Of course, the idea of using several different devices to communicate may seem quaint before long. Unified messaging offers the enticing prospect of simplifying communication methods while saving time. Hormazd Dalal, president of Castellan Inc., believes the rise of unified messaging will reshape the way that office communication is handled.
“I think it will be mainstream before the end of the decade,” he says.
Smart Business spoke with Dalal about how unified messaging can add to the productivity of employees, the type of software that he expects will take unified messaging mainstream and what advances he envisions in the future.
What is unified messaging?
Unified messaging is the convergence of the different forms of messaging. It brings e-mail, voice mail and faxes into one inbox. Benefits include the ability to have your e-mail read to you from a phone, retrieving your voice mail from your e-mail inbox, or retrieving either from a remote device. It unifies the entire process into one mailbox so you can check your e-mail, voice mail or faxes at the same time.
How will unified messaging add to employees’ productivity?
Currently, most communication is done by the phone, through voice mail or e-mail. To retrieve these messages a person must either log onto a computer or dial into the office to retrieve voice mail. This is time consuming. Employees will be far more productive if they can just go to one place and see all communication in one area be it voice, fax or e-mail.
What software will make unified messaging mainstream?
Today, Microsoft Exchange has the largest market share for messaging servers in the business world. We believe that the next version of Microsoft Exchange combined with Microsoft’s commitment to unified messaging will make it mainstream. Microsoft has also indicated that it will be going into the phone business. It has agreements set up with companies like Samsung and Nortel, so you’ll be able to purchase a phone system that will integrate seamlessly with your mailbox and likewise.
When the product that has the largest market share makes unified messaging an added feature, at no additional charge, I think it’s safe to say that unified messaging will be compelling enough that no one is going to leave it by the side.
When do you anticipate unified messaging becoming mainstream?
Certainly by the end of the decade. The next version of Exchange that supports unified messaging will be released early next year. Unified messaging will be one of the compelling features that will make people want to upgrade.
As usual, it takes about two years for a new technology to start getting deployed in the marketplace.
What types of questions should a business ask vendors when exploring a unified messaging solution?
You want to know if the vendor has the correct skill set. It’s important that he or she has worked with both messaging systems and voice systems. Whether it be a Cisco voice system or any other IP-based phone system, the person must show familiarity with both and understand conceptually how the unified messaging system works. You will want to ask the same types of questions that you would ask of any vendor to test his or her knowledge of the solution you’re looking to deploy.
What do you see in the future for unified messaging?
In another five to six years, we’ll probably be able to retrieve or communicate with people from practically any device. It could be a device in your pocket that’s doubling as a unified messaging client and your cell phone.
As third-generation wireless networks begin to be deployed in the United States, as well as globally, workers will be able to retrieve unified messages from any device; typically one that is in your pocket or in your car.
HORMAZD DALAL is president of Castellan Inc. Reach him at (818) 789-0088, ext. 202 or firstname.lastname@example.org.
In October of 2004, President Bush signed into law the American Jobs Creation Act, which includes a tax benefit for certain domestic production activities. The production activities that qualify run the gamut, from software development to construction of residential and commercial buildings to engineering and architectural services.
One common thread that runs through the legislation is that the goods and services must originate in the United States. That’s a stipulation that can benefit middle-market manufacturers that don’t have global operations scattered across the world, says Colleen Taylor, a senior manager at Vicenti, Lloyd & Stutzman LLP.
“The spirit of the law was designed to help out small manufacturers that are engaged in domestic production,” she says.
Taylor spoke with Smart Business about how businesses can take advantage of the new law and why it is crucial for manufacturers of all sizes to educate themselves about the changes.
What is the underlying goal of the new tax deduction for manufacturing activities?
Primarily, this tax deduction came as a result of a repeal of the Extraterritorial Income Exclusion. That exclusion was ruled as an illegal subsidy by the World Trade Organization about four years ago, and the American Jobs Creation Act of 2004 provided for the new deduction for U.S production activities. It is designed to give U.S. manufacturers a break for domestic production activities versus going overseas.
What steps can a business owner take to capitalize on the tax changes?
The number one step is to identify what their domestic production gross receipts are and to determine if there is an allocation that is going to be required. The new deduction is effective for the period beginning after December 31, 2004, so anyone with domestic production activities in the year 2005 would definitely be able to benefit from this.
Businesses need to start doing their homework, as far as identifying domestic gross receipts versus other gross receipts. Also, they have to identify the costs related to those domestic gross receipts. The best thing to do would be to read some of the guidebooks put out by the U.S. Treasury Department.
They can go to the U.S Treasury Web site to get guidance and look at the fact sheet on Section 199, which provides a really good overview. This is a good place for manufacturers to get started to see if this affects them and what steps they should take.
What constitutes manufacturing activities?
This law has been defined very broadly to include not only traditional manufacturing, but also engineering, energy production, computer software, construction activities and processing of agricultural products. It’s a very broad, broad range for manufacturing.
In what ways can a business benefit from these tax deductions?
Businesses as well as individuals, corporations, partnerships, trust and estates can take advantage of this credit. The deduction is based on the profit from domestic production activity and therefore the more they produce domestically, the more their deduction will be, up to a limit. They’re limited to 50 percent of the W-2 wages.
Congress has enacted safe harbors to ease the burden of calculations. Why is this so important to small manufacturers?
The small manufacturer is so overwhelmed. They usually don’t have the expertise in-house and a lot of times can’t afford to pay for somebody to do a lot of very difficult calculations. So Congress has provided some de minimis rules and simplified formulas to assist small taxpayers in determining their taxable income from the qualifying activity.
The de minimis rules, for example, state that if less than 5 percent of a manufacturers’ gross receipts are from nondomestic production, they are able to include their total gross receipts and they don’t have to separate it out. Also, they have simplified formulas for determining the W-2 wage limit. There are three different methods and there is a simple method that people can take advantage of.
The problem with the small manufacturer is that if the process is too difficult or takes too much time to calculate, they’re not going to take advantage of it. It’s important that small businesses talk to a tax professional and educate themselves so they can take advantage of the credit.
How will the deduction be phased in?
It’s going to be phased in over a period from 2005 to 2009. So for the years beginning in 2005 and 2006 it is 3 percent. For 2007 and 2008 it will be 6 percent. Then for years beginning after 2009 it will be 9 percent. There again, it is still limited to 50 percent of the W-2 wages.
Colleen Taylor is a senior manager at Vicenti, Lloyd & Stutzman LLP, a business consulting and CPA firm based in Glendora, Calif. She plans, directs and supervises accounting and consulting services for the firm’s corporate and individual tax clients. Reach her at (626) 857-7300, ext. 248 or email@example.com.
Thin client systems are attracting the attention of businesses for several reasons. First, they offer a way to protect confidential data. Also, there is no need to fret about individual PCs passing viruses to other company PCs.
“The new-found interest in thin clients is because of the security and lowered total cost of ownership,” says Hormazd Dalal, president of Castellan Inc.
Smart Business spoke with Dalal about why a company would want to pursue thin client architecture, what types of businesses can benefit most and how he sees thin clients being used in the future.
What are thin clients, and how do they differ from PCs?
A thin client is a device that typically does no processing and accesses a server where all of the applications and data reside. There are no programs or data on the thin client. It provides access to a virtual desktop on a centrally located server that allows users to function. A PC has its own hard drive and a processor fast enough for it to run applications locally, which requires the software to be managed.
How do thin clients compare price-wise to PCs?
In today’s marketplace, thin clients are around the same price if not, in certain cases, a little more expensive than PCs. Thin clients are more specialized products and they tend to cost between $600 and $800, whereas today you can buy a PC for the same price with an operating system loaded and ready to go.
Why would a company want to pursue thin client architecture?
The primary reason would be for management purposes. If the cost of acquiring the hardware is the reason for pursuing this type of architecture, then it would be the wrong reason. You want to go with thin client architecture because of manageability issues there is no management required on thin clients. You don’t have to worry about virus protection, you don’t have to worry about data on the thin client, and you don’t have to worry about a broken application on the thin client. It all resides on a backend server.
What security and maintenance advantages do thin clients offer?
You never have to reach out to the thin client to do any security or maintenance issues. Typically, you do all this on the server. Thin clients are not vulnerable because there is no activity on them.
What types of businesses are most likely to use thin clients?
Large organizations and any organization with multiple sites. A large organization has management issues that an organization with just 20 or 30 users does not have. When there are multiple sites, you can have one centrally managed location where hundreds or thousands of thin clients can be accessing their desktops from all over the world. This allows for everything to be managed on one server, or for a cluster of servers to be load-balanced to handle the volume of users.
Thin client architecture has been around for some time. Why is there a new interest in this old concept?
It’s an old concept because, in the days of the mainframe 20 or 30 years ago, that’s how most people computed. Large organizations had a dumb terminal that would access a session on the mainframe. Then as PCs became easier to use with graphical interfaces, there was a logical shift toward client server architecture. Technology was developed to allow the management of remote PCs so that users could function with the latest graphically oriented software.
Today, with Citrix and Microsoft’s terminal servers, a thin client can enjoy the graphical user interface (GUI) that was not available with the dumb terminal of the past, allowing the management and security advantages of centralized computing.
What do you see in the future?
I see the future of thin client architecture taking off. We deploy terminal services to many of our customers. However, they don’t necessarily use a thin client. They’re using a PC, but that PC isn’t required to do anything. The drawback of a thin client is that it won’t do anything on its own as a standalone machine, whereas if you buy a PC it can be used as a thin client and also as a standalone device.
The architecture and concept of thin clients are taking off, but I don’t think the actual use of a thin client machine will become mainstream for awhile. This is because they are not necessarily cheaper. People will still pursue the architecture, but they will use the regular PC as the client.
HORMAZD DALAL is president of Castellan Inc. Reach him at (818) 789-0088, ext. 202 or firstname.lastname@example.org.
Following changes to the tax code is important for businesses and individuals alike, says Mary Ann Quay, co-managing partner of Vicenti, Lloyd & Stutzman LLP. “You need to plan ahead, be aware of what’s going on and then determine whether or not it affects you,” she advises. “If it does affect you, you need to maximize that deduction or benefit before the end of the year.”
Smart Business spoke with Quay about the recent changes to the tax law, why these modifications were made and what businesses should know about the Section 179 deduction.
What are some of the recent changes to the U.S. tax law?
The new law that was signed by President Bush on May 17 has a lot of significant changes in it. Its biggest impact is keeping the tax rate on investment income capital gains and qualifying dividends at a very low rate. The rates on this type of investment income were scheduled to increase in 2009 and the new law has extended the current low rates through 2010. The second significant item that affects individuals is the exemption for the alternative minimum tax has been increased for 2006. This is just a one-year change, however, and the anticipation is that there will be more legislation later to address the problems we currently have with this type of tax.
Another big change for individuals has to do with Roth IRAs and high-income tax payers. Under the old law, if you were a high-income taxpayer, which is over $100,000 of income, you could not convert a regular IRA into a Roth IRA. After 2009, high-income taxpayers will be able to convert their IRAs into Roth IRAs if they choose to do so.
The new law also allows the income that is recognized on a conversion done in 2010 to be spread out over two years. Normally, all of the income has to be recognized in the year of conversion. The one major item that affects businesses is the Section 179 deduction.
How can a business take advantage of the Section 179 deduction?
This is a special deduction that allows businesses to immediately write off expenditures that they make for capital items. Under normal procedures, you would have to capitalize them on your books and take depreciation, which means write them off over a number of years. Instead, you can now purchase up to $100,000 of equipment, furniture, fixtures or computers and immediately write them off.
This law has been around for awhile, but the new law allows it to continue at the $100,000 level, adjusted for inflation, instead of dropping back to $25,000, which it was scheduled to do in 2008. This is indexed, so in 2006 the amount that can be deducted is $108,000 and, presumably, that will go up for the next few years.
Why were the changes to the tax law made?
This is part of a comprehensive bill that was started back in 2005 by Congress. A lot of things that should have been included in the bill got left out because they couldn’t agree. There are expectations that there might be some stand-alone legislation later on this year that would address some of these things. For example, state and local sales tax deductions as well as some other popular deductions and credits.
What changes have been made to the Domestic Production Activities Deduction?
This is a special deduction for manufacturers and other businesses that produce goods and services here in the United States. Prior to this year, the amount of a deduction could not exceed the W-2 wages that you paid for the year. Now, the deduction can not exceed 50 percent of your wages that are allocable to domestic production. This will reduce the amount of deductions that a business can take.
Why is it so important for companies to stay abreast of changes to the tax code?
All companies are concerned about the bottom line. Any thing you can do to decrease your taxes is going to make that bottom line better. Frequently, these tax code changes are very complicated, and in many cases they only affect a small number of companies. But if they do affect your company, they can potentially have a large effect on your cash flow and your taxable income.
MARY ANN QUAY is co-managing partner of Vicenti, Lloyd & Stutzman LLP. Reach her at MQuay@vlsllp.com or (626) 857-7300.
Fortunately, it is improbable that the strain will surface on American soil without advance warning, says David Pegues, professor of clinical medicine at the UCLA Medical Center. “We’re planning for something that nobody knows when it will strike or how severe it will be. These viruses come from China and the Far East, so we’ll have a matter of weeks or months to increase our preparedness.”
Smart Business spoke with Pegues about how the pandemic is being tracked, how businesses should prepare for an outbreak and the challenges involved with distributing effective vaccines.
How serious is the current pandemic risk?
To date, there have been just over 200 cases reported in humans since 1997, although the case fatality rate (over 55 percent) is high. In contrast, each year about 7.5 percent to 8 percent of all deaths in the United States are related to seasonal influenza or pneumonia. I think this puts things into perspective.
Right now, there is very little evidence that supports direct person-to-person spread of avian influenza. These are bird-adapted, not human-adapted, viruses. But the possibility remains that these viruses could adapt, change and become easily contagious to humans while retaining their ability to cause high fatality rates.
What would be some warning signs that a pandemic is about to start?
The warning signs would be based on laboratory detection, or what we call laboratory surveillance. The WHO (World Health Organization) along with the CDC (Centers for Disease Control and Prevention) participate in a worldwide network of laboratories that identify and characterize, or type, influenza strains. It would be on the basis of this laboratory surveillance network that we would identify the emergence of a new influenza virus strain and very early on know that we’re dealing with a potential pandemic.
What policies can be implemented to help stop the spread of a deadly virus?
When you’re coughing, cover your mouth with your hand.
When you’re sneezing, cover your mouth with a tissue.
Always clean your hands with soap and water or alcohol hand gel after coughing or sneezing.
The other commonsense thing is to avoid going into a workplace when you’re ill with an influenza-like illness: fever, cough and muscle aches. Employees who go into work sick have the potential of transmitting the infection to coworkers as well as to people in the community at large during their commute. The best thing you can do when you’re sick with a flu-like illness is to stay home.
How should a business owner prepare for an outbreak?
First, focus on what you do and the business that you’re in. Who are your essential employees? Who are your suppliers? What is the potential implication on your business plan?
For us in the health care industry, our essential employees are the direct caregivers, the people who keep the hospital running and the people who supply our critical patient-care supplies. We’ve identified the supplies that we need in order to keep people alive in an influenza pandemic and determined how we will run our business if a pandemic strikes. We’re going to shut down and stop delivering services to all but the most critically ill. Elective services will be stopped and patients will be discharged from the hospital whenever possible to alternate care sites or home.
The other thing that we work on regularly at the hospital is a disaster drill. If you have a plan but it’s just on a piece of paper, it doesn’t really serve anyone’s best interest. Businesses not only need a preparedness plan, but also need to know how and when to implement it.
What are some challenges that health officials are faced with in developing and distributing an effective vaccine?
The first thing that we’re trying try to do is predict what the pandemic flu strain will be. There is a great risk involved in our current strategy of manufacturing millions of doses of vaccine against the current avian influenza strain, because many think that this is not likely to be the strain of virus that adapts, circulates and causes a pandemic. It doesn’t do much good if you have 40 million doses of avian influenza vaccine and it’s not the avian influenza strain that causes the pandemic.
What we’re really focusing on right now is looking at new ways to more rapidly produce, and get out on the market, effective influenza vaccines once the pandemic strain is identified.
DAVID PEGUES is a professor of clinical medicine at the UCLA Medical Center. Reach him at DPegues@mednet.ucla.edu.
Early detection is a key component to winning the battle against this curable cancer.
“Historically, prostate cancer was not detected early and the vast majority of men who were diagnosed with it died from it,” says Dr. Robert Reiter, a professor of urology at UCLA Medical Center. “Nowadays, with early diagnosis it’s very curable. We believe because of increased curability the number of men who are dying from this cancer has decreased by about 25 percent during the last 10 years.”
Smart Business spoke with Reiter about who is most at risk for prostate cancer, what types of treatment options are available and what types of advances he expects in the future.
What are some of the typical symptoms of prostate cancer?
Early prostate cancer is almost always asymptomatic: it has no symptoms. In its late stages, when it progresses or grows in the prostate, it can cause urinary blockage. Also, if it metastasizes, it can cause bone pain which is the most typical symptom of late-stage cancer. The important point for most men to know is prostate cancer, when it’s curable, causes no symptoms.
What role does genetics play in prostate cancer?
If you have a first-degree relative, such as a father or a brother who has prostate cancer, your risk increases significantly. African-Americans have a much higher risk than Caucasians, and Asian-Americans have a lower risk than Caucasians.
What are some of the treatment options that are available?
Radical prostatectomy the removal of the prostate has traditionally been done through an incision. At UCLA we now do this with robotic assistance, which is a minimally invasive approach; it minimizes the hospitalization, the blood loss associated with the operation, and speeds up the recovery time of patients.
Radiation can be done in a number of different ways: a radioactive seed is a safe approach that works well for older men who have very low-risk prostate cancer. IMRT is a form of external radiation therapy that minimizes the number of side affects and is also appropriate for many individuals.
There a number of different treatments. The message that I have for patients is that one size does not fit all. You should seek care from someone who understands this and can give objective information about all of the different available treatments.
Currently, all of the approved treatments for prostate cancer have side effects. In the future, how could applying targeted therapies result in fewer side effects?
With a better ability to actually see the cancers and more knowledge about which cancers pose danger to individuals and which do not we can foresee utilizing what we call focal treatments. Instead of removing the entire prostate gland, just the actual cancer is removed. I would warn that there are people out there saying that they can do this now, but there is no evidence that it works. The reason is because prostate cancers are almost always multifocal: there are usually two or three or more tumors within the prostate. We don’t yet know which one is the dangerous one, so right now it’s beyond the edge of what technology permits.
From start to finish, how long does it take for a new drug like the one for prostate cancer that’s in clinical trial to be approved by the Food & Drug Administration?
Clinical trials usually occur in three stages. The first phase determines the safety of the drug. The second phase is a slightly larger trial to determine if it is effective. The third phase, which is the longest, is a very large trial sometimes more than 1,000 patients and it establishes whether a drug can prolong life or have some effectiveness. The total amount of time it can take from the first phase until acceptance by the FDA can be 10 years or more.
What future advances do you envision in the fight against cancer over the next decade?
Within the next decade there will be major advances in diagnostics that is, the ability to figure out which cancers are dangerous and which ones are not. This will allow us to decide who needs treatment and who does not which is a big issue with prostate cancer. We will probably have better ability to image tumors and determine the stage of the tumor. There will be further refinements in surgery and in radiation. Also, I think we are beginning to see new targeted therapies that will prolong the life of men even more.
ROBERT REITER is a professor of urology at UCLA Medical Center. Reach the UCLA Medical Center Department of Urology at (310) 825-5088.
“The charity should be efficient,” says Wade McMullen, partner at Vicenti, Lloyd & Stutzman LLP. “You don’t want your donations to go toward inefficient operations.”
Smart Business spoke with McMullen about how to decide which charities to give to, how to evaluate your contributions and what types of tax implications should be considered.
What criterion should a donor use when deciding which charities to give to?
First, the donor should look at how the charity spends the money that it receives. In terms of a percentage that is spent on the charitable purpose of the organization, it should be 60 percent or greater. You should look at how much money it’s spending for fundraising and how much it’s getting contributed for those fundraising expenses. The other criteria would be looking at that particular organization and seeing if it has large asset reserves or if it is using the money that is being donated. It shouldn’t have more than three to five years worth of operating expenses as reserves.
How do the financial statements of a nonprofit differ from a for-profit enterprise?
It used to be really different than a for-profit enterprise. The financial statements were not organized in such a way that they could be comparable from one to the other. Then in the mid-1990s, the way financial reporting was done changed, and they became more uniform. The biggest difference is that the for-profit financial statements don’t have anything to do with donor-imposed restrictions and they don’t show things on a functional basis (programs, management and general, and fundraising). They show things on a natural classification basis, which includes items like salaries, rent, etc. Some nonprofits also give information about natural classifications as they specifically relate to the functional categories.
How can a donor determine how much of a nonprofit organization’s budget is used for programs that fulfill their mission?
There are three ways to look at that. One, look at its Web site and get information on its budget and the different type of programs that it has. A more concrete way would be to look at its audited financial statements which show how much is spent on programs, how much is spent on management in general and how much is spent on fundraising. The third way would be looking at its federal informational tax return, which is Form 990. That not only gives information about expenses, but also lists who the key officers, directors and employees are and how much money they make.
How should a donor follow-up and evaluate their charitable donations?
One way of doing that is contacting the organizations and asking for reports. If you give a large donation, you can stipulate that you would like to have a report prepared and sent back to you about how the organization spent your money. Big foundations or donors will often ask for that type of information to verify that the entity has spent their money on what they had planned on spending it on.
Another way is to utilize the philanthropic infrastructure that supports donors. There are now organizations that help donors monitor their giving, how it is being spent and even helps them make decisions on which charities to give to.
There are also Web-based services like GuideStar.org and Give.org that give advice on screening.
What are some of the tax implications that should be taken into consideration when donating to charities?
From a business standpoint, there are limitations on the deductibility of charitable gifts. Usually, it’s limited to 10 percent of taxable income so that is a consideration for corporations when they give charitable donations. There is a good chance that, if you’re giving significant amounts to charities, you might be limited on how much you can deduct in one year. You can, however, carry those deductions forward on the corporation’s tax return for up to five years, but after five years you lose the deduction.
Because of the limitations that corporations have on their charitable deductions, we encourage them - whenever they possibly can to make those donations on a personal level rather than on a corporate level so that they can get the full deduction for the tax return. For individual donors, it is important that the organization you’re giving to is a 501(c) organization that is exempt from taxes. Also, you should be asking for acknowledgement letters of your donations so that you can deduct them on your personal tax returns.
WADE McMULLEN is a partner at Vicenti, Lloyd & Stutzman LLP. Reach him at email@example.com.
To turn the tide, it is important for companies to institute fraud prevention programs that combine thorough auditing procedures with open avenues of communication for employees who suspect foul play.
“People who know that someone’s watching have to think a little harder about committing a fraud than when it’s wide open and there are no deterrents in place,” says Karin Heckman Nelson, a partner at Vicenti, Lloyd & Stutzman LLP accountants. “If you know that nobody is going to do anything, it gives you an opportunity which is one of the things that you need in order to commit a fraud.”
Smart Business spoke with Nelson about the average financial loss of a company that has been defrauded, the types of collateral damage that can be sustained, and how to best implement fraud controls.
Why is fraud becoming so prevalent?
It’s hard to know if it’s becoming more prevalent or if today’s environment is actually encouraging more reporting of fraud. There has been increased attention to fraud with the recent large, publicized fraud cases. Also, the Sarbanes-Oxley Act has placed more emphasis on corporate governance and regulations. These factors may lead to more actual reporting of fraud rather than fraud going undetected.
What types of companies are most at risk, and what types of fraud are most common?
Organizations that process large amounts of cash are at greatest risk. Those would include financial institutions and retailers. However, there is risk in all companies and across all sectors, including governmental entities and nonprofit organizations.
As far as types of frauds, you have cash skimming where a lot of cash is handled and a person deposits some of it and keeps a portion for their own pocket. There are payroll schemes, which involve setting up fictitious employees and then having checks written in that person’s name, which are then deposited in the perpetrator’s account. It’s also possible to set up fake companies like Enron did. There are all kinds of possibilities.
What is the typical financial loss for a company that has been defrauded?
According to the 2004 Report to the Nation on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners, the median loss to small businesses was $98,000. The typical organization loses six percent of its annual revenue to occupational fraud.
In addition to economic losses, what types of collateral damage can a business incur?
There are other less tangible losses, which can include damage to a company’s reputation both with the public and with its employees. Fraud can also lead to reduced employee morale and open the doors to more deception: if an employee sees somebody else getting away with something they may say ‘Oh, that was easy,’ and try it themselves.
How can businesses implement fraud controls to protect their assets?
One of the most effective ways to limit fraud losses is to have an anonymous reporting mechanism such as a fraud hotline. The surveys have found that the most common way for fraud to be discovered is through tips. Employees are less willing to steal if they know that controls are in place to protect against theft. It’s important to have strong internal controls set up that both would deter someone and detect if a fraud has occurred. Internal and external audits can also be an important tool.
If a company suspects that fraud has occurred, what steps should it take to stem the situation?
First, it needs to investigate the allegation. The company can either assign captive employees or find someone outside the organization. If the claim is then substantiated, the company needs to take appropriate action such as termination and prosecution. These actions are important because they demonstrate that the company is not tolerant of fraud - which can discourage the next employee from taking such actions.
KARIN HECKMAN NELSON is a partner at accounting firm Vicenti, Lloyd & Stutzman LLP. Reach her at (626) 857-7300 or firstname.lastname@example.org.
“Your staff is a resource, and they will make or break you,” says Gail Cowan, director of human resources at Sander A. Kessler & Associates Inc. “My goal is to make sure that my organization has the right employees, with the right skill set, in the right places, at the right time.”
Hiring smart and then training effectively, she notes, will reduce turnover and costs while increasing productivity. This applies to the blue-collar environment as well, where sound practices can ultimately lead to reduced workers’ compensation losses.
Smart Business spoke with Cowan about successful hiring strategies, how to effectively develop employees and how to keep them once they are trained.
What are some best practices for locating and hiring employees that fit an organization’s needs?
For most companies, having a good referral system is important. The reason this works well is that you have people who are happy with your company, happy with the environment, they know the culture, they know the business, and they’re referring someone who will fit in well. We have one in place where employees receive a generous bonus if they refer someone that we hire. When interviewing, I look for computer proficiency, which is absolutely key in today’s business environment, and interpersonal skills.
How can effective communication about job expectations help increase retention?
Effective communication is absolutely key. People need to know what is expected of them; not only their job duties, but what type of culture they will be joining and what type of schedule are required. You have to be fair with people and let them know if the job will require more than the standard hours. If a person has the tendency to be an 8-to-5 kind of individual, then they’re not going to fit in that job. When I interview, I give them an idea of the culture, the expectation of the job and expectation of the personalities that they’ll be interacting with.
How can employees be trained and developed to reach their full potential?
There are three types of basic training that occur: business literacy, technical knowledge and computer proficiency.
Training should be easily accessible for the employee, so that they can attend the training as well as maintain their jobs. You have to set a career path for individuals, so that they know how to build the training in a direction that will take them to the next job where they will have more responsibility and, hopefully, more money. You can also train people by enriching their job. This means adding responsibility and giving them projects to work on, so they’re stretching outside of their usual mundane tasks.
What steps can a business take to decrease the likelihood of losing a key employee to a competitor?
You need to make sure that the salaries and benefit packages are competitive and that there is a work/life balance. In addition, you should provide challenging work. When individuals are engaged in what they’re doing, feel empowered with what they’re doing, and feel that they are making a contribution to the organization’s ultimate success, they’re not going to leave you.
It is also important that employees have good relationships with their manager. That’s the number one reason why people leave a job. When there is a good rapport with their manager and the manager is encouraging and mentoring them, they won’t leave. If the employee is a manager, then it’s up to senior management to make sure that they keep that manager motivated.
What types of reward and recognition programs are most effective for keeping morale high?
There are two types: one that is frequently given and one that is reserved for achieving a long-term goal.
We use spot bonuses which are immediate rewards that can be given at any time. Each manager has a budget that they oversee and they can recognize a job well done and give someone a pat on the back with a $50 spot bonus.
For recognizing long-term achievements, we give out an annual award called the Kirsch Kup, which is named after one of our partners. The criterion for this award is based on our mission, vision and values, with managers nominating individuals who have been with the company for at least one year. The winner receives $5,000 in cash, reserved parking, and their name is engraved on a trophy that sits in our lobby. It’s very meaningful and not given lightly.
GAIL COWAN is the director of human resources at Sander A. Kessler & Associates Inc., a property and casualty insurance and employee benefits firm. Reach her at 310-309-2200 or email@example.com.
“Sometimes a letter of intent actually can be a contract. It really depends on the binding nature of the letter of intent,” points out Marshall Horowitz, partner in Alschuler Grossman Stein & Kahan LLP’s Transactional Department.
Smart Business spoke with Horowitz about how letters of intent should be used, when they should be made binding, and what type of legal disputes can arise if not done properly.
What is the basic principle behind a letter of intent?
A letter of intent is a way for businesspeople to gauge a level of interest in a project or transaction without having to go through the whole process of entering into a long-form contractual agreement. It can be an effective and cost-efficient way to determine the level of interest that parties have in a transaction. It also has the benefit of being able to focus the parties’ expectations about a deal, set up the key terms, make sure the parties are on the same page, and identify potential road blocks.
How does a letter of intent differ from a contract?
The pragmatic distinction is that a letter of intent is usually more of an outline of a potential business deal. The parties lay out the basic principles behind a deal and highlight some of the main points, but don’t describe in writing all of the details. In a contract, you want your i’s dotted and your t’s crossed.
The other distinction is that contracts with definitive documentation would almost always be binding, whereas only certain provisions are usually intended to be binding in letters of intent.
What are some of the business functions of a letter of intent?
Often, the business function of a letter of intent is for the businesspeople to avoid some of the costs and expenses of negotiating long-form documents. Sometimes, you will put confidentiality provisions in a letter of intent.
Although I would recommend that there is a separate disclosure agreement especially if there is sensitive technology that might be discussed. Also, you can lay out timelines, major objectives and make sure that people understand the due diligence process.
How should a business negotiate a letter of intent?
The sooner they can bring their lawyers in, the better. At the end of the day, lawyers can look at potential pitfalls in a letter of intent that businesspeople might or might not be thinking about. For example, breakup-fee clauses are often put into letters of intent. These can sometimes be very significant sums, so you want to make sure that type of provision is done right.
Should businesses make their letter of intent binding?
If the parties actually intend to be bound, then certainly they should make it binding. However, normally, businesses only want some of the provisions to be binding. They really look at a letter of intent as more of a document that lays out the basic interest in doing some sort of transaction or working together on a project, but they know that they really need to do the detailed negotiation later on.
For example, the acquirer of a business knows that it might need to do a lot of due diligence before it finalizes the price and finalizes whether it wants to do a deal, but it wants to indicate its interest in doing the deal. In that case, the acquirer would only want certain provisions of a letter of intent to be binding.
What are some of the common legal disputes that arise from letters of intent?
The most common legal dispute is whether or not a letter of intent is binding. There is a well-known case, the Texaco/Pennzoil case, where I believe a jury awarded $9 billion to one of the parties over a letter of intent that the other party thought was not binding.
A typical dispute that might arise is if a business is looking to get some financing. They enter into a letter of intent and think it should be binding, but the financier never thought it was binding. The party receiving the financing is relying on the agreement, and they go ahead and take certain actions, stating that they had a binding letter of intent. This points out the need to have a well-drafted letter of intent that makes very clear which provisions, if any, are binding and which provisions, if any, are not binding.
MARSHALL HOROWITZ is a partner in Alschuler Grossman Stein & Kahan LLP’s Transactional Department. Reach him at (310) 255-9019.