Troy Sympson

Friday, 26 December 2008 19:00

Don’t be a casualty

A casualty loss can result from the damage, destruction or loss of your property from any sudden, unexpected and/or unusual event such as a flood, hurricane, tornado, fire or earthquake. However, the key words here are “sudden,” “unexpected” and “unusual.” Therefore, termite damage to your home is not considered a casualty loss, since it’s not sudden. But, damage to your car as a result of termite damage to your garage may be considered a casualty loss.

The IRS allows tax deductions for casualty losses sustained during the taxable year that are not compensated for by insurance or other means. These deductions are limited to the amount the casualty losses exceed the casualty gains, plus 10 percent of the adjusted gross income of the individual or business within the taxable year. Also, individual taxpayers are only allowed to include losses to the extent they exceed $100 for each casualty. The deduction is limited to those losses sustained during the taxable year and not compensated by insurance, or otherwise.

Understanding and filing casualty losses is no simple task. It can be an arduous and time-consuming process, and if it’s not done right, you and your business could face a multitude of headaches and lost money.

“It’s always best to consult your CPA on how to identify a casualty loss for tax purposes since each incident should be analyzed separately,” says Rene Lozano, CPA, a manager in the Tax Department at Briggs & Veselka, Co.

Smart Business spoke with Lozano about casualty losses, how to identify them and how to file taxes for them.

How have recent natural disasters affected casualty losses?

Hurricane Ike is a good example of a natural disaster that caused a lot of casualty losses. Besides ravaging Galveston with floodwaters, Ike sent strong winds and storms through Houston, destroying homes and businesses while leaving many without power for days and even weeks. Damage estimates from Ike are expected to exceed $27 billion, making it the third costliest U.S. hurricane of all time, behind Andrew in 1992 and Katrina in 2005.

The IRS often gives taxpayers located in presidentially declared disaster areas, such as Harris County, various concessions. The IRS gave individuals, partnerships and corporations time extensions to file their federal returns. They now have until Jan. 5, 2009, if they were located in a presidentially declared disaster area for Hurricane Ike. The IRS is also allowing taxpayers to take 2008 casualty losses for Hurricane Ike on their 2007 return. These are a few of the many concessions that the IRS has made.

How do you measure a casualty loss?

Individual taxpayers calculate their casualty losses on Form 4684, ‘Casualties and Thefts.’ A casualty loss calculation starts with the actual cost of the property and fair market value of the property before and after the casualty loss. The loss is the reduction of fair market value from the lesser of cost minus fair market value after the casualty, or the fair market value before the casualty less the fair market value after the casualty. The taxpayer will also have to subtract any insurance processes he or she received from the loss calculated. The loss is then reduced by $100 and then again by 10 percent of your adjusted gross income. The IRS has also waved the 10 percent of adjusted gross income reduction for Hurricane Ike victims.

How do you prove a casualty loss to the IRS?

This is a very good question, and there isn’t any one correct answer. The best answer is to document your loss as to the type of loss and when it happened and show how the loss was a result of a casualty. You also need to keep records that show you owned the property and that show the cost to repair or replace the property. The very best course of action is to contact your tax professional and determine where you have a deductible loss and what records should be kept and attained.

What problems or issues can arise when filing for casualty losses?

The most common problems the individual taxpayer encounters are insurance proceeds that are received after a loss has already been taken on his or her individual returns. If you received less than expected when you calculated your casualty loss, you can include the difference in the year you do not expect any more reimbursements. If you receive more than you expected, then you would include the difference as income in the year you received it. Please note that the taxpayer does not have to include the difference in income unless the taxpayer reduced his or her taxes in a previous year. So, if you did not have any taxable income to offset in a previous year in which the loss was taken, then you do not have to include additional insurance proceeds as income.

RENE LOZANO, CPA, is a manager in the Tax Department at Briggs & Veselka, Co. Reach him at or (713) 667-9147.

Thursday, 25 September 2008 20:00

If you build it

In today’s fast-paced, highly technological world, every company needs a solid, efficient network to conduct business and connect with customers. But, maintaining a network environment can be a daunting task — especially if you don’t have a full-fledged or fully staffed IT department.

Besides the issues of staffing and resources, some companies just don’t put a lot of thought into their network. Quite often, a network is built over time, piecemealed together as needs arise and change. But, just about everything a company does technology-wise is dependent on the effectiveness of its network.

“The network is the backbone of IT,” says John Bristol, senior director of the Cisco and Networking Infrastructure Practice at Technology Integration Group (TIG). “It is critical that the network is structured, streamlined and well-architected.”

Smart Business spoke with Bristol about why having a well-thought-out network architecture is essential to your company’s growth, efficiency and productivity.

Why is a good network architecture so important?

A good network architecture helps ensure that business strategies and IT investment are properly aligned. So many companies just throw money at IT over time, growing the infrastructure organically. There’s no thought process on how the network should be architectured. Much attention is paid to systems and applications, but all of that rides on the performance of the network. It’s like a highway system. People don’t give a lot of thought to it, but it’s critical to how they get around. Your network may not appear to be dynamic or interesting, but without it, your business isn’t going anywhere.

Besides keeping the company’s systems up and running, how does a network affect business?

The collaboration between customers and companies is changing. The business world is becoming a much more dynamic environment because of mobility. With various technologies such as laptops, PDAs and iPhones, there are many ways to reach your customers. You need to be open and accessible at all times, providing customers and your employees with real-time info — anyway and anywhere they want it. You need a network architecture that can handle all of this. Your network must be able to maintain business continuity and provide resiliency from both an uptime and a security perspective. Again, your network is critical to your business, your employees and your customers.

If a company’s network isn’t up to par, what challenges could it face?

There are several issues that can arise from a subpar network, including scalability, reliability, compliance, security and exposure. There’s also the risk of downtime. Many business networks are mission critical — every minute or even seconds that the network is down costs the company revenue and risks losing customers. Your network must be resilient and robust, or you could quickly lose money and customers. Also, if you try to implement new applications or a virtualization plan, you need a strong network or your best-laid plans will fail. A poorly designed network can also lead to decreased efficiency, productivity and wasted energy and resources.

Should a company seek outside assistance, or can it maintain the network architecture on its own?

Most organizations have some form of IT resources, but no matter what size of the organization, network maintenance can become status quo. If you’re not keeping up with what’s going on with the latest networking trends, your network could suffer. A qualified network engineering firm will know how to assess your company’s current network infrastructure and apply the latest architectural principles appropriate to your businesses needs — it has the latest experiences that will help you avoid the pitfalls of choosing bleeding-edge technology over leading-edge technology. A good technology firm has seen it all, and it has seen it in various industries and environments. Outside assistance will help you leverage and scale technologies, looking at the long-term big picture, not a quick fix. Depending on your staff and/or resources, you may be able to create a solid network architecture, but an outside firm will definitely get your network where it needs to be — now and in the future.

What other benefits does a strong network architecture offer?

Besides keeping your business running on all cylinders, an architectured network gives your IT the justification it needs to validate IT expenditures within the business budget. You have a road map that shows how IT will align with the business. This is a huge benefit for your chief information officer. A solid network architecture gives you a foundation to capture your IT budget and expenditure needs. It gives you a vision of where IT is going and why, instead of just throwing money at IT blindly and ending up with things you don’t need. Your IT is streamlined, productive, efficient and, most importantly, cost-effective.

JOHN BRISTOL is the senior director of the Cisco and Networking Infrastructure Practice at Technology Integration Group (TIG). Reach him at (949) 753-1933 or

Thursday, 25 September 2008 20:00

Guarding innovation

In any given company, several assets need to be protected. There’s your inventory, your facilities, your money and, of course, your employees. But, one asset that is sometimes over looked is intellectual property.

Intellectual property is the key to day-today business. Your products, brands and designs are what make you unique in the marketplace. But, many companies — especially small and midsize ones — are not aware of the ins and outs of intellectual property. If left unprotected, your amazing ideas could get scooped up and used by a larger competitor with more resources and legal know-how.

“There are not many mistakes a company can make that can’t be fixed once it has more resources,” says Doug Morgan, the managing partner of the Columbus office of Calfee, Halter & Griswold LLP. “But the one thing that is hard to fix is intellectual property mistakes. Once you mess that up, the opportunity may be gone forever.”

Therefore, adequate protection of your company’s intellectual property is crucial. You’ve got to make sure you — and not your competitors — are profiting from your company’s innovation and creativity. And, besides protecting your ideas, innovations and inventions, covering your intellectual property bases will help you gain the capital you need to make your business grow.

“One of the first things an investor will ask when considering your company is whether or not you have any intellectual property and if that intellectual property is properly protected,” says John Cipolla, a patent lawyer and the co-chair of the IP (intellectual property) group at Calfee, Halter & Griswold LLP. “Having a strong intellectual property strategy will help you win over investors and lenders, and it will help you when you’re trying to get a state or federal grant.”

Smart Business spoke with Morgan and Cipolla about intellectual property and what you can do to ensure your great ideas aren’t somebody else’s meal ticket.

What are the different types of intellectual property?

There are four categories of intellectual property: patents, trademarks, trade secrets and copyrights.

  • Patents. A patent prevents others from making, selling or using the patented invention and from importing the patented invention or an article made by a patented process into the United States. But, a patent does not really permit the patentee to do anything with the invention. Generally, patent rights are exclusionary, not permissive rights.

  • Trademarks. A trademark identifies the source of origin of a product. Trademarks protect the public so that a consumer is not confused as to the maker or provider of a good or service.

  • Trade secrets. This is anything that is confidential and that gives the owner a competitive business advantage. It could be a real invention or an intangible like a technique, method, manufacturing process or idea.

  • Copyrights. Copyrights protect the original expression of an idea. A copyright does not protect an idea itself, but rather the way that the creator expresses the idea. The owner of a copyright can exclude others from reproducing, adapting and publicly distributing, displaying or performing the copyrighted work.

What should companies be aware of when it comes to intellectual property?

You have to always be aware of who owns the intellectual property. For example, if you outsource the engineering or development of, say, your Web site, you have to get an agreement in place that says your company owns that intellectual property. Likewise, you need agreements with your employees that say the company owns any intellectual property they create. Usually in the United States, the one who creates is the original owner of the intellectual property. But, when it comes to the intellectual property of your company, you need a contract that provides ownership to the one who is paying for it, i.e., your company.

Also, you should consult with outside patent lawyers before filing any patent applications. Besides keeping you from filing useless patents that may be a waste of money, a good intellectual property attorney will help you understand patent laws and the strict deadlines that come with them. Just because you have a patent doesn’t mean you’re home free. Having a partner in the patent world will help you ensure that you don’t lose any of your rights.

How can a company protect its intellectual property?

Again, a good patent attorney is invaluable. There are several laws designed to encourage development and innovation by granting property rights to creative and inventive people. These rights allow artists, authors and inventors to protect themselves from unauthorized use and misuse of their creations. Besides helping you file the right patents and grow the development of the product, a strong intellectual property firm keeps you from infringing on the rights of others. Not only that, you’ll ensure that your innovations remain your own. You can have the best idea in the world, but if you don’t properly protect it, someone else may come along and take it. To preserve the well-being of your company now and in the future, you must have your intellectual property protected.

DOUG MORGAN is the managing partner of the Columbus office of Calfee, Halter & Griswold LLP. Reach him at (614) 621-7011 or JOHN CIPOLLA is the co-chair of the IP group at Calfee, Halter & Griswold LLP. Reach him at (614) 621-7100 or

Tuesday, 26 August 2008 20:00

Unifying business

If you ask someone what unified communications are, you’ll likely hear a broad range of answers — from voice mail and e-mail integration to instant messaging to video capabilities. But, according to David Wittmann, the director of unified communications for Technology Integration Group (TIG), unified communications is really about application enablement.

“Using unified communications gives you the power to enable business applications to truly change the way your company does business,” Wittmann says.

One example of unified communications is the ability to have an inventory application automatically call a vendor and let it know that a supply of stock is low and to send new stock. But, in order to be able to do this, says Wittmann, different technologies need to be able to interact, which is where standards become important and where having a non-proprietary, open architecture is key.

Smart Business spoke with Wittmann about unified communications, how to implement them and why they’re so beneficial.

How do you know if unified communications are right for your business?

Many businesses have already taken advantage of the first generation of IP telephony benefits like lower phone bills, networking multiple sites together to work as a single system, and having a single network for voice and data. In order to stay ahead of the competition, companies are now looking for ways to deliver more services to their customers and cut down on the time it takes to make critical business decisions that will increase the bottom line. If you are looking to do any of these things, then you need to be looking at putting in a solid foundation to launch unified communications for your business at a point in the near future that makes sense for the organization.

What are the benefits of unified communications?

Key benefits include:

  • Better collaboration internally; leveraging things like an internal audio/videoconferencing bridge versus using an expensive, external service for this application

  • Better collaboration with vendors

  • Better and faster communications using features like instant messaging and integration with corporate directories

  • Lower cost in hardware and energy requirements (going green) if all of the various applications can reside on less servers, which allows a single server to support IP telephony, IP messaging, IP conferencing, e-mail and many other business applications

What problems or issues can arise from unified communications?

Problems can and do occur because many current vendors do not have the ability to interoperate easily with different technologies. Until recently, telephony vendors had closed proprietary systems that only allowed specific phones and applications to work on their telephony platforms. This severely limits choice for businesses that wanted to customize their business applications to work with the telephony system. However, having a set of standards that both the application vendor and telephony manufacturer can work with can help overcome this problem. Unlike most vendors that still offer proprietary products, Cisco and 3com have built their telephony solutions on industry standards like Session Initiation Protocol (SIP) and have designed their architecture so that application vendors can access the IP telephony code via a Software Developers Kit (SDK) and have the two work together.

What’s involved with implementing unified communications?

Implementations of some of the more basic aspects of unified communications are fairly simple and straightforward. Things like unified messaging, audio/videoconferencing and call centers have been around for a long time and are well defined and developed. Presence is something that requires SIP, and some vendors can implement this easily if their solution is based on the SIP standard.

If you’re looking to do true unified communications, which is really application enablement, there are a number of steps to take. First, find out from your telephony vendor if their solution is ‘proprietary’ or ‘standards-based.’ If it’s proprietary, then application integration will be very challenging. If it’s standards-based, then see if there’s an SDK. If there is, then the voice vendor can work with the application developer to provide a customized solution for an organization.

What are the consequences of not implementing unified communications?

If a company does not at least put in a base telephony system that can support true unified communications in the future, it will be less competitive and have to make a major investment in the future once application integration becomes the rule rather than the exception. But, the resolutions for overcoming many of the challenges of unified communications are already in progress. Many application designers are now building telephony ‘hooks’ into their code that will allow for interoperability between the telephony system and its application. Standards like SIP are being implemented by most major players in the telephony marketplace. And technologies like ‘Open Source’ continue to make major gains in acceptance. <<

DAVID WITTMANN is the director of unified communications for Technology Integration Group (TIG). Reach him at (858) 566-1900 or

Saturday, 26 July 2008 20:00

Virtual solutions

Virtualization is certainly not a new concept, but it seems to be gaining steam in recent years. When a company creates a virtual infrastructure, a single computer can do the work of several, allowing access to multiple operating systems and applications. Virtualization can save companies money on computing expenses and energy costs, and it helps increase security and efficiency.

“One of the most promising features of virtualization is that it satisfies the various computing needs of management, allowing them to quickly, efficiently and safely achieve all their objectives,” says Steven Patterson, senior director of sales of the solutions group at Technology Integration Group (TIG). “It offers a great deal of flexibility and allows businesses to guarantee up-time of critical applications.”

Besides being able to run multiple systems and applications on the same computer at the same time, virtualization provides both local and remote access, so your data is always available. And virtualization does-n’t end with servers, adds Patterson. Just about all aspects of your infrastructure can be virtualized, including networks, servers, storage, desktops, applications, user interfaces and databases.

Smart Business spoke with Patterson about the intricacies of virtualization and how it can enhance business and contribute to the bottom line.

How did the concept of virtualization come about?

As a company expands and business grows, everything has to grow along with it, especially networks and systems. Also, we’ve been seeing several trends in the market, the largest being consolidation efforts, disaster recovery and business continuance. Virtualization addresses these needs. Companies need to get more out of less — they need to drive business and achieve more using the technologies they already have deployed. Virtualization allows companies to leverage all aspects of their systems, giving them flexibility within those infrastructures. It allows them to move virtual systems around as necessary and to do so within a financially sound business model.

Why is virtualization becoming a growing trend?

In the past, virtualization was costly and difficult. In today’s highly technological world, virtualization is fast and easy. Virtualization is a very scalable architecture, and it gives organizations flexibility in how they utilize their systems. It’s interesting that there is a lot of discussion around virtualization on the front end (servers and systems), but there’s also a growing trend in the back end (the actual infrastructure and storage space). I think both trends will meet somewhere in the middle, and we’ll see continuing growth in virtualization across the board. As a concept, virtualization covers server consolidation, disaster recovery, testing, training and portability — just to name a few — and it is a trend that will continue to grow.

How can companies benefit from virtualization?

Purely having systems highly available and being able to leverage resources when needed is a huge benefit. Certainly, the green initiative is important to a growing number of companies. Virtualization improves the utilization of your technology investments, reduces your data center footprint, and lowers power, cooling and cable management costs. Here in Southern California, where we experience brown-outs, the cost of utilities and power is a growing concern. Plus, it makes the work of your IT staff easier, saving you time, money and valuable resources.

Business continuance and disaster recovery are major issues these days for most businesses. In today’s business world, a company can’t afford to be down for an hour, let alone a day or longer. Virtualization will help you recover from any disaster and minimize any disruption, allowing your company to press on with business as usual.

Also, virtualization helps your testing and development environments to achieve financial gains and scale, allowing companies to deploy faster and achieve benefits of being the first to market with offerings. Finally, as more and more businesses are getting into a high level of compliance needs, virtualization helps ensure these concerns are addressed.

What should companies watch out for when implementing virtualization?

As with anything, some applications simply won’t match the capabilities of a virtualization effort. Some may have high I/O (input/output) or be real resource hogs that just are not good candidates. Getting all your virtualized pieces to cohesively hum can be challenging at times. Because of this, you need to have a complete understanding of your systems and infrastructure before you even think about implementing a virtualization solution. That is where professional organizations like TIG come into play to assist customers.

STEVEN PATTERSON is the senior director of sales of the solutions group at Technology Integration Group (TIG). Reach him at (818) 389-0564 or

The most common legal entity structures are sole proprietorships, C corporations, S corporations, partnerships and limited liability entities, such as limited liability companies (LLC) and limited partnerships (LP). Understanding the advantages and disadvantages of each is imperative when deciding on the best entity structure for your business.

“Choosing the correct entity is an important decision for every business,” says Jason Sanders, CPA, a tax manager with Briggs & Veselka Co.

Smart Business spoke with Sanders about corporate entity structures, the various intricacies of them and how to know which one is right for your business.

How do you know what corporate entity structure is right for your business?

Unfortunately, the best choice of entity is not always clear. Many factors must be evaluated before making an ultimate decision. You really need to look long and hard at each option, comparing the major advantages and disadvantages of each. This is not a decision that should be taken lightly.

How do different entities offer different benefits?

A sole proprietorship consists of one individual and is the easiest form of business to organize. There are few legal restrictions associated with the formation and operation of the business.

C corporations offer three distinct advantages. First, they afford business owners limited liability protection. Second, they’re advantageous when you’re looking to raise outside capital. The flexibility of ownership allows for creativity through the use of different classes of stock with different ownership rights. Finally, owner-employees can take advantage of corporate-provided, tax-free fringe benefits, which are deductible to the corporation for federal income tax purposes but are not taxable to the owner-employees.

S corporations also enjoy limited liability protection but are not faced with the double-taxation dilemma that plagues C corporations. S corporations are often referred to as ‘flow-through’ entities because the corporate-level profits and losses are passed through to the corporate shareholders. As such, S corporations avoid double taxation as profits are taxed at the shareholder level. Losses are passed through to the owners and are deductible at the shareholder level to the extent of the shareholder’s stock and loan basis.

General partnerships also provide freedom from double taxation of earnings. Generally speaking, general partnerships are easier to establish than other forms of entities and offer greater flexibility in ownership and capital structure. Partnerships also allow partner-level basis for partnership debt, the ability to specially allocate tax benefits among partners, and the ability to step up the basis of partnership assets upon the sale or exchange of partnership interest.

LLCs and LPs are often referred to as ‘hybrid’ entities. These entities are generally structured to ensure limited liability of the owners but also offer greater flexibility and tax benefits. This combination of corporate-like protection and tax benefits has greatly increased the popularity of these types of entities over the last few years.

What problems or issues can arise from the various entities?

The major disadvantage to operating as a sole proprietorship is unlimited liability of the owner. This disadvantage may be alleviated, however, by forming a single-member limited liability company (SMLLC). SMLLCs provide limited liability protection without interrupting the ease of operation of the business.

C corporations are taxed as separate entities from the principal owners, which gives rise to the potential for double taxation of the company’s earnings. The earnings are taxed at the corporate level and again upon distribution to the owners. In addition, corporate-level losses are trapped at the corporate level and cannot be deducted by the owners. This is often a problem for start-up entities that experience losses early in the corporations’ life span.

S corporations allow for only one class of stock, are limited in the number of owners and types of ownership interests, and do not allow for special allocations of tax benefits. Also, fringe benefits are generally included in income for those who own more than 2 percent.

General partnerships do not offer limited liability protection. All partners are liable for the debts of the partnership and claims based on the actions of all other general partners as well as employees of the partnership. Another disadvantage is that fringe benefits are included in the partner’s income as guaranteed payments.

What’s involved when a company decides on an entity and begins to implement it?

Every aspect of the business should be carefully considered before a decision is made. Besides the various advantages and disadvantages, factors such as business type, profit and loss expectations, estate planning and ownership transfers should be weighed carefully during the decision-making process.

JASON SANDERS, CPA, is a tax manager with Briggs & Veselka Co. Reach him at (713) 667-9147 or

Wednesday, 25 June 2008 20:00

M&amp;A acumen

Even in today’s choppy economic environment, mergers and acquisitions (M&A) are a common component of the business landscape. And with millions of baby boomers reaching retirement age within the next few years, they will become even more common. Selling your business can be a lucrative endeavor, one that provides you the security and financial freedom needed to retire comfortably.

“Selling their business is frequently the largest transaction an owner will ever be involved in,” says Rick Hunter, a managing director with B&V Capital Advisors LLC, a subsidiary of Briggs & Veselka Co. “It’s the culmination of years of effort and a transaction that can definitively determine an owner’s net worth and standard of living during their retirement years.”

Smart Business spoke with Hunter about what you should do if you receive an unsolicited offer on your company.

What do business owners need to watch out for if they receive unsolicited offers?

The best way to answer this might be to offer an example of a recent acquisition that began with such a letter from a potential purchaser. The timing was right for the owner so he thought: ‘Why not let them come in, look around and see where the process leads?’

He actually ended up getting an offer, but it was set to expire in five days. While the offer was more than adequate for the owner’s retirement needs, it was well below what he thought his business was worth. Still, he was inclined to accept the offer. He spent the next four days attempting to negotiate a higher price — all the while the clock was ticking. On the last day, the buyer disclosed that it had another target company in its sights and was prepared to let the offer expire as scheduled in order to pursue the other opportunity. That is, unless he accepted the original offer.

The tactic used by the buying company in this case may sound amateurish, but it is not uncommon. And walking away from $6 million in order to start the process anew is not as easy as it may sound. Obviously, it would have been a good idea to have known what the business was worth and to have gotten other competitive bidders involved in the process before the stakes got so high and time so short.

The expiring offer equaled three times cash flow. I knew the other company had just paid a six multiple for a similar company. I recommended that the seller tell the offering company that he needed to think about such a big decision over the weekend. The owner was concerned he might lose his original offer, but the offering company agreed. By Monday morning, he accepted an offer equal to six times cash flow for a total of $12 million.

What are the lessons a seller can draw from this experience?

Well, I would not recommend depending on a stroke of luck as in this case, where we were able to get a team in there to put an offer on the table over the course of a weekend. A better way would have been to begin a process early on to ensure that you create a competitive bidding environment. If you receive an unsolicited letter, then certainly begin the process before providing any information.

So what would the steps be in such a process of selling your company?

First, get a valuation of your company. This will provide you with a benchmark by which you can gauge potential offers and may give you important insight into the value drivers for your business. You might also consider hiring an M&A adviser. Your adviser would then provide the valuation as the first step in the engagement.

The next steps in the process would include the preparation of a company descriptive memorandum and a buyer analysis, the selection of a marketing strategy, approaching potential buyers, buyer due diligence, solicitation and analysis of proposals, negotiations and closing. An M&A adviser can help with all of this.

In addition to creating a competitive bidding environment, a good adviser will be able to act as your quarterback through the process, overcoming obstacles along the way. And, advisers tend to know how the game is played — they’ve seen the tactics the other side uses and know how to respond.

Confidentiality and the need to continue to focus on running your business are also critical issues. Letting the business underperform or having a customer find out that you are for sale during the process can kill a deal or result in a painful renegotiation.

RICK HUNTER is managing director with B&V Capital Advisors LLC, a subsidiary of Briggs & Veselka Co. Reach him at (713) 366-8580 or

At any given company, most of the management staff would tell you that document management is crucial to productivity. Yet, many companies don’t have aproper document management solution inplace and others have never even examined their document processes.

Research from an information technology research and advisory company shows that printing costs are 1 to 3 percent of a company’s gross revenue. Consequently, a $100 million company is spending $1 million to $3 million each year on its print devices — printers, copiers, faxes, etc. — and the consumables of those devices — software, paper, etc.

High printing costs don’t just come from wasted paper, either. Different departments manage different devices, devices are procured from various vendors, and rental and maintenance costs are not identified or measured. Additionally, devices and their components are often misused and under-utilized. All of these are issues a company must face if it wants to streamline business and enhance the bottom line. The task can be rather daunting; however, there is help —managed print solutions.

“Most companies don’t know what they’re spending on printing,” says John Turner, consultant for managed print solutions at Pomeroy IT Solutions. “Managed print solutions will help identify how much you’re spending on print and show you where to cut costs and how.”

Smart Business spoke with Turner about managed print solutions and why they’re so important in today’s business world.

Why are managed print solutions so important in today’s business world?

For years, we’ve been hearing about increasing technologies and the move to a ‘paperless world.’ Ironically, companies are using more paper today than they did 20 to30 years ago. Simply put, the proliferation of technology allows more access to printing. Thus, companies need to manage printing costs. This is where a managed print solution comes in. By identifying how much money is spent on printing and why, a company can reduce hard costs while moving to a more efficient and effective method of electronic data management. A managed print solution can typically save a company 10 to 30 percent on printing costs.

If a company implements managed print solutions, how does the process work?

The first step is to identify where the biggest problems are, and then do whatever is necessary to eliminate those pain points. Next, a comprehensive audit is conducted to determine exactly how much is being spent on printing — including costs for devices, paper, cartridges, toner and maintenance — during a typical business cycle, which is usually anywhere from 30 to 60 days. The data collected from the audit will then be used to determine how much the company is spending on printing compared to similar businesses in the same industry. Subsequently, recommendations are made, focusing on reducing costs while improving productivity — reducing cost per page, enhancing output volumes, ending the waste of consumable stock and reducing support costs.

There are many ways to improve a business’s printing methods. Sometimes, it’s as simple as buying new equipment, streamlining printer locations, reducing document flow or switching from inkjet printers to laser ones. Usually, though, it will take time to change a company’s printing culture. For example, employees will have to get used to fewer printers and new printing locations.

How does a company monitor printing costs?

The final component of a managed print solution is the implementation of a software-monitoring device that will keep track of day-to-day printing. This will keep track of everything you need to know when it comes to printing — excessive or unnecessary printing, consumable levels, maintenance needs, etc. By continually monitoring assets, devices will perform to optimal levels. Downtime will be reduced because any time toner is needed or a part or maintenance is needed, alerts will be sent and the necessary items will be automatically ordered and sent. This benefit reduces the need to stockpile consumables or have several service calls for one simple problem. Monitoring gives companies the ability to be more proactive in responding to issues quickly and correctly.You’ll always know how much printing is being done and where, and you can place restrictions on the number of pages printed, the use of color printers, etc.

What are some other benefits and/or drawbacks to managed print solutions?

With efficient, cost-effective and well-maintained devices, employees will be happier and more productive. Plus, your help desk will become more efficient, since it won’t be responding to everyday printer issues. Besides that, you have to look at the total cost of ownership. Newer devices are more cost efficient, so a company can actually save money by replacing older devices, even if those devices are already paid off. It has long been thought that ‘a printer is a printer is a printer,’ but that is simply not the case. Printer consumables and downtime negatively impact a company’s bottom line. A managed print solution will help your company move to the more efficient electronic transfer of documents, speeding up business and enhancing the bottom line.

JOHN TURNER is a consultant for managed print solutions at Pomeroy IT Solutions. Reach him at (859) 586-1515 x4169 or

Sunday, 24 February 2008 19:00

D&amp;O concerns

As anyone in the directors’ and officers’ (D&O) liability insurance market will tell you, 2008 is shaping up to be an important year to monitor, as current trends and conditions take form.

Three major areas to keep an eye on are the subprime lending crisis, litigation trends and environmental concerns, according to Jerry G. Kysela, resident managing director of Aon Risk Services Inc.

“While the D&O liability marketplace has been relatively soft for the past several years, underwriters are becoming very nervous about the direct and indirect fallout from these factors,” he says.

Smart Business spoke with Kysela about current D&O concerns and what companies should watch out for in the coming months.

How will the subprime lending crisis affect D&O liability insurance?

Well, the main concern is the direct impact this will have on financial institutions. Besides that, there’s an indirect concern about how this will affect businesses and their ability to grow, expand and invest. Lenders are being more careful with just how much and whom they lend to. D&O carriers will pay specific attention to companies who are reliant upon relatively significant levels of debt to finance business and growth. You have to follow their business plans and see how they’re planning to weather the storm. These strategies need to be discussed with your D&O underwriter. Other areas to watch are corporations who invested in subprime investments, such as mortgage-backed securities. These investments may not be worth near what they were, which will affect portfolios, pensions and retirement investments.

What about litigation trends?

Coming off an eight-year trend of high frequency of securities class action claims against directors and officers, 2005 experienced a 22 percent decrease in the number of claims filed and a 39.5 percent decrease in 2006. 2007 reversed this trend with a 40-plus percent increase in frequency over 2006. Most of the increase in frequency materialized in the second half of 2007. The recent increase in frequency is most likely indicative of the recent stock market volatility as well as the sub-prime lending claims, which plaintiff attorneys began to file near the end of 2007. Further, this increased frequency in securities litigation has not been contained only to the financial services sector, despite the headline risk from the sub-prime crisis. Several independent sources have commented that they expect 2008 to be a robust year for securities class action filings, basically a return to historical average annual filings versus the recent trend experienced in 2005 and 2006.

How about environmental concerns?

In late 2006, the SEC voted to propose interpretive guidance for management to improve Sarbanes-Oxley 404 implementation. The proposed principles-based guidance, issued Dec. 20, 2006, is organized around two important principles. First, management should evaluate the design of the controls that it has implemented to determine whether there is a reasonable possibility that a material misstatement in the financial statements would not be prevented or detected in a timely manner. Second, management should gather and analyze evidence about the operation of the controls being evaluated based on its assessment of the risk associated with those controls.

The proposed rule notes that significant accounting estimates and critical accounting policies — both characteristic of environmental liabilities — present a higher risk of material misstatements and control failures. Thus, in the wake of earlier public financial scandals (Enron, WorldCom, etc.), the SEC increased its focus on accounting practices in order to better regulate corporate disclosures. Now, the SEC seems to have turned its attention on environmental financial disclosures. Corporations and corporate executives should take special note of the heightened attention that the SEC is now giving to these disclosures. We expect further activities and guidelines from the accounting profession, as well, through developments in GAAP (Generally Accepted Accounting Principles) procedures for estimating and developing environmental and sustainability risk exposure reserves.

If these factors are not watched closely, what will the consequences be?

The outcome will be potentially expensive litigation with the management — the directors and officers — of public companies facing allegations of misrepresentation and mismanagement.

So, what’s the resolution to all of this?

The resolution is additional due diligence and the necessary disclosure on the part of pubic companies. From an insurance perspective, now is the time to make sure your corporate directors’ and officers’ liability policies — those that protect corporate and personal assets — are tailored to address potential litigation stemming from environmental exposures.

JERRY G. KYSELA is the resident managing director of Aon Risk Services Inc. Reach him at (216) 623-4150 or

Wednesday, 26 December 2007 19:00

Taking ownership

Every employee wants to know if he or she will be able to retire comfortably. But, there are many retirement plans out there, and navigating them can be cumbersome and time-consuming. Because of this, many companies shoulder the burden for their employees, offering various options designed to prepare employees for their golden years.

One such plan is the Employee Stock Ownership Plan (ESOP), which is similar to a stock bonus plan or money purchase plan. ESOPs are intended to invest first and foremost in the employer’s stock, instead of mutual funds or publicly traded stock, according to Rene Lozano, CPA, a manager in the tax department at Briggs & Veselka Co. Essentially, these plans are set up to purchase stock from the private company owner.

“ESOPs were created by Congress in 1974 to help supplement retiree income,” Lozano says. “Since that time, these plans have been used by the likes of Microsoft and General Electric. They can be very beneficial to both employees and employers.”

Smart Business spoke with Lozano about ESOPs and how companies can utilize them to ensure prosperous futures.

What are the benefits of ESOPs?

ESOPs have a number of benefits. First and foremost are the tax benefits. A plan can also help a business owner diversify his or her investment. And ESOPs can even help increase employee productivity and retention.

The owner of a private company can defer the gain on the sale of his or her stock to the ESOP if he or she sells at least 30 percent and the corporation is not classified as an S corporation. To defer the gain, the seller will also have to reinvest the proceeds in other stocks or bonds. As an added benefit, the owner of the private company is diversifying his or her investment in other stocks or bonds.

The company will also be able to take a tax deduction of up to 25 percent of eligible employee wages when the company contributes to the plan. If the company is an S corporation it will not have to pay any federal income taxes on the ESOP’s share of the company’s profits. In fact, a 100 percent ESOP-owned S corporation will not pay any federal income taxes on company profits. The reduction in taxes generally helps to increase cash flow and is often used to help pay for the ESOP contributions.

ESOPs give employees a direct stake in their own output. This connection helps to increase employees’ productivity, and they are also more likely to control costs and reduce misconduct.

What problems or issues can arise from ESOPs?

Owners of private companies with S corporation status are not eligible for the tax-free rollover when they sell their shares to an ESOP. This can be avoided by converting into a C corporation; unfortunately, the change will cause the company to pay corporate income taxes for at least the next five years. A company will also not be able to deduct more than 25 percent of eligible employee wages to the ESOP. So, any portion of contributions made in excess of the 25 percent is not deductible by the company.

How can the problems be solved?

Most or all issues related to an ESOP can and should be avoided with proper planning. Excess nondeductible contributions can be avoided in this way. The owner can also avoid taxes on the sale by reinvesting the proceeds.

What are the consequences a company faces?

ESOPs have the ability to take out loans to purchase company stock. A loan may not be the proper course of action if the company is not profitable enough to make loan payments and repurchase shares from employees retiring or leaving the company.

What is the resolution to all this?

ESOPs can and should be used as a tool to help private owners and their companies in a variety of ways. A properly executed ESOP will benefit the owner and the company. The owner has the ability to retain control of the company in a sale. A seller of less than the entire company will often find himself owning a smaller share of a larger company. And, employee ownership will also help to increase productivity while increasing overall company value.

RENE LOZANO, CPA, is a manager in the tax department at Briggs & Veselka Co. in Houston. Reach him at (713) 667-9147 or