselves and their companies. ●


“We have a phrase: ‘Market leaders need to meet market innovators.’ It’s a ‘two-fer’ because the innovators often need to have partnerships with the market leaders in order to really scale their companies. That could be as simple as a distribution agreement. It could be joint R&D. It could be capital. It could be a variety of things that form a partnership.

Likewise, if you think of firms like Procter & Gamble that have had edicts from the top that half of their innovation will come from outside the ivory tower, then those are the kinds of opportunities that we hope to be able to continue to bring.

Go and find those innovators … and likewise for the innovators, make sure your reach out and look for strategic partnerships that help your business grow.”

Bryan Pearce, Americas Director, Entrepreneur Of The Year and Venture Capital Advisory Group, EY


“Cost pressures are always high. What we need to make sure we do is continue to innovate our audit services and all our services to make sure we make maximum use of technology. We also need to make sure we take advantage of both time zone arbitrage and cost arbitrage where talent zones are present.”

Jim Turley, retired global chairman and CEO, EY


“The drive to always want to get better and do more is what keeps me going. It’s hard for me to turn it off and say, ‘That’s great.’ I’m always thinking about tomorrow. You can’t take things for granted in our business.”

Corey Shapoff, president and founder, SME Entertainment Group


“When you have a monopoly, it slows innovation. It reduces competition and is generally not good for the market. Once you have an open Internet with no government operating on top of it, then I’m very optimistic about humanity when it comes to producing things.”

Sir Timothy Berners-Lee, inventor of the World Wide Web


“As a startup you go to the specialty stores first. That’s how you start and you grow and once you reach a certain level, then you go to the big retailers.

I didn’t want to do that. I wanted to go to the big retailers and be in the regular dairy isle. That was a crazy idea and nobody thought that would go, but at least we tried. When we tried, we convinced one retailer in New York. The result from that was we were able to expand to a couple of other retailers. After the second or third customer that we had success with for our yogurt, I knew it wasn’t going to be about selling, it was about making enough.”

Hamdi Ulukaya, founder, president and CEO, Chobani Inc., Entrepreneur Of The Year 2012 United States, 2013 World Entrepreneur Of The Year


“In our country, our main challenges are new regulations and new financial reforms that we have to comply with. We are getting together for meetings inside the bank in different areas to study each one of the reforms.

Also at the Association of Banking Industry in Mexico, we have an association of the 44 authorized banks where we get together in different commissions to make sure that we can modify some of the new policies that are going to come out later this year.”

Lorenzo Barrera Segovia, founder and CEO, Banco BASE, Entrepreneur Of The Year 2012 Mexico


“One of the main challenges is how to train the talent we have in Latin America. Latin America has 600 million people and 1 million IT workers. The next step is to train more people and convince people to adopt technology as a career. If you provide the proper entrepreneurial environment to that, maybe the next Google or Facebook can come from Latin America.”

Martin Migoya, CEO, Globant, Entrepreneur Of The Year 2012 Argentina


“One of the biggest challenges the industry faces is trying to figure out what the impact of the natural gas/shale gas revolution is going to have on us. Suddenly there is cheap natural gas, which is going to be more challenging for renewable projects to compete with. Rather than looking at it as an either-or world, you have to look at how the two technologies can work together.”

Jim Davis, president, Chevron Energy Solutions


“Zonamerica is a different kind of company, a business and technology park. But in general, we have a financial sector, we have 60 banks, a wealth of private funds, we have call centers, cell services and headquarters for companies that want to develop business in the region. The problem is all these companies require very qualified personnel. Our core purpose is to attract the best human resources to produce or offer the product. So we created a database and we have, at this moment, more than 24,000 people registered. Then these companies, according to the needs they have, can see and select the personnel they want. And then we also have schools to teach skills to prepare people for these kinds of employment.”

Orlando Dovat, founder and CEO, Zonamerica, Entrepreneur Of The Year 2012 Uruguay


“Zonamerica is a different kind of company, a business and technology park. But in general, we have a financial sector, we have 60 banks, a wealth of private funds, we have call centers, cell services and headquarters for companies that want to develop business in the region. The problem is all these companies require very qualified personnel. Our core purpose is to attract the best human resources to produce or offer the product. So we created a database and we have, at this moment, more than 24,000 people registered. Then these companies, according to the needs they have, can see and select the personnel they want. And then we also have schools to teach skills to prepare people for these kinds of employment.”

Orlando Dovat, founder and CEO, Zonamerica, Entrepreneur Of The Year 2012 Uruguay


“Probably the most difficult cost control challenge is managing staff salary software. There is a specific reason for that within our company — we are going through a system conversion, so when we acquire practices, they each have their different practice management software. Some are fully computerized; some are not computerized at all. We at one point had 18 different systems within our company. We have converted all of our 107 locations onto one platform this year, so with training and obviously the unknowns that occur with changing people's worlds by changing their operational platform, that's our biggest challenge this year. Having said that, that will allow us to create a line of central efficiencies in the coming years.”

Dr. Alan Ulsifer, CEO, president and chair, FYidoctors, Entrepreneur Of The Year 2012 Canada


Monday, 30 September 2013 08:00

Understanding your ‘natural instincts’

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The animal kingdom has long been instrumental in teaching children about appropriate behavior.

A rabbit named Peter educated us on the importance of conflict resolution. For better or worse, Curious George was habitually inquisitive and, in separate incidents, three bears and three pigs taught us the importance of home security.

But despite a literary reputation as “big” and “bad,” according to Jack Hanna, “A wolf will feed the sick, the old and the young first.”

That’s a pretty impressive character trait for a creature so often maligned by the human race. Over the years, however, we’ve learned to expect Hanna to set the record straight on an important part of our world that most of us will never experience firsthand.


Following the footsteps of a legend

Inspired by wildlife pioneer Marlin Perkins, Hanna parlayed a fascination with animals and a position leading the Columbus Zoo into a television empire spanning 30 years. He’s had countless TV appearances on popular shows such as “Good Morning America” and “The Late Show with David Letterman.” In addition, he currently helms two television programs, “Jack Hanna’s Wild Countdown” and “Jack Hanna’s Into the Wild.”

Not surprisingly, Hanna’s high regard for the animal population is also reflected in his view of the public’s acceptance of the animal kingdom: “Most people who say they don’t like animals don’t like people much either.”

Phil Beuth, former president of “Good Morning America,” observes, “With Jack, what you see is what you get — he’s a genuine gentleman.”

Hanna has set a simple benchmark for appropriate professional behavior, “I operate by The Golden Rule — do unto others as you would have them do unto you.”

Of course, humans are animals too — complete with instincts, genetic predispositions, unique skill sets and laws to keep us from acting like predatory animals. Yet, prey we do — leveraged buyouts, hostile takeovers, foreclosures, etc.


Comparing workforces of nature

When asked about lessons human worker bees can glean from the animal kingdom, Hanna enthusiastically says, “Just look at ants and termites. They each have specific jobs to do.” By performing specific tasks every day, these creatures work solely to serve the greater good — ostensibly without complaining.

Animals = 1 Humans = 0

Hanna also points to an innate respect in the wild that does not always translate into the land of the bipeds: “The animal world does not waste food and animals do not abuse their own children. For example, gorillas may fight but they still work together.”

Working through issues to achieve top performance is apparently part of the natural order of things. It’s about survival. As the concept of business survival has never been more prominent, shouldn’t cooperation receive equal billing?

Animals = 2 Humans = 0

Though Hanna also marvels at the mysteries behind the instinctual and highly effective way animals communicate, many in the office marvel at some people’s overwhelming lack of communication skills.

Animals = 3 Humans = 0

Specifically, according to Hanna, “The elephant is one of the most intelligent creatures on the planet.”

So yes, it seems that without the benefit of an iPhone, Twitter or Outlook, an elephant truly never forgets.

Time to hire me an elephant. The Laws of Nature win every time. ●


Speaker, writer and professional storyteller Randall Kenneth Jones is the creator of and the president of MindZoo, a marketing communications firm in Naples, Fla. For more information, visit

Twitter: @randallkjones



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A marketing epidemic, to put it mildly, has been impacting most businesses — and it’s time to think about keeping your message simple if you haven’t already done so.

The roots of this epidemic can be traced back to two events.

First, during the economic fall of 2008, as businesses looked for ways to preserve revenue streams, companies hunkered down and focused on sales to preserve existing customers. Many cutoff or significantly reduced marketing budgets, and others shifted to digital media as a “low-cost alternative.”

The second event was the rapid spread of social media and the skyrocketing use of smartphones and tablets, which provide instant access to relationships, information and communication.

The social media craze and businesses’ desire to market on the cheap led companies to flood the marketing channels with content. Sales sheets, photos, videos, web pages — companies were suddenly all things to all people because they could push content to digital channels for “free.”

The problem — our marketing channels are now very noisy. As consumers of information, we respond to this noise with limited attention spans. The result — companies have sent confusing messages to the marketplace and people aren’t listening.

This current epidemic of marketing noise distributed across all channels leads to a common marketing need for all businesses — simplification.


Keeping it simple

So how do you achieve message simplification? It all ties back to the business. Here are seven steps to help get you started:

1. Identify three to four key business objectives for the next two years. Do you want regional growth or growth in a new industry? Do you want to sell more to existing customers?

2. Prioritize your objectives by placing dollars or number of opportunities next to them. This will help you focus on the most important areas.

3. Brainstorm a list of marketing tactics that can help you achieve each objective. Can you generate more leads from trade shows, your website, your existing customer list? What tactics do you need to adopt?

4. Write a succinct summary, or “elevator pitch.” This should be one to three sentences on how you benefit the people you are targeting in your objectives.

5. Compare your elevator pitch to your marketing tactics and existing materials. Review your website, brochures, email newsletter, social media accounts, videos, trade show collateral, etc. Notice how many “extra” things you say in an effort to cover all your bases.

6. Rework your message. Focus on the audiences for your key objectives. Identify the benefits for these audiences. Your marketing message should speak directly to these audiences so they can understand your value and usefulness to them.

7. Prioritize your marketing tactics. It’s tempting to be trendy and market on social media or through video, just remember to consider which tactics will best reach your audiences. You don’t need to be in every marketing channel, just the ones where your customers and prospects will hear you.


Finally, once you’ve simplified your message, stick to it! It is important so that people understand the benefits and value that you deliver. While it might seem repetitive to you, your audience will appreciate the clarity and with time, will remember what your business does best. ●


Kristy Amy is director of marketing strategy for SBN Interactive. Reach her at or (440) 250-7011.

Life has a way of presenting us with difficult circumstances. Sometimes it’s in our personal lives, and sometimes it’s in our business.

If the circumstance is severe enough, it can create a crisis, which can often cause a feeling of hopelessness. When things outside your control come at you in droves, it becomes difficult to cope with them. Entire organizations can be overwhelmed and pulled down by external circumstances, which if not dealt with promptly and correctly, can destroy the company.

The CEO’s role is to right the ship and rally everyone around a solution — and it most likely won’t be easy. People are always looking for the easy way out, but that path is rarely an option. When facing a difficult situation, you have to play the ball where it lies, which means the resources you have in people, dollars or equipment are all you may have to work with.

But challenges also present opportunities. Faced with a crisis, you and your leadership team will be forced to look at your assets in new ways. You’ll be required to take a careful look at your customer base, your market and your processes. This kind of in-depth evaluation may uncover not only a possible solution to your problem, but it may open your eyes to markets or applications you never considered before.

Take Netflix for example. The company was the king of DVD-by-mail, and had already knocked off the once mighty Blockbuster. With the increase in streaming video content, however, customers began moving away from DVDs, threatening Netflix’s main revenue channel. It reacted by creating not only streaming content, but also by creating its own unique content. Customers can stream video from many outlets, but it’s tough to beat Netflix’s reputation and ease of use.

Often, the resources you need are already at hand; they just need to be used in new ways. Netflix already had the capabilities; it just needed to apply them differently.

You may find that after assessing what you have, you have started to create a new path that leads away from the crisis.

At the beginning of a difficult time, you may not be able to see a way out, which can lead to despair. By starting with an initial step and continuing, however, you’ll soon see the light. Start by calling your bank or suppliers to ask for better terms or whatever it is you need, and then build from there.

No matter what you do, though, don’t compromise your integrity. Always do the right thing in the wrong circumstances, because depending on how severe your crisis is, your reputation might be the only thing you have to negotiate with.

If you work hard, do the right thing and stay positive, a solution will likely present itself. It may not always be in a form that you anticipated — you may need to change your products or your market — but if you keep an open mind and work with what you have, everything will work itself out. ●

Most weeks I get on a plane and attempt to have an out-of-body experience to deal with all the hassles of flying as I travel from point A to point B. When flying, I have a few simple rules. One, I almost never eat the food. Two, I attempt to talk to no one other than obligatory hellos. Three, I never argue with or say a cross word to flight attendants.

One other very important practice I follow on land, sea and especially in the air is that I constantly scan my surroundings for potential troubles and new ideas.

On a recent flight, upon boarding, I quietly and obediently proceeded to my assigned seat.

As I began to sit down, a gentleman asked if I would mind trading seats with him so that he could sit next to his wife. Like most seasoned travelers I try to accommodate reasonable requests. In this case it seemed a no-brainer to agree to move.


Notice the details

As I started to settle in and fasten my seat belt I noted that my new seatmate was very hot. No, it’s not what you’re thinking. I mean she seemed to be flushed and radiating heat, ostensibly from a high fever. I’m thinking, this is not good, plus it proves the age-old adage that no good deed goes unpunished.

In the next minute I had an epiphany, which happens frequently as I believe that many problems come disguised as opportunities.

I rang the call button and, when approached, asked the cabin attendant to please bring me two cloth napkins. I stated that the purpose was to construct a makeshift face mask by tying the two pieces together to prevent possibly contracting some dreaded disease.

I feared that my intentions could be misinterpreted if I were to don a mask without an explanation; this could cause a well-meaning passenger to drag me to the floor thinking I had nefarious motives.

The stewardess smiled, nodding approvingly of my plan. She then summoned all her co-attendants to my seat and proceeded to whisper what I was attempting. Otherwise, she explained, they, too, could misunderstand my appearance and cause me bodily harm.

As founder and CEO of Max-Wellness, a health and wellness retail and marketing chain, I’m always looking for that next special something to share with my team. Therefore, while burying my now masked face in a newspaper so as not to frighten or offend the sick seatmate, I began dictating a memo to my merchandise product group proudly asserting that I just had another “aha!” moment, for which I am well-known, among my colleagues. For full disclosure, however, I am sometimes known for being a bit “out there” on occasion — but no one bats a thousand.


Turn an idea into a product

This particular predicament gave me the idea to develop a product kit that we could sell to weary travelers in our stores and in airports. I suggested a handful of complementary products, including a mask, a disinfectant spray and, if all else fails, relief remedies. I also noted that it probably would be prudent to include a cigarette pack-type “Black Box” warning stating that the mask is not what some suspicious flyers might think, but instead it’s for prevention of disease only. I even proposed we market these kits directly to the airlines to dispense as an emergency prophylactic for passengers exposed to airborne (pun intended) pathogens.


Fleeting thoughts have value

A key role for business leaders is teaching a management team to use fleeting thoughts as a springboard, to pair common problems with sometimes-simple solutions.

Just because it is a simple fix, though, doesn’t mean the idea couldn’t be a lucrative breakthrough.

When something sparks an idea it needs to be taken to the next level before being pooh-poohed. Most likely the vast majority of these inspirations won’t see the light of day, but that’s OK. Just think — what if one transient idea translates into the next Post-it Notes, Kleenex or bottled water?

The next time you sit by a masked man on a plane, it most likely won’t be the Lone Ranger. Instead, you might be witnessing the incubation of the next best thing since sliced bread. ●


Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, published by John Wiley & Sons, is now available. Reach him with comments at

When employees are hired or leave a company, the process typically involves HR staff inputting or changing information in a variety of places.

“HR is adding them or removing them from payroll, typing in information and sending it to the insurance provider, and using seven to 10 different systems to handle the various tasks,” says Liz Howe, director of Business Development at Benefitdecisions, Inc.

Companies are alleviating that burden by automating processes through benefit administration systems.

“They recognize the burden that HR people face. And employees are becoming more technologically savvy and want information at their fingertips,” says Howe.

Smart Business spoke with Howe about benefit administration systems from both employer and employee perspectives.

What are the advantages of benefit administration systems?

From an employer standpoint, HR personnel can easily see who is enrolled in benefit plans. These systems help eliminate errors because the plans are entered into the system once, along with employee and employer contributions. So when an employee enrolls, there’s no question as to whether he or she has a dependent or not, for example. Because everything is computerized, that also eliminates paperwork.

Once employees are enrolled, HR can reach out to carriers with information about who has enrolled and at what level — employee and spouse, employee and family. With a benefit administration system, all those characteristics are readily available.

For employees, they can point and click to find out exactly what will be deducted from their paychecks and the coverage available in their plans.

How detailed is the information provided?

It varies. You can have one focused solely on benefits, with employee information, plan description, plan summary, deductions, and employee and employer contributions. Other systems can have a total compensation statement built in, showing employees how much their benefits cost the employer.

Benefit administration systems also can house HR information such as designation, education, paid time off — anything typically tracked by HR. These systems are scalable to the company’s size and needs.

Have there been any recent developments?

The big push at the moment is toward having mobile apps to allow employees to enroll and make changes online through their smartphones. They can enter the system from home, or if they’re at the doctor’s office and need a group number, they can retrieve that on their phone.

Health care reform, and the state insurance exchanges, will probably lead to some other advancements.

What would keep a company from implementing a system?

Security is a concern that makes some companies hesitant. But companies use the Internet already, so they just need to ensure their connections are safe.

There also may be employees who don’t have access to a computer on a regular basis, although many of them do have a smartphone. Employers can place a computer kiosk or iPad station in a centrally located area for employees to enroll and check information.

Of course, there are always people who don’t want to use an electronic system. Those cases can be managed the old-fashioned way, although it’s not recommended. If you move to an electronic system, it’s best to make a complete switch.

What training is involved?

Every company does it differently. Usually, HR has specific training on the administrative aspects. Supervisors are trained so they can educate their staffs on how to use the system. Employees who need extra help can get one-on-one sessions with instructors, although sometimes that isn’t necessary. Benefit administration systems tend to be very user-friendly and easy to understand from an employee perspective.

Implementation can be a bit tricky. However, over time you’ll see how many errors are eliminated and how much time is saved. No one ever says they were disappointed in the results, they say they can’t believe they didn’t do it sooner.

Liz Howe is Director of Business Development at Benefitdecisions, Inc. Reach her at (312) 376-0452 or

Insights Employee Benefits is brought to you by Benefitdecisions, Inc.

Approximately 60 percent of the U.S. commercial population is self-funded today, and as health care premiums continue to rise under fully insured plans, self-funding looks to become even more attractive. However, many employers don’t realize how much self-funded health insurance has evolved with strategies and plans designed to help control costs.

“Self-funding does not look the same as it did just a few years ago,” says Mark Haegele, director of sales and account management at HealthLink.

Smart Business spoke with Haegele about how self-funding fits into health care today.

What’s driving the increase in self-funded health insurance?

Health insurance premiums are increasing at an unsustainable rate. Employees pay 89 percent more for family health care premiums, compared to a decade ago. In 2013, premiums only rose 4 percent, but that’s more than twice the rate of wages.

Self-funded premiums typically aren’t as costly. A recent Department of Labor report found that in 2011 fully insured premiums increased by $808, while self-funded premiums only increased by $248.

In response, 60 percent of companies self-insured their health benefit programs in 2011, up from 49 percent in 2000, according to a Kaiser/HRET survey. This increase can be partially attributed to more self-insured employers with fewer than 1,000 people in their health plan programs. In just two years, small and midsize employers that self-insure nearly doubled, according to PricewaterhouseCoopers data from 2010.

How has self-funded insurance changed?

Fifteen to 20 years ago, employers were afraid to trust self-funding, even though they knew it brought certain advantages, such as avoiding premium taxes, risk charges and state mandates. A self-funded environment gives employers more plan flexibility, depending on the disease prevalence or demographics of their population, as well as more access to data and lower fixed costs. But a piecemeal approach to health insurance that went against the insurance market culture was a foreign concept.

Today, there is less fear and higher adoption rates. At the same time, historical best practices still exist — avoiding taxes, risk charges and state mandates with lower fixed costs — as well as additional cost savings where self-funded plans avoid rules and regulations of the Patient Protection and Affordable Care Act.

What do self-funded plans look like today?

There is a market culture shift in the self-funded environment with more flexible plan designs. Member data is now transformed into actionable intelligence. Plans target specific high-dollar categories, such as high-dollar claimants, high-cost imaging, cancer and dialysis treatment, and pharmacy. With more transparency, employers can influence purchasing decisions by aligning incentives.

High-dollar categories like pharmacy are an area where vendor selection is key. Self-funded plans today have more administrator and vendor integration to better control these costs. A majority of employers spend around 16 percent of their total health care budget on pharmacy.

In addition, self-funded plans can be designed with custom networks, based on the cost of care. Through data analytics, plan sponsors can identify preferred facilities, procedures and/or services, and then use the plan design to cover a higher percentage of a preferred procedure or service.

Another strategy is using domestic centers of excellence. With this type of contract, providers offer preferred pricing due to exclusivity and volume. Employers can achieve savings on the unit cost. There’s also a performance component to eliminate waste — the provider gets a bonus for avoiding surgeries.

With pay-for-performance, a budget is set with expected costs, and the health care providers and employer agree on how to measure performance, looking at readmission rates, member pharmacy compliance, minimum levels of care, etc. Then, providers receive a percentage of the savings realized, as an incentive.

Self-funded plans are even utilizing alternative delivery models, such as telemedicine, on-site or near-site clinics and concierge health services.

Self-funded insurance may not be what you thought, so take the time to see if today’s plans would work for your business.

Mark Haegele is director of sales and account management at HealthLink. Reach him at (314) 753-2100 or

Insights Health Care is brought to you by HealthLink

In 2012, more than 40,000 businesses filed for federal bankruptcy protection. When this happens, the bankrupt entity or the bankruptcy trustee will sometimes seek to recover certain payments previously made to the bankrupt entity’s creditors so that those funds can be redistributed in accordance with the U.S. Bankruptcy Code. One type of payment that the bankrupt entity or the trustee may seek to recover is called a preference.

Smart Business spoke with Julie Johnston-Ahlen, of counsel at Novack and Macey LLP, about how to deal with being sued for preferential payments.

What is a preference?

A preference is a transfer or payment on an existing debt. It’s made by a soon-to-be bankrupt debtor to a creditor within the 90-day period preceding the bankruptcy filing.

Why can’t you keep the money that the bankrupt entity paid you?

The purpose of the law on preferential transfers is to try to make the bankruptcy process as fair as possible for all of the bankrupt entity’s creditors. When a business has insufficient cash flow, it will often pay certain creditors in full and not pay others, depending on which goods and services are most critical to the soon-to-be bankrupt entity’s business. In an effort to maximize the fair distribution of the bankrupt entity’s assets, creditors that receive preferential payments are often forced to return the money to the bankruptcy estate for redistribution, subject to the supervision of the court.

Do you have to return the money?

It depends. The bankrupt entity or trustee has the burden of proof. So, it must be demonstrated that there was a transfer or payment of property of the debtor, to or for the benefit of a creditor, on account of antecedent debt. This must occur within 90 days of bankruptcy and enable the creditor to receive more than it would in a Chapter 7 liquidation. In addition, the transfer or payment must have been made when the bankrupt entity was insolvent.

Even if these elements can be established, many creditors have viable defenses that may enable them to keep some or all of the money they received. These defenses are fact specific, and in practice, can be difficult to assert without the assistance of an attorney familiar with defending preference actions.

What should you do if you are sued for a preference?

In most cases, you have two options: you can pay back the full amount of the payment, or you can fight the claim. If you fight it, you have a good chance of keeping some portion of the payment, particularly if you can demonstrate that you have one or more viable defenses. Further, even if you don’t assert specific defenses, but you make a reasonable offer of partial repayment, the bankrupt entity or trustee may be willing to settle for that lesser amount. This is particularly true in larger bankruptcy cases where the bankrupt entity may be pursing repayment from many creditors. It’s often not feasible to fight with every creditor in an attempt to recover the full amount of each transfer.  

Should you accept payments from a customer that might be having financial trouble?

Generally speaking, yes. There is nothing ‘wrong’ with accepting a payment that turns out to be a preference. You just might be forced to pay the money back later.

Creditors are almost always better off accepting payment from the future bankrupt entity, and then later dealing with any efforts it makes to recover the money. Again, it is often the case that the bankrupt entity or trustee will settle the claim for less than the full amount of the payment. The creditor keeps the rest, and it’s almost always the case that it ends up recovering more money than if it had not received the payment.

Julie Johnston-Ahlen is of counsel at Novack and Macey LLP. Reach her at (312) 419-6900 or

Insights Legal Affairs is brought to you by Novack and Macey LLP



On Aug. 13 the Public Company Accounting Oversight Board (PCAOB) exposed proposed changes to the standard auditor’s report that have the potential to impact the relationship between auditors and their clients.

“Practitioners, issuer entities and attorneys dealing with accountants’ liability matters should all understand the implications of the proposed changes,” says Barry Jay Epstein, Ph.D., CPA, CFF, a principal at Cendrowski Corporate Advisors LLC.

Smart Business spoke with Epstein about the changes and their impact.

What are the main proposed changes to the auditor’s report?

The proposal most likely to generate controversy is that which requires identification of what the auditors determined to be ‘critical audit matters.’ This will mean that audit decisions that are currently not shared with the public, and most often are not even disclosed to the clients, will be set forth for financial statement users.

The second of the proposed requirements pertains to auditor independence, auditor tenure and an auditor’s responsibility for information that is outside the financial statements but that is included in the financial statement filings. Auditors have long been required to at least ‘read and consider’ other information included in documents containing audited financial statements. This is in an effort to be assured that information, such as the management discussion and analysis section of Form 10-K, does not contradict or conflict with what the financial statements convey about the reporting entity’s financial position or results of operations. This rule was imposed in reaction to observed situations where disparate implications could be drawn from the financial statements and footnotes, on the one hand, and narratives such as the ‘chairman’s letter,’ which sometimes would present a rosier scenario than would seemingly be warranted by the ‘hard data’ in the financial statements, on the other hand.  

The last of the three proposals amplifies slightly the already-extant options for the auditors to include certain explanatory paragraphs, addressing matters that, in the auditors’ judgment, deserve to be emphasized. It also draws attention to the so-called ‘going concern’ language when there is substantial doubt that the reporting entity will be able to survive for a year beyond the balance sheet date. These changes, too, are not deemed likely to garner opposition from the profession, or to expand auditors’ exposure to litigation.

What specifically would citing critical audit matters entail?

According to the PCAOB, critical audit matters are those matters addressed during the audit that:

  • Involved the most difficult, subjective or complex auditor judgments.
  • Posed the most difficulty to the auditors in obtaining sufficient appropriate evidence.
  • Posed the most difficulty to the auditors in forming the opinion on the financial statements.

Most firms’ internal audit guidance materials, such as manuals, programs and checklists, require that auditors plan their audits on the basis of financial statement assertions. Inherent and control risks must be considered for each of these assertions so that appropriate planned audit procedures can be selected or developed for each material assertion. Unless litigation later arises, these audit judgments are not generally shared with others, even with client personnel. Thus it is a radical departure to propose that critical audit matters be explicitly set forth in the auditors’ report or be made public in any other manner.

Will the PCAOB proposal improve the efficacy of audits?

As the SEC, the PCAOB and assorted academic researchers have documented, the predominant reasons audit failures occur among public companies are:

  • Exhibiting insufficient audit skepticism.
  • Failure to obtain and correctly evaluate sufficient appropriate audit evidence.
  • Inadequate planning, including risk assessments.

Audit failures rarely occur because the auditors misidentified critical areas deserving of audit attention.

Barry Jay Epstein, Ph.D., CPA, CFF, is a principal at Cendrowski Corporate Advisors LLC. Reach him at (866) 717-1607 or

Insights Accounting is brought to you by Cendrowski Corporate Advisors LLC


Monday, 23 September 2013 03:19

Travel tips: How to spend smarter on overseas trips

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Today’s technology is making it easier for consumers to plan a trip overseas. With just a few mouse clicks, you can book the best flight deals, find accommodations, scope out the local attractions and even map out a detailed travel itinerary.

But even with so many resources to consult for travel advice, consumers may overlook important financial considerations in the trip planning process, says Art Rice, the VP and Manager of International Operations and Product Development for FirstMerit Bank.  For anyone planning a trip overseas, Rice offers the following financial tips:

Do your homework

Rice counsels first-time travelers to first do as much research as possible in advance of an overseas trip. Take time to learn about the country you’re visiting, including the differences in the culture and financial marketplace. Where is it safe or wise to use a credit card? How much pocket change should you carry?

"It’s just being aware of the culture, who you are with and how you account for transactions,” Rice says.  Doing research up front is useful in identifying unforeseen costs and fees. How much will you need to pay for courier and insurance expenses or premiums on credit card purchases?  You may also find ways to save. Are there opportunities to barter in the country? Factor this into the overall trip cost to anticipate how much money you’ll actually be spending.

Monitor exchange rates

Exchange rates for foreign currency change daily, so travelers should recheck every few days to get the most updated figures. But it’s also important to understand where you’re getting the exchange rates, Rice says. Many people will check the newspaper or Internet to monitor exchange rates for hard currency; however, these numbers can be off as much as 10 percent in either direction.

The rates seen in The Wall Street Journal are meant for multi-million dollar electronic transfers, and most website quotes are averages of current buy and sell rates. Instead, consumers should ask their bank to get the most accurate exchange rates.

Hit the bank

An easy way to save money on overseas travel is to order foreign currency before departure. Some banks, such as FirstMerit, supply popular foreign currencies to their local branches at no charge to the customer and on short notice.  Exchange money at one of these banks to avoid service fees and ensure that you have some pocket money to spend when you reach your destination.

Credit cards are definitely convenient for overseas purchases, but make sure you find out what fees you may be charged in addition to the exchange rate.

Fill in your credit card company

While consumers should never be without an international credit card overseas, carrying one makes you more vulnerable to identity theft and fraud. That’s why some credit card companies turn off the ability for cards to work outside of the cardholder’s local area. To ensure any overseas transactions are approved without a hitch, it’s critical that travelers keep their credit card companies in the loop about their travel plans, especially extended trips. 

“You don’t need to clear your trip with your credit card company, but to make things go smoothly when you’re out of the country, it is nice to alert them that you’re going to have non-traditional transactions posting to your account,” Rice says.  When making any purchases, you’ll also want to keep track of receipts as well as the name and number of the vendors. This information will help you refute any illegitimate charges on your statement after you return.

How to reach: FirstMerit Bank, or, (330) 384-7178