Troy Sympson

For as long as there have been computers, there have been hackers. And as soon as a hacker or scam is identified, a newer, more dangerous one pops up. So, it’s no surprise that yet another wave of cyber attacks is targeting businesses.

The most common types of cyber crime are malware, phishing, vishing and SMiShing, and the primary threat is malicious software that infects a computer. When it has done so, the malware has the ability to alter the user’s online browsing session and simulate the user logon and transaction activity with any of that person’s online banking portals and related applications, says Matthew J. Zeck, VP, CTP, a treasury management sales manager with Fifth Third Bank.

“You used to have to click on a link to be exposed; now, hackers are going through the back door and you don’t even know about it,” says Zeck. “These cyber criminals keep evolving and growing.”

Anti-virus and anti-malware software can offer protection if you keep these programs up to date and regularly run scans. A firewall can also help prevent your computer from being infected.

If your company has one or more Internet sites, says Zeck, it’s a good idea to incorporate intrusion detection and vulnerability management, and to ensure that your employees cannot override or circumvent security software. Implement a policy of updating your operating system and security software on all computers, and assign someone the responsibility for seeing that this is done regularly.

Smart Business spoke with Zeck about how to identify cyber crimes and how to protect your business against them.

How can you tell if your computer has malware running on it?

Malware, or ‘malicious software,’ is designed to infiltrate or damage a computer system without the owner’s knowledge or informed consent. Examples of malware include computer viruses, worms, Trojan horses, spyware and other malicious software.

By design, malware is difficult to detect. In most cases, the creator of the malware program does not want the victim to know that the malware exists. Each piece of malware is somewhat different, which makes it difficult to make a list of definite signs.

But some signs that indicate your computer may be infected include:

  • Additional toolbars added to your Web browser that you did not authorize.
  • Pop-up windows that advertise services that you did not request.
  • Unusual windows that show up and possibly go away when you start your computer or are browsing the Internet.
  • Unusual links showing up in Web pages where there are not usually links. These links will probably lead to Web pages advertising some service.
  • An unusual slowdown in your computer’s performance.
  • The appearance of unexpected programs in your computer’s startup folder.

What should you do if you discover malware on your computer?

If you suspect that your computer has been infected by malware, avoid using it for any private or personal transactions. Contact a computer professional as soon as possible to have your computer cleaned of all malicious programs. Some malware downloads other pieces of malware once it installs itself on a victim’s computer. So if there is one piece of malware, there is a good chance that there are more hiding in other places. Security is like a chain; it’s only as strong as its weakest link.

How does phishing work?

Phishing occurs when a fraudster impersonates a legitimate company or organization (this is the bait) using e-mail, faxes, and/or Web sites in an attempt to lure recipients into revealing confidential information. The messages are well crafted and are often difficult to distinguish from those of the companies they impersonate.

Although they are designed to be nearly impossible to distinguish from legitimate e-mails, there are some common signs to look for.

  • They urge the recipient to click on a link to update or verify account information.
  • They convey a sense of urgency and often mention negative consequences for failing to respond.
  • They do not contain any personalization — the recipient’s name, the last four digits of their account number or other information that shows that the sender knows something about the recipient’s account.
  • They are unexpected and are not consistent with other e-mails from the company.
  • They may contain spelling errors and bad grammar.

What is vishing?

Vishing is related to phishing in that the basic scam is the same. The fraudster is trying to trick you into divulging personal or financial information or to download malicious software. Vishing incorporates mass-distributed automated phone messages into the attacks. In this type of scam, special response phone numbers are used instead of fake e-mails and Web sites. The term ‘vishing’ is a combination of the words ‘voice’ and ‘phishing.’

How does SMiShing work?

The newest form of phishing targets cell phone and mobile device users. The term SMiShing is derived from a combination of the term ‘phishing’ and ‘SMS’ (short message service), which is the technology used for sending text messages.

Similar to phishing, SMiShing uses cell phone text messages to deliver the bait to get you to divulge personal information. The ‘hook’ — the method used to actually capture your information in the text message — may be a Web site URL.

However, it has become more common to see a phone number that connects to an automated voice response system.

Matthew J. Zeck, VP, CTP, is a treasury management sales manager with Fifth Third Bank, Greater Cincinnati Affiliate. Reach him at (513) 534-0344 or

Now more than ever, executive compensation plans are under the microscope. As a result, organizations must be careful when it comes to their executive compensation strategies.

In the past, many executives have been compensated purely on financial metrics. However, such practices do not recognize that successful financial performance is a result of successful operational strategies.

Moreover, with the current heightened level of scrutiny on executive compensation, many firms are actively benchmarking their compensation packages against those of their peers.

“Compensation packages require careful deliberation and should be tailored specifically to each organization,” says Harry Cendrowski, CPA, ABV, CFF, CFE, CVA, CFD, CFFA, the managing director of Cendrowski Corporate Advisors LLC.

Smart Business spoke with Cendrowski about the issues surrounding executive compensation packages and the strategies you can use to make sure your package is effective, fair and legal.

What current issues do you see with respect to executive compensation?

Many public corporations compensate executives based on earnings, revenue and market share growth — in other words, they look largely at financial metrics in assessing an executive’s performance. However, financial metrics are the output of successful operations, product quality and a significant focus on the customer. Success in these areas often foreshadows successful financial performance, not vice versa.

For instance, Toyota was long revered for its customer-first focus. This intense focus produced successful financial results: The company was building products consumers were willing to buy, and many became repeat buyers of Toyota products.

More recently, however, a former high-level Toyota executive stated that ‘anti-family, financially oriented pirates hijacked’ the company, implying that some recent Toyota executives became too focused on finances instead of Toyota’s customers.

The actions of these individuals, arguably, caused Toyota to perhaps grow too fast, too soon.

Do some executive compensation packages overcompensate executives for excessive risk taking?

I’m not sure I’d phrase it that way. We’d first have to define what it means for risk taking to be ‘excessive.’ For instance, is it fair to state that banks were taking ‘excessive’ risks when many other financial institutions were taking similar risks? Weren’t their policies simply competitive?

Of course, hindsight is 20/20. Congress and many in America would like to point the finger at banks for taking excessive risks, but the financial policies of banks allowed them to deliver stellar returns to investors for many years. In fact, rather than discussing ‘excessive’ risk taking in the financial sector, I’d argue that we should really be investigating why so many institutions took similar risks. Such actions only serve to increase the correlation between portfolios of differing banks, exacerbating the effect of any shocks to the economy. This, in my mind, is really a fundamental causal factor of the credit crisis.

Are executive compensation practices to blame?

In part. There’s a great push within public companies right now not to establish ‘competitive’ executive compensation practices. The way this is achieved is by establishing a peer group of similar companies and benchmarking pay packages with respect to these peers. One might also argue that similar practices occur within the strategy groups of organizations because no one wants to be outdone by a competitor.

Unfortunately, one of the byproducts of such benchmarking is that groupthink can manifest itself within a peer group. For example, a firm implements a new policy that is highly controversial but also successful. Another firm then implements this policy hoping to achieve similar success, and then another and another, etc.

Pretty soon, several firms have implemented this once-controversial practice, not because their executives think it’s in their best interest, but because other firms are doing so. This is particularly dangerous, especially if some executives and board members don’t really understand the underlying dynamics of the practice, such as collateralized loan obligations and collateralized debt obligations.

How can that follow-the-leader strategy be overcome?

Perhaps the best piece of advice I’d give executives and those devising compensation packages is to listen to their private beliefs and select actions that they feel are in the best interest of the firm. Don’t switch strategy simply because another competitor does so. While they may experience high returns in the short term by ‘following the leader,’ these practices may prove detrimental in the long run.

For instance, several years ago, when oil prices hit $145 per barrel, many in the industry felt the price had appreciated too quickly. However, it kept rising and rising, arguably because investors dismissed their own private beliefs, instead telling themselves, ‘I’d better get in on this before the price goes even higher.’ Then, Goldman Sachs famously stated oil prices would soon hit $200 per barrel. Well, it never happened.

Oil subsequently crashed to about $35 per barrel, and with rapid speed. It just goes to show that, more often than not, what goes up does comes down, especially when prices appreciate rather quickly.

Harry Cendrowski, CPA, ABV, CFF, CFE, CVA, CFD, CFFA, is managing director of Cendrowski Corporate Advisors LLC. Reach him at (866) 717-1607 or, or visit the company’s Web site at

In a time of frozen wages and other monetary cuts, benefits are more important to employees now than ever. Your work force needs quality benefits for their physical well-being, and they need work-life benefits for mental well-being.

Many organizations are aware of this, and several of them are taking steps to alleviate these issues. The problem, however, is that, many times, benefit changes or enhancements go unacknowledged and, therefore, unnoticed.

“Many organizations have the right things in place and are more than willing to help with the work-life balance but don’t properly communicate these things,” says Karen Mathews, the director of Work Life Services/Human Resources for WellStar Health System. “If you don’t communicate, your employees won’t understand or appreciate what you’re offering them.”

Organizations should start by benchmarking against other companies’ best practices, and look at other high-performing organizations inside and outside of their industry. World-class organizations tend to excel because they have the best talent. If you have a great place to work, offer quality benefits and help employees with their work-life balance, attracting and retaining the top talent becomes that much easier.

Smart Business spoke with Mathews about ways to effectively communicate benefit decisions, enhancements and changes to your employees and why the work-life balance is so important.

Why is it so important to communicate any and all benefit decisions?

Transparency is the key to trust. Employees often value a benefits package as much as or more than a compensation package. If you have any changes in your benefits, those changes will have a direct impact on your employees. Since organizations spend a significant amount of money on benefits, it’s important that you make sure employees know how to effectively utilize those benefits.

If an employer doesn’t properly communicate changes or enhancements, what consequences could it face?

Organizations typically spend 30 percent of their overall budgets on benefits. If you fail to effectively communicate those benefits, it has a direct negative impact on both the employees and the overall organization. For employees, it may mean that they misunderstand their options, fail to take full advantage of the benefit program, fail to appreciate what is being provided for them and/or develop a negative perceived value of the benefits package. For the organization, it means low utilization, more time spent managing complaints and higher costs.

Spend the time properly communicating benefits on the front end, and you won’t have issues that later have to be repaired — at a premium. Many times a company has to completely rework its benefits plan just because of employee dissatisfaction. Needless to say, that creates a low return on value.

How do changes in benefits affect employees?

Benefits matter to employees, and the kind of benefits an organization offers should be based on what is important to the employees. Employees want family-friendly benefits; it’s not just about health insurance or a 401(k) plan. So, again, benefits are critical, especially in this economy. But, what’s also important is how user-friendly the benefits process is and how many options are available. For instance, employees are very interested in work-life benefits, such as guaranteed time off, childcare assistance and retirement benefits. People want and need a ‘total’ benefits package.

If cuts have to be made, how should employers handle it?

Transparency is key, whether you’re cutting employees or the benefits package. When it comes to cutting people, be careful and consider all other options first. People are your single most important asset; evaluate deeply before you act on cuts. Often, it can seem like a good quick fix to a bottom line, but what usually happens in the long run is you end up hiring those same positions back. It actually costs more money to hire positions back than the savings you realized on the front end when you eliminated those positions.

Still, sometimes cuts are inevitable. If staffing cuts are needed, look for opportunities to offer people other positions in the organization. Make sure you have a strong performance management model in place so you can clearly show employees which cuts are being made due to the economy and which are a result of performance.

That same transparency applies to cuts to the benefits package. If you have to do it, show the pain the organization is in and why the cuts have to be made. Be clear about whether the cuts are for the short term or the long term. With any kind of cut, be supportive, be clear, be strategic and, most of all, be careful.

Why is the work-life balance so important?

In 2008, the Families and Work Institute conducted a national study on the changing work force. One of the key findings was that employees’ physical and mental health has a significant impact on the work outcomes that employers are most interested in, such as engagement, turnover, job satisfaction and productivity. The study also identified six criteria that are critical to an effective workplace, and one of those was having a good work-life balance.

Employees want to know that the organization and their supervisors care about them. Are you responsive to your employees’ personal and family issues? Do you offer flexibility? These types of things are critical to today’s employees and are key components of an effective workplace.

Karen Mathews is the director of Work Life Services/Human Resources for WellStar Health System. Reach her at (770) 792-4968 or

Tuesday, 26 January 2010 19:00

Tax time is coming

Legislators have been working overtime for the past 12 months, but with all the buzz surrounding this renewed Congressional action, tax implications of new legislation are often overlooked.

 In brief, there are three significant pieces of legislation that could affect taxpayers. The first is an extension of tax provisions such as Section 179 deductions that benefit small businesses. Several years ago, limits on Section 179 depreciation and bonus deductions were raised to encourage business spending. Extensions to these raised limits have passed in the House but not yet in the Senate. Similarly, the House voted to extend into 2010 a tax on estates that was originally set to expire at the end of 2009. However, the Senate has not yet passed a bill extending the estate tax into this year.

The third piece of legislation continues to be debated on both the House and Senate floors — a comprehensive health care reform bill. While each house of Congress has passed its own version of the bill, a uniform piece of legislation still eludes lawmakers.

 “Any taxpayer would be well served to be fully aware of the tax provisions contained within these three bills,” says Walter M. McGrail, JD, CPA, a senior manager at Cendrowski Selecky PC. “However, while the implications of Section 179 and estate tax bills are more frequently discussed, those related to the health care bill have attracted little attention to date.” 

Smart Business spoke with McGrail about the two versions of the health care bill, the tax provisions included within them and what expectations taxpayers should form regarding pending legislation.

What is the major difference between the House’s health care bill and the Senate’s?

What will attract the most attention is the different ways the House and the Senate approached paying for health care reform.

The House bill contains a provision to tax high-income individuals. This would create a surtax on anyone making more than $1 million if married/filing jointly, or more than $500,000 for any other taxpayer. If you surpass those limits, you will have to pay an additional 5.4 percent on all the income that goes over the limit.

The Senate took a different route by increasing the Medicare tax on wages and self-employment income over certain limits. The current combined employer and employee tax on self-employment income is 2.9 percent. The Senate’s bill would raise the rate an additional 0.8 percent, to 3.7 percent, effective for all wages and self-employment income in excess of $250,000 if married/filing jointly, or in excess of $200,000 for all other taxpayers.

Is there any other part of either bill that taxpayers should be aware of?

Part of the Senate plan includes an excise tax on so-called ‘Cadillac plans’ — an excise tax of 40 percent to be levied on insurers that have medical benefits that exceed a certain dollar threshold for covered insureds.

If the cost of a single person’s plan is in excess of $8,500, there will be a 40 percent tax on the excess. For family plans, the 40 percent tax will kick in on anything in excess of $23,000.

While this seems to only apply to insurance companies, the excise tax also extends to self-insured employers. If a medium to large company decides that it wants to self-insure for medical costs, that same 40 percent excise tax applies on the same levels of benefits.

As far as to which plan is ‘better,’ it all depends on where you stand. If you’re making, say, between $500,000 and $700,000 per year in wages or self-employment income, you’ll definitely like the House’s surtax on people making more than $1 million. If you’re making more than $1 million a year in income of any source — including interest, dividends and capital gains income — you’d much rather see the Senate’s version that taxes wages and self-employment income.

Depending on what your source of income is and what your level of income is, you’re going to have a vested interest in one plan over the other.

What, if anything, can taxpayers do to prepare for these changes?

When tax changes are on the horizon, you usually have a fair amount of opportunity to prepare for those changes. But since there are two versions of the bill — each with its own tax on different types of income streams — and no one knows what version will be passed, planning becomes more difficult.

However, if the Senate bill passes, you’ll see many people employ a longstanding technique of avoiding wages and self-employment income. For example, if a small business owner who operates an S Corp makes $1 million in a year and pays himself $1 million in salary, he would be subject to the wages and self-employment surtax.

However, if that same business owner paid himself a more reasonable salary, say $100,000, and took the other $900,000 as distribution on earnings from the S Corp, then he would avoid wage and employment taxation.

If the House bill is enacted, things get tougher. It’s pretty hard to hide from income.

You can do things such as salary deductions to get under $1 million for the year or postpone income where possible, but it’s not likely that anyone would forgo income to avoid an additional 5.4 percent of taxes.

Once you’re over the limit, you’re over, and you’re paying the surtax.

WALTER M. McGRAIL, JD, CPA, is a senior manager at Cendrowski Selecky PC. Reach him at (248) 540-5760 or

Monday, 07 December 2009 19:00

Get engaged

With the holiday season upon us again, many individuals and corporations are looking into charitable activities. But, there’s no reason charity should be a once-a-year endeavor. Many charities need assistance year-round, and getting your company involved in charities is a great way to help those less fortunate in your community.

Getting involved in community outreach programs takes time and money, but doing so will give far more than it takes. Besides feeling good about doing something positive, you’ll be benefiting the communities you do business in.

“When your company becomes actively engaged in each of the various communities that it serves, it not only benefits those communities, but also fosters a sense of accomplishment and commonality among co-workers and gives your business another dimension,” says Oscar H. Martinez, a senior vice president and business banking manager with Wells Fargo Bank.

Smart Business spoke with Martinez about how companies can take part in charitable endeavors and the various benefits that come with getting involved.

Where should executives look to get involved in the community?

I think executives have to know and understand the needs of the community and find something that they as an individual have a passion for, as they will be more engaged and serve that charity or nonprofit with more vigor. In today’s wonderful age of technology, you can use Google as a resource to narrow down the various community organizations by category. In the end, it all comes back to a passion for a particular interest.

How do you get employees to buy in to community outreach programs?

Create team-building events around community service, which helps expose employees to various organizations and programs. It usually takes off from there. In different settings around your organization, talk about the various community organizations, and do this all year long, not just at certain times of the year. By talking about many different charities, you’ll find that most, if not all, of your employees have been touched by something that instills a passion for a certain cause. Therefore, they become champions of that cause through their own volunteerism.

The interesting thing is that when one person talks about his or her volunteer work, it kind of permeates through the rest of the company. Then, it becomes fun and a little competitive, with employees inviting one another to their community service projects. In the end, everyone is helping with each of the various community outreach programs.

What should CEOs know before getting involved in community activities?

CEOs should understand that, from time to time, they will need to be flexible and give employees time to volunteer for certain events and projects. Time commitment is generally a large part of being actively involved and it may require some well-planned scheduling. Equally important would be to understand the needs of the various community groups so as to maximize the positive impact to them.

What challenges do employers confront when balancing business and community involvement?

As mentioned, the time commitments will require careful consideration and planning. Employers also should make sure they don’t let political or business alignment dictate which charity they work with. This definitely requires a balancing act, as the employer needs to maintain objectivity and separation of the two to avoid any conflicts or appearance of conflicts of interest.

What benefits will executives and employees gain when they are engaged in the community?

The benefits are both tangible and intangible. The greatest satisfaction is knowing that you made a difference in someone’s life in a positive manner. The tangible benefit is having the local population recognize that your company is engaged in the community and cares about the people of the community. Being genuine and sincere gives others a comfort level; they trust that you truly have their best interests at heart.

When people and businesses are fully engaged in the communities in which they live and work, the community tends to become stronger, economically and socially, which becomes a huge benefit for those executives and employees, as this is their community as well.

What enrichment will corporations experience, over time, as they reach out to the community?

The more involved that corporations and their team members are in the community, the stronger those communities will become.

It truly is a team concept that is embraced by all and will make the community thrive and flourish. It is also a great example to the youth to get them involved early and eventually perpetuates itself. People tend to gravitate to those who are a positive influence in their lives and those around them.

I know it may sound like such a cliché, but it is all about people and building relationships, and the only way to do that is to get involved and stay involved.


Oscar H. Martinez is a senior vice president and business banking manager with Wells Fargo Bank. Reach him at (713) 284-5561 or

Monday, 26 October 2009 20:00

Giving back

Every business owner wants to make an impact and leave behind a strong legacy. One of the best ways to do that is to not only create a strong company but to also consider creating a charitable foundation.

A charitable foundation gives you an opportunity to influence your community, in terms of where you place your money, how you make your grants and which organizations you serve and support. Take, for example, Tecumseh, Michigan. It’s not a town many people have heard of, but it’s consistently voted one of the top 100 places to live in the country. A big reason for that is the philanthropic work of Kenneth G. Herrick, who founded Tecumseh Products Co. and created The Herrick Foundation, which is one of the largest charitable foundations in Michigan.

Among other things, Herrick gave to libraries, museums, schools, human service agencies and health care providers.

“During his lifetime and since his passing, Herrick was a significant philanthropist, helping to shape and grow the community of Tecumseh,” says Gregory A. Schupra, the vice president and group manager for the Charitable Services Group at Comerica Bank. “Like Herrick, you too can perpetuate your legacy and affect the quality of life in your community for generations through a charitable foundation.”

Smart Business spoke with Schupra about charitable foundations, how to set one up and what you need to know when doing so.

Why should business owners establish a charitable foundation as a charitable trust as opposed to setting up a nonprofit corporation?

There are two main reasons: One, with a charitable trust, you can protect and preserve your charitable intents more easily. Two, you can protect and preserve your family’s involvement with the foundation as well so that it does not get ‘hijacked’ by outsiders.

When you set up a nonprofit — no matter what state you’re in — the trustees or directors can amend the articles and bylaws of the nonprofit to change the charitable purpose without anyone knowing or having any say-so. However, if you have a charitable trust, the trustees or directors would have to go to court to make a change like that, at which point it would be up for public debate.

Another aspect of a nonprofit is that trustees and directors are self-appointing, so, if they keep appointing nonfamily members to the nonprofit, the family can lose all authority and control. You could put family protection into the articles and bylaws of the nonprofit, but it’s a lot easier to have a charitable trust with certain requirements that family members have to be involved.

What tax implications should business owners be aware of when creating charitable foundations during their lifetimes?

The thing to keep in mind is that tax law is different for gifts from people’s estates as opposed to gifts given to a foundation during a lifetime. For example, if you have a piece of real estate — which many business owners do — and you give that real estate to your foundation during your lifetime, you can only deduct the cost basis. On the other hand, if you leave that real estate to your foundation in your estate, your estate can deduct the full fair market value. It’s the same for closely held stocks. If you give during lifetime, deduction is only on a cost basis; if you leave through your estate, deduction is full fair market value.

How should the foundation’s assets be invested?

First, the foundation has to determine what its grant-making and spending polices are going to be. If it’s going to grant out a higher percentage of its assets each year, then the assets should probably be invested in more fixed-income vehicles, such as bonds and treasury bills, in order to preserve more value. On the other hand, if the foundation is going to be giving, say, only 5 percent a year — which is the required minimum by law — then the asset allocation should be in longer-term investments like equities.

If you asked this question a year ago, I’d say that a perpetual long-term charitable foundation should have an asset allocation of 60 percent equity and 40 percent fixed income. But, because of the paradigm shift in the economic markets, it’s now 40-50 percent equity and 50-60 percent fixed income. It’s likely to stay like that for the next three to five years.

Bottom line, you want to create an asset allocation that fits your spending needs and the short- and long-term objectives of the foundation.

When looking to set up a charitable foundation, what are some other key considerations?

The key is to ask yourself the following four questions:

  • Do you want to conduct charitable activities (educate, feed the homeless, etc.) or make grants to organizations that conduct the charitable activities?
  • Do you want to establish during your lifetime or testamentary?
  • Do you want to support specific charities, particular charitable purposes or geographic areas?
  • Do you want your grant making to be competitive or noncompetitive?

There are many philanthropic options for business owners, and those options might seem complex, but if you work with professional advisers who know what to do and how to do it, you can have a great experience, both during your lifetime and by perpetuating your legacy over time.

Gregory A. Schupra is the vice president and group manager for the Charitable Services Group at Comerica Bank. Reach him at (734) 930-2417 or

Monday, 26 October 2009 20:00

Save time on banking

If you’re spending too much time traveling to and from your bank — not to mention the time spent parking and waiting in line to make your business’s deposits — you’re wasting more than time. You’re wasting money and valuable company resources.

And don’t think it’s any different if you send someone else — many times when you send employees in your place, they don’t just go to the bank, they also run a few errands of their own.

But you can streamline your processes, saving both trips to the bank and money, by using remote deposit capture, an online banking function that allows businesses to scan checks and then transfer the images electronically to the bank for posting and clearing.

“Besides saving you time, remote deposit capture helps you maximize productivity in the office,” says Christine Thompson, vice president of branch administration at First Place Bank. “Plus, it’s safer. Instead of having your employees exposed as they travel to the bank with checks, they stay safely inside while the bank processes your hard-earned funds.”

Smart Business learned more from Thompson about remote deposit capture, how it works and how it can benefit your company.

How does the remote deposit capture process work?

Once you start a remote deposit capture program with your bank, you’ll receive a scanner, which you’ll use to scan customer checks as your business receives them. Once a check is scanned, an electronic file is sent to your bank, and the bank will then process the check.

The original checks never leave your business and can be destroyed after a certain period of time. The images, however, remain available to you via an online system for up to 90 days, and you’ll have access to them for any customer service inquiries or audits.

How can remote deposit capture improve recordkeeping, increase productivity and reduce costs?

Everything is electronically filed and stored, so there’s less of a chance for human error. The remote deposit capture system will make sure that deposits balance before the process is completed, which further decreases errors.

If your company has more than one location, each location can scan the checks it receives and deposit them into a single account at one bank. Therefore, the owner will always be able to see all the images deposited into that account from multiple locations. Plus, audits will be less burdensome because information is readily available and easily accessible.

Again, it increases productivity and reduces costs by saving the time and expense of having to make trips to the bank, and the owner can use his or her time and money more productively.

Another benefit comes from speeding up cash flow, which accelerates the clearing process, which lessens the amount of time you’re waiting for the funds to be available.

Are there any downsides to remote deposit capture?

There is some potential risk for insider fraud, but there are ways to control it. Typically, remote deposit capture services prevent problems or issues within a company, unless all access is assigned to one individual and he or she has full control of the information and transaction initiation. Therefore, you have to have a separation of duties to reduce the risk of fraud.

Also, banks usually provide training on how to use the system and the best practices to reduce fraud. They will also provide you with a contract defining who is responsible for what. During the time frame that you are responsible for the physical checks, make sure you have a policy about where you store them and how you destroy them.

Is there a risk of consumers’ personal information being compromised with this process?

A consumer’s checking account number is on the check whether the check is taken to a bank or scanned at a remote location. All programs are encrypted and password protected to ensure security and protection of information. The bank’s contract usually defines how the physical checks should be stored and then destroyed after a certain period of time. No matter what, your customers’ information will be protected.

Does using remote deposit capture require a financial investment?

Yes. There is the cost to rent or purchase the scanner and/or there may be some per-item costs, but they tend to be lower than when presenting paper. Plus, if you keep your balance high enough in your account, the bank may waive the fees. For most businesses, there is a cost savings with using remote deposit capture.

The cost of scanners is similar to the cost of a modest PC or copier, and there are minimal increases in operating costs in most cases. The product can pay for itself very quickly by increasing productivity and decreasing transportation costs.

The product also may speed up your cash inflow because it allows you to conveniently make deposits every day, providing you quicker access to your money, which, in turn, may reduce your borrowing costs or increase your interest income.

Christine Thompson is vice president of branch administration at First Place Bank. Reach her at (248) 386-9876 or

Friday, 25 September 2009 20:00

H1N1 preparations

It should come as no surprise to any business owner that the world is facing the very real prospect of an H1N1 (also known, although not appropriately, as “swine flu”) pandemic this coming flu season.

Employee health-related absences always present a challenge to employers, and this challenge will become that much greater depending upon the eventual severity of the outbreak. In a survey recently published by the Harvard School of Public Health, researchers found that a mere one-third of businesses believed they could sustain their operations without severe disruptions should a significant segment of their work force be out sick.

“Everyone from the Center for Disease Control (CDC) to President Obama to Sesame Street’s Elmo are offering advice on dealing with H1N1,” says Peter B. Maretz, a shareholder with Stokes Roberts & Wagner ALC. “Wash hands frequently with soap and water or at least use hand sanitizer, cough into your elbow, stay home if you’re sick, keep your distance from people who are sick, etc. In other words, use common sense.”

Smart Business spoke with Maretz about H1N1 and what you can do to make sure your company is prepared.

What are the first steps to take to minimize the risk of H1N1?

In terms of steps you can take to minimize the risk of H1N1 running through your workplace, common sense should prevail. Of course, make hand sanitizer available around the office; tell people to go home if they appear sick; provide information on vaccination sites and allow people time off to get vaccinated; or, better yet, arrange to have flu shots administered at your workplace.

Get a sense for what your absence levels are typically like for past flu seasons, so you can better gauge if you are reaching abnormal levels. Look for opportunities to cross-train employees to better cover critical positions when key people are out. This is particularly critical when it comes to functions such as payroll. ‘My paymaster was sick’ is no defense to a late payment claim.

How can you educate employees on H1N1?

Make it clear to your employees that they should not come to work if they feel sick, and confirm to them that there is no penalty or retaliation for taking this time off. While there is no legal requirement to provide paid sick days, it does make for a good practice, so if your business does not afford its employees that benefit, consider extending it in advance of the flu season.

There is a fair amount of flexibility in how these policies are crafted. To avoid the problem of employees using them for every bump or bruise or, as is more common, nursing a hangover, consider making the first sick day unpaid, and then the sick days immediately following paid. Along similar lines, consider requiring a doctor’s note for it to count as a paid sick day and/or a doctor’s note to return to work. Some agencies are suggesting suspending the requirement of a doctor’s note should medical facilities become inundated with patients, so be mindful of that. Absent a doctor’s note, according to the CDC, a flu patient is safe to be back in the workplace 24 hours after his or her fever breaks.

Are there other ways employers should alter their time-off practices?

Oftentimes, sick leave is lumped in under the broad category of ‘paid time off’ along with leave such as vacation. While that may make it easier on payroll and accounting, there is no requirement that unused sick days roll over each year. So-called ‘use it or lose it’ policies are permissible. Such policies are not, however, permissible for vacation days. If you lump sick days in with vacation days, they will roll over and accrue from year to year (with some capping permissible) like vacation days.

Finally, clarify that sick days can be used to care for children or spouses who are sick, or to care for children if schools are closed due to the pandemic. Of course, there is a potential for abuse, but the impact of an employee getting away with a sick day is minor compared with the risk of a truly sick employee infecting the rest of the workplace.

Are there any time-off concerns under the Family Medical Leave Act?

Yes, you have to be mindful of the parameters for leave under the Family Medical Leave Act (FMLA). As of this year, for leave to qualify under FMLA, the employer has five days to request the employee to provide medical certification of his or her condition, and then five days to notify the employee whether the requested leave qualifies for FMLA. The employee’s condition must be ‘a serious health condition,’ which, under FMLA, means he or she must miss at least three consecutive days of work, go to the doctor within seven days of onset of the condition, and then their doctor must call them back for follow up within 30 days. While some employers may choose not to strictly follow these parameters during the flu season, understand those same employers may be stuck with those lax standards or face discrimination or disparate treatment claims should they try to tighten things up once the flu season is passed.

Is an H1N1 outbreak truly possible?

To be sure, the hope is that the fears of a pandemic are overblown, much like the Y2K doomsday predictions. Nevertheless, you have to be prepared for anything. Let common sense be your guide, and administer policies consistently from employee to employee.

Peter B. Maretz is a shareholder with Stokes Roberts & Wagner ALC. He regularly advises businesses on all aspects of employment law. Reach him at or (619) 237-0909.

Friday, 25 September 2009 20:00

Dissecting RAC

Although many Americans are focused on the key points of the proposed health care reform legislation, health care providers are instead focusing on existing legislation that could negatively impact their cash flow.

As a result of the Medicare Prescription Drug Improvement and Modernization Act of 2003, Recovery Audit Contractors (RACs) will audit historical claims to identify improper payments previously paid by Medicare. RACs are paid on a contingency fee basis according to identified overpayments, which will be charged back to the provider in accordance with the legislation.

The RAC process places hospitals under an intense level of scrutiny that will force changes in the way services are documented for reimbursement purposes.

“The main issue is not that the hospitals are requesting reimbursement for services they did not provide,” says Sheldon P. Mandelbaum, MBA, senior manager at Cendrowski Corporate Advisors. “The increasing complexities of documenting and translating those services have created an environment ripe for clerical errors to occur.”

Smart Business learned more from Mandelbaum about how hospitals should respond to and manage the RAC process.

What should hospitals do to respond effectively to RACs?

Hospitals need to develop and empower a team of internal experts to oversee all aspects of the RAC audit process. This team will have to educate senior management and the board on the potential impact to the organization while applying continuous improvement methods to identify root causes of errors.

They will also have to manage the audit process, responding to audit requests and appealing adverse findings where appropriate. Finally, this team will serve as the catalyst to bring necessary refinements to existing processes across all hospital departments, increasing the level of compliance and reducing the potential financial impact.

What causes improper payments?

Many of the causes are directly related to the complex rules and regulations that health care providers must follow to document and explain the type of care that was given and why it was provided. For example, if the physician’s record is not detailed enough, written in a certain way or doesn’t contain the correct verbiage, the hospital could be asked to return the payment, even though there is no doubt the patient received good quality care with good outcomes.

Another area of complexity is the translation of the medical record into coding methodologies required to submit a claim form to Medicare. The claim form summarizes the services provided and is submitted to obtain reimbursement. This is ripe for clerical error because of the vast numerical configurations and the very detailed schemes required to describe the service and the medical necessity for the service with a high level of specificity.

How can hospitals better understand their risks?

Hospitals will have to estimate the potential magnitude of identified overpayments and plan for these in their cash budgeting and forecasting. They also need to modify their operating budgets for the additional costs required to properly respond to and manage the RAC audit activity.

To estimate exposure, hospitals can review the findings of previous audits, as well as the initial findings of the internal risk exposure audit, to identify areas needing improvement. Some hospitals perform in-depth data analysis against their own data files to seek out potential errors. They can create process maps to chart the flow of data to identify where breakdowns occur and why. Hospitals will then be able to determine if the improvement opportunity is related to technology, people or processes, and then prioritize accordingly.

How can hospitals leverage their existing compliance programs?

Although hospitals have compliance programs already in place, an even higher level of review will be required to blunt the impact of the RAC audits. The program should include increased awareness across the revenue cycle as well as advanced educational programs and aid for the medical staff.

The need to establish strong processes across the patient encounter will assure higher levels of data accuracy. Additional internal review methodologies can be initiated for known exposure areas so that if errors are present, they are corrected on a prospective basis. Finally, programs that will systematically and regularly monitor the process to mitigate future risk should be created.

What steps should a hospital take to manage the actual audit?

Managing the audit process will be very time-consuming and resource intensive. An audit management plan must be created to track each audit request to be able to effectively respond within the strict time frame protocols. Each request will have to be categorized, and a catalog of potential sources of documentation that may be required to properly respond and defend the audit should be established.

Hospitals will need to develop strategies and detailed action plans to determine what audit findings will be appealed and when identified overpayments will be repaid. Hospitals may consider engaging outside counsel and consultants to help clarify the process and the protocols of this lengthy and difficult process.

Sheldon P. Mandelbaum, MBA, is a senior manager at Cendrowski Corporate Advisors. Reach him at (866) 717-1607 or

Wednesday, 26 August 2009 20:00

Ponzi protection

Everyone wants their money to work for them and to invest it in a way that prepares them for retirement, but fear of Ponzi-like schemes is leading money away from private equity (PE) investments into more mainstream securities.

However, PE investors can gain some comfort from the clarity that the IRS has provided for claiming tax losses resulting from Ponzi-type schemes. Thanks to recent IRS-issued guidance — Revenue Ruling 2009-09 and Revenue Procedure 2009-20 — investors have been provided a safe-harbor method (an IRS approved method) of computing and reporting losses.

“These pronouncements are very taxpayer-friendly,” says Walter M. McGrail, JD, CPA, a senior manager at Cendrowski Selecky PC. “The IRS wanted to clarify its position for claiming losses on Ponzi-like schemes and white-collar crimes while alleviating some of the pain of those victimized by these acts.”

Smart Business spoke with McGrail about what the new IRS pronouncements mean for investors and how to use the rules to your advantage if you become a victim of fraud.

How can investors protect themselves from becoming a victim of these schemes in the first place?

Look at whether there is transparency with the investment. It’s cliché, but if it sounds too good to be true, it probably is.

But, if you are a victim and you want to be safe when claiming deductions, follow procedures, fill out the proper forms and make sure you comply with all safe harbor laws. Being prepared and knowledgeable before, during and after you make an investment is your best protection.

If an investor does fall victim to an investment scheme, how can Revenue Ruling 2009-09 help?

The IRS concluded that investment theft losses are not subject to the limitations otherwise applicable to personal, casualty and theft losses; that such loss is deductible in the year of discovery; and that the loss includes unrecovered investments and income reported in prior tax years.

Also, theft losses that result in net operating losses can be carried back two years and forward 20 years.

How can Revenue Procedure 2009-20 assist victims of fraud?

Revenue Procedure 2009-20 states that the IRS will deem the loss to be the result of theft if the promoter was charged with fraud or embezzlement.

There must also be some evidence of an admission of guilt, or a trustee who has been appointed to freeze the assets of the scheme. In the past, the determination of whether a deductible loss had occurred as the result of a criminal act involved a subjective determination of whether the person perpetrating the fraud had criminal intent. That is no longer a requirement.

There is now a safe harbor that permits taxpayers to deduct these losses based on the filing of criminal charges against the perpetrator.

How do you determine the value of the loss?

You get to take a loss for all amounts you invested, minus the amount of any actual recovery through the year of discovery. If you invested $100 and got $30 in distributions, you have a $70 loss that you can get back.

Also, any income from the investment that was included on previous years’ tax returns will increase the amount of your loss. Take that same $70 in the previous example and say you picked up $10 worth of income over the years. Then, $80 would be the amount of your loss. The loss is also adjusted by 5 to 25 percent to the extent of any recovery expected from insurance and from lawsuits against the parties involved.

In addition, the new pronouncements have clarified that taxpayers can deduct the losses in the year of discovery, in the year that the perpetrator is accused. Even if you made investments 10 or 15 years ago, you can deduct the loss in the year the fraud was alleged. So, if [Bernie] Madoff burned you, you could deduct the losses in 2008.

How does a taxpayer classify losses for tax purposes?

Capital losses — which can only be deducted against capital gains — are subject to more stringent limitations, and they can’t be carried back. Revenue Procedure 2009-20 made it clear that these types of losses are ordinary losses; they are deductible as itemized deductions and without regard to any limitations.

The IRS even went one step further by stating that these losses are not subject to the limitations of itemized deductions.

Typically, an itemized deduction is subject to a limitation of 2 to 3 percent of gross income. These safe-harbor-determined losses are deductible in full.

The character of the losses is also important because if the loss incurred is large enough to either put an investor into a net operating loss position or, when coupled with other losses, gives the person a deduction greater than overall income, such loss is classified as a business loss, which avoids complications and limitations in claiming refunds for operating losses.

WALTER M. McGRAIL, JD, CPA, is a senior manager at Cendrowski Selecky PC. Reach him at (248) 540-5760 or