Arthur G. Sharp

Tuesday, 31 January 2006 09:34

Complementary and alternative medicine

The use of complementary therapies such as herbs, supplements and modalities — acupuncture and chiropractic — is growing in the United States. Physicians and health care practitioners of all types are becoming aware of the importance of discussing complementary and alternative medicine (CAM) with their patients.

Concomitantly, many health benefit carriers are providing coverage or discount programs for their members who choose certain CAM treatments.

“With CAM discount programs, employers and consumers can save on a variety of alternative approaches to preventive care and the maintenance of good health, from chiropractic services to vitamins, nutritional and herbal supplements, and related products,” says Heather Dowell, manager of sales and service, covering Illinois and Wisconsin.

Smart Business spoke with Dowell to learn more about complementary and alternative medicine and how it is being incorporated into health benefit plans.

What is complementary and alternative medicine?
The industry defines CAM as a group of diverse medical and health care systems, practices and products that are not presently considered to be part of conventional medicine. While scientific evidence exists regarding the safety and effectiveness of some CAM therapies, for most therapies these key questions still need to be answered through well-designed scientific studies.

As CAM therapies are proven to be safe and effective, they are often adopted into the conventional health care system. Since information on CAM is changing constantly, patients should talk with their doctors before using any CAM therapy.

Do complementary medicine and alternative medicine differ from each other?
Yes. Complementary medicine is used with conventional medicine. For example, aromatherapy is used to lessen a patient’s discomfort following surgery.

Alternative medicine is used in place of conventional medicine, such as using a special diet to treat a diagnosed cancer, rather than having the patient undergo doctor-recommended surgery, radiation or chemotherapy. Any time complementary or alternative medicine is being considered, it’s vital to research the effectiveness of the therapy.

What is the employer perspective on CAM?
Employers are showing increasing interest in CAM and looking for value-added CAM programs offered by health benefit carriers. And they are concerned that patients have accurate information regarding CAM therapies.

There is a significant amount of advertising and promotion of CAM products in the marketplace. This information shouldn’t be confused as an objective account of scientific research.

One good place to find information about CAM therapies is the Web site, which features Harvard Medical School’s consumer health information. We also encourage members to speak with their doctors about any CAM therapies they may be using, because the therapies could cause dangerous interactions with other medicines.

How should individuals find a doctor who understands CAM?
Finding doctors who understand CAM is becoming easier. Many doctors have grown more receptive to the potential benefits of CAM treatments.

But, individuals should research basic information about the doctor first, including location, gender, medical school, year of graduation, residency training, board certification, and specialty and hospital affiliation.

Then learn about other health care professionals who are affiliated with that doctor. Many health carriers maintain online provider directories that contain much of this information.

Next, individuals should ask the doctor directly about the type of practice and the doctor’s attitude toward complementary and alternative medicine.

Does the doctor give you the balanced advice you are seeking? You may have to pay for a couple appointments before you find the right doctor to guide you through the maze of complementary and alternative therapies. Whatever your goals, you will benefit most from a doctor who neither condemns complementary and alternative medicine wholesale nor blindly advocates it

Does the insurance industry make CAM services available?
This varies by carrier and is subject to benefit plan designs. Frequently, discounts will be offered if a patient uses a provider that participates in a carrier’s health plan. Examples of CAM services available at a discount include acupuncture, nutritional counseling and chiropractic services.

Other carriers provide discounts for over-the-counter vitamins and nutritional supplements purchased through contracted vendors. Again, before individuals purchase a discounted service or product, we recommend that they ask their physician if the service or product is right for them.

Who is eligible to participate in CAM programs offered by carriers, and how much do the programs cost?
This varies, depending on the carrier. Experience suggests that many carriers do not charge additional fees or premiums to employers or employees for access to their CAM discount programs. Generally, the employee only has to pay the discounted cost of the CAM service or product.

Heather Dowell is manager of sales and service, covering Illinois and Wisconsin. She is responsible for managing sales and client management for Aetna’s select accounts segment, which includes businesses with 51 to 300 employees. Reach her at (312) 928-3585 or

Monday, 23 February 2009 19:00

A long-term relationship

Companies looking to retain accounting firms as their service providers often go through as rigorous an interviewing process as they would when hiring their own employees. Applying their own hiring standards enhances the possibility of retaining the accounting service providers that meet their specific needs and can help them immediately.

One way companies can identify the best match is to look at the standards accounting firms apply in their own recruiting programs and develop a list of questions to ask them based on those criteria. Asking those questions can improve companies’ chances of creating the viable, long-term partnerships that benefit both participants.

Smart Business spoke with Beth Baldwin of Burr Pilger Mayer to get a general idea of the criteria accounting service providers look for when hiring accountants. Those criteria are the foundation for a list of factors that companies might consider as they interview potential accounting service providers.

Should potential clients inquire about the continuity of the accounting service provider’s recruiting program and balance in the level of experience?

Successful accounting service firms experience turnaround. How accounting firms replace departing employees is important. The new employees might be experienced hires, recent college graduates, interns or a combination. If the accounting firm maintains a balance of employees at different levels of experience in its work force, that is a positive factor. Companies should look at the balance and continuity of an accounting service provider’s work force when considering it as a partner.

Should companies worry about working with newly hired professionals at accounting firms?

There are a lot of factors to consider here. Some of the issues involve the types of degrees the accountants have earned, where they obtained them, how early in their employment they got to work with partners and whether they completed internships with their firms. In the case of experienced new hires, it might be helpful to learn about where they gained their experience, e.g., at a ‘Big Four’ accounting firm or at a one-person operation. Knowing those things can provide insights into the level of the experienced employees’ technical and client-oriented skills and shed some light on whether they have track records of being successful. Companies should take the answers to these questions into account when considering which accounting service providers to work with.

Is there a benefit to knowing what types of degrees accountants at prospective accounting service firms have?

Yes. For example, it would be helpful to know whether accounting service providers prefer to employ people who have accounting degrees, rather than finance degrees. Hiring people with accounting degrees accelerates the new employees’ learning curves, since they are already familiar with the accounting principles clients do not want to wait for them to develop. Employees with other types of business degrees may take a little while longer to acquire in-depth knowledge of those principles, which inhibits how quickly they can get up to speed with clients.

Is it advisable to ask about the colleges from which the accountants earned their degrees?

The information can be helpful. For instance, some colleges in the company’s area of coverage might have better, more established accounting programs than others and better track records in placing graduates with the more prestigious accounting firms. Others might focus on general business majors, rather than accounting specifically. Accounting firms take those differences into account. Their clients should, too.

It might also be helpful to learn how long a firm has worked with a particular college. Some accounting firms form close working relationships with people in a college’s career development centers and become well known at the schools. Consequently, the students become familiar with those firms and their reputations. Those longstanding relationships create pipelines for the firms, and provide employment and internship opportunities for students. Eventually, the benefits of those relationships filter down to the clients.

How do internships influence newly hired accountants’ experience?

Internships familiarize the accountants with their firms’ cultures, areas of specialization, etc. The experience they gain in internships provides them with the knowledge they need to apply when they become full-time employees and gets them involved in the firm’s operations more quickly. They are better prepared to work with clients as a result.

How do the factors discussed above benefit long-term relationships between companies and their accounting service providers?

Once the companies realize that the service providers can offer a beneficial mix of experience and skill sets, they will feel more comfortable working with them. That is particularly true if the accounting provider employs professionals who are ready to start working at once. That saves companies time and money, and provides a good starting point for the long-term relationship that benefits them and the accounting service provider.

BETH BALDWIN is the director of human resources at Burr Pilger Mayer. Reach her at (415) 677-3300 or

Monday, 26 January 2009 19:00

Save time and money

United States businesses lose about 7 percent of annual revenue to fraud. Small companies alone report a median loss of $200,000 to employee fraud. Yet, executives do not always deal with fraud wisely when it occurs at their companies. Often, their immediate reaction is to investigate the issue internally. That sometimes makes matters worse.

For instance, executives may identify the fraudsters but cannot fire them because they could not obtain sufficient evidence to prove wrongdoing. In some situations, companies find themselves being sued by fraudsters for harassment and lose money by settling the claim.

Such outcomes can be avoided. As Chandra Papneja, director in the Fraud and Forensic Accounting Practice of Burr, Pilger Mayer LLP, suggests, “If you find or suspect fraud in your company, hire a forensic accountant who can obtain evidence to support the action you will take against the fraudster.”

Smart Business spoke with Papneja to learn how that advice can save companies’ time and money.

How does a company benefit from hiring forensic accountants?

Forensic accountants can gather and protect evidence, determine the extent of the problem, create a ‘no tolerance for fraud’ tone from the top down, give executives the time they need to run the business, and assist with the development of anti-fraud programs and controls to prevent future loss from fraud. The intrinsic and extrinsic advantages to hiring forensic accountants outweigh any drawbacks.

Should companies contact forensic accountants as soon as fraud is detected?

By all means. According to the Association of Certified Fraud Examiners, embezzlement schemes typically last two years before detection. That explains why forensic accountants play such a valuable role in fraud protection and fraud investigation and why they should be called as early as possible when executives suspect any kind of financial irregularities in their operations.

What advantages do forensic accountants have over internal fraud investigators?

Executives investigating suspected financial irregularities waste time and money in their efforts. Their internal investigations consume valuable time they could be using to oversee business operations and to make money. Often, they tip off perpetrators to the fact that there is a probe going on. Consequently, they often exacerbate the problems instead of finding solutions. Worse, they can create situations that lead to costly and embarrassing harassment claims and lawsuits against their firms — and themselves.

The forensic accountants take the lead and launch investigations at any level of the company — from the top down — to determine whether financial irregularities actually occurred. Once they make that determination, they ascertain how long the process has been going on, identify the party or parties responsible for the irregularities, calculate the loss amounts from those irregularities and assist in loss recovery. More importantly, they recommend, implement and monitor remedies to strengthen the company’s reporting systems — including deterrent programs.

Why are internal fraud investigations not advisable?

The list of difficulties executives can encounter in their self-investigations is lengthy. For instance, proof is hard to come by, it is difficult to identify all the people who might be involved in suspected irregularities, and the wrong person or persons can be named. As a result, the executives might determine who has committed fraud, but they cannot terminate individuals because of their inability to obtain specific evidence to substantiate their suspicion. The list does not end there.

Results like these lead to bigger problems for the company than would exist if executives had turned the investigation over immediately to forensic accountants when the problem first surfaced.

Is it possible for companies to deter fraud?

Yes. Companies do not always have to wait until they suspect that fraud has occurred to bring forensic accountants on board. One of the keys to detecting and preventing financial irregularities is to develop, implement, publicize and enforce strong, effective deterrent programs that let employees at all levels know that fraud, embezzlement, etc., will not be tolerated. That is another area in which forensic accountants can be of help.

Forensic accountants’ services go beyond uncovering irregularities and preventing ensuing fraud-related activities. They also provide liaison services between clients and regulatory agencies, such as the SEC; oversee compliance with SOX, FASB standards, etc.; instill in CEOs, CFOs and other executives a level of confidence that fraud and misconduct are minimal in their companies; design effective anti-fraud controls to reduce the risks of future lawsuits; and testify on companies’ sides in trials.

Pragmatic executives recognize that fraud, embezzlement, etc., are possibilities and prepare plans to prevent them whenever possible or deal with them when they do occur. They can accomplish those objectives by partnering with forensic accountants as soon as fraud is suspected.

CHANDRA PAPNEJA is a director in the Fraud and Forensic Accounting Practice at Burr Pilger Mayer LLP. Reach him at (408) 961-6331 or

Wednesday, 25 June 2008 20:00

Closing a business

The hardest work involved in running a business may be closing it, which is the ultimate end point of the life cycle of a business: birth, growth, maturation and decline. Owners who are not prepared for a formal closing process — and even those who are — will find the job daunting.

But, closing a business is a common occurrence, whether it is by choice or circumstance, and there are professionals who can simplify the myriad steps involved based on extensive opportunities and experience.

Nationally, about 75,000 businesses fail each year, closing with unpaid debts — which is approximately half the number that opens each year. And of those 150,000 annual start-ups, approximately one-third will close within two years of opening. These figures suggest that every business owner should be prepared for that eventuality.

Smart Business spoke with Russ Burbank, a partner with Burr Pilger Mayer, to learn more about the formal business closing process and the risks associated with sidestepping it.

What risks do business owners who do not follow the formal closure process face?

Businesses close for good reasons. They can range from acquisition or owner retirement to consolidation or business failure. In any case, the formal closure process has to be completed. Otherwise, owners run risks like incurring personal liability for taxes, assessments, fines as well as loss of protection under state statutes against future claims until a certification of dissolution is issued by the Secretary of the State.

Are all business closures the same?

Not at all. The process varies, depending on factors such as whether the company is insolvent or solvent when it is closed, the reason it closed, the complexity of the business and the level of cooperation among the creditors. The more complex the company and the more contentious the creditors, the more likely it is that they will seek the strong arm of the bankruptcy court to maintain an orderly process.

How important is the role creditors play in the closing process?

That depends somewhat on whether the business is solvent or insolvent. When a business is solvent, the owners decide how and when to close. In this case, the closure process typically consists of an orderly wind down of operations, settlement of all outstanding liabilities and a formal dissolution of the business entity. But, it is different when there is the possibility that creditors may not be paid in full at closure because the company is insolvent. In those cases, creditors ultimately decide how the business will be closed, either in or out of court. The court might involve Chapter 7 or Chapter 11 bankruptcy filings. Deciding out of court might mean that an Assignment for Benefit of Creditors (ABC) specialist will distribute the proceeds from liquidation of the business to creditors. Either way, the closing process can be tedious, time-consuming and costly when not done properly.

What steps exist when a business closes?

Here are just a few: Owners must terminate and pay employees; issue or make arrangements for wage and withholding information (W2s); provide information to subcontractors (1099s); notify vendors of ceased operations, request them to submit final invoices and ask them to indicate final bills were paid; notify tax authorities of the closure in accordance with state, federal and local procedures; cancel state and local permits, including business licenses, sellers permits and fictitious names; and deal with landlords regarding lease terminations. The list goes on.

The process is often made more complex because owners let their employees go as part of the closing process and are faced with doing many of these tasks themselves. That explains in part why professional ‘closers,’ such as attorneys, accountants and turnaround specialists can be valuable assets in the process.

Why hire a professional to help with a business closure?

It can be as difficult to close a business as it is to start one. Depending on the complexity of the organization, its number of locations and the kinds of liabilities that must be terminated — such as employee pension plans, tax accounts and insurance claims — a complete closure can take a year or more. So, there is a point in the closure process when the owners are better off turning it over to professional ‘closers’ who do that kind of work more economically and efficiently.

For one thing, professional ‘closers’ cut business owners’ costs. The neutral third parties to whom they hand over the closure will typically be working on an as-needed basis, rather than full time. That speeds up the process and increases productivity. Third-party professionals will focus their attention on the closure details, sometimes on an hourly paid basis, which may not be true with the company’s management team or employees who milk their final days or may be more concerned with finding their next job than they are with terminating their soon-to-be ending position. Either way, they are less productive and that costs the owners money that could be better used to pay creditors or themselves.

RUSS BURBANK is a partner and Certified Turnaround Professional (CTP) with Burr Pilger Mayer’s Consulting Group. Reach him at or (415) 677-4530.

Wednesday, 25 June 2008 20:00

Saving success

Companies acquire businesses for a variety of reasons, ranging from acquiring talent, processes, proprietary technology and brands, to leveraging their ongoing operations.

Regardless of their reasons, buyers have to address several key issues during the acquisition process. Among them are how to find the right company to acquire, how to identify and avoid the pitfalls inherent in taking on a new business and how to ensure success with the acquisition.

There are challenges at every turn in the process, most of which can be overcome through the creation of a highly skilled internal and external advisory and integration team that makes the acquisition as seamless as possible, says Gregory J. Skoda, CPA, the co-founder and chairman of Skoda Minotti.

Smart Business spoke with Skoda to learn how companies can identify and leverage acquisition opportunities, put the right advisory and integration teams in place and enhance their chances of success in the process.

How do buyers find the right company, or companies, to acquire?

The key is to network as diligently as possible to identify and contact companies in a market or in a product line that might make good acquisitions. Buyers never know what they are going to find. If a business owner doesn’t know buyers are looking, both parties may lose out on some great opportunities.

Be persistent. Some successful buyers have simply picked up the phone, reached the owners — not necessarily on the first call — and eventually acquired a business. Once a potential acquisition candidate has been identified, it is as simple as talking to everybody they know who is in the information flow to learn about the company. That could include the intended acquisition’s employees, lawyers, accountants, insurance professionals and bankers — anyone who has knowledge about its strengths, weaknesses and markets.

Additionally, companies can go to the Internet for information, look for information from any kind of association, franchise networks, investment bankers or business brokers, and make cold calls.

Why should buyers consider acquiring a business that is in trouble?

Buyers should not automatically avoid a business that is in trouble. Companies that are in trouble can represent perfect opportunities for the right buyers. Buyers have to work to understand why the company is in trouble, determine if it is salvageable, and ascertain what it is going to take in talent, time and capital to turn it around.

Discovery and due diligence may prove that the company is in trouble simply because its growth has been ignored or mismanaged. It may be that the business was great when it was a $5 or $10 million business, but its managers are really not capable of running the $20 or $30 million business into which it has grown. A buyer who really understands that size of a business can help take it to the next level. It is critical for buyers looking at a business that might be in trouble to do due diligence to understand thoroughly the issues that have led to its difficulties.

How can buyers fully leverage the opportunities presented in an acquisition?

There are several ways. For example, they have to develop a clear understanding of why they are buying a business — it could be one of many reasons, including acquiring new talent, improving processes or expanding their customer base. They must have a clear idea of exactly how much money, time and talent capital they will need to accomplish the goal that they have set forth for the new business. Perhaps most importantly, they have to plan specifically how to integrate and run the new company. Failure to think that process through can have a tremendous negative impact on both the buyer and the acquisition. Another key is to avoid shortcuts in the acquisition process. Some buyers rely on themselves too much in the purchase and fail to evaluate the opportunity properly. They should not rely only on their own due diligence in deference to working with professional advisory and integration teams to complete transactions.

How does the integration team contribute to a successful acquisition?

The key is to put together an integration plan and team early in the process and make sure every member understands what the buyer is getting into. There has been more than one acquisition that has failed because the owners or senior management of a business bought a company without ever assembling the right internal and external advisory team and then spent the first few years after the acquisition trying to figure out how to put the proverbial round peg into a square hole. Putting the right integration team together can help buyers avoid making too many assumptions about the acquisitions. It is better for buyers to know everything they can about the new business before the acquisition process is completed. They have to get to a place where they can take advantage of all the knowledge that is available.

Assumptions can kill success. An integrated approach to acquiring and running a new business can help make the most of it.

GREGORY J. SKODA, CPA, is the co-founder and chairman of Skoda Minotti. Reach him at (440) 449-6800 or

Friday, 25 April 2008 20:00

Compliance programs

Most people know that companies can be fined for acts of their employees. Did you know executives and directors could be imprisoned for acts of employees of their company? With the increased criminalization of laws, the risk of going to jail and being fined has dramatically increased over the last 10 years. However, there is a way for them to avoid prison, fines and community service for employees’ business malfeasance. They can implement an effective ethics and compliance (E&C) program and make sure that all their employees are aware of its existence, the laws that govern their business and the significance of complying with applicable laws.

Smart Business talked to Mark Jones of Porter & Hedges LLP to learn how businesses that are exposed to possible criminal liabilities by their employees — and that is almost every business and organization — can develop such programs and why they should do so.

How does an E&C program protect executives and directors?

Executives and directors should want to insulate themselves from being indicted for employees’ criminal acts. An E&C program set up in conformance with federal sentencing guidelines helps them do that. The guidelines provide certain things employers can do to avoid being prosecuted for employees’ criminal acts, which is critical in today’s business environment. Governments are criminalizing more laws nowadays, and executives and directors go to prison more often for business-related crimes than they did in the past.

Do judges use E&C programs to determine whether a business is a ‘good citizen’ when considering indictment?

Yes. There are seven principal points in the federal sentencing guidelines that employers have to address. A judge will evaluate an employer’s attention to the guidelines to determine whether it is a ‘good citizen.’ The degree to which the employer adheres to the guidelines and the complexity of its E&C program can influence a judge’s willingness to indict it, its officers and directors when an employee commits a crime.

Who is ultimately responsible for implementing an employer’s E&C program?

The responsibility lies at the top of the organization. The board of directors and senior management should have an effective E&C program in place to assure that the company is acting in the appropriate manner. It is also their responsibility to provide training for employees to ensure that they are familiar with laws in various areas, set up a ‘hot line’ to let them know if there are problems and appoint an individual who has credibility within the organization and in whom employees have confidence to monitor and report ethical issues and concerns and deal with them in an appropriate manner.

Who should be involved in setting up an E&C program?

The implementation starts at the top with the CEO and other senior management and directors who demonstrate their commitment to the program and who will monitor its progress. The makeup of the rest of the development team depends on the employer’s size and type of business.

Some of the typical people who might be involved in the implementation of an E&C program are the general counsel, human resources leadership, business unit leadership and outside counsel who is experienced in setting up and facilitating the implementation of comprehensive programs for employers as well as establishing protocols for monitoring the effectiveness of the program by executives and directors. The involvement of senior management and experienced outside counsel can make the programs more effective from the onset and speed up the learning curve for employers and employees.

Should smaller companies create E&C programs?

Regardless of size and type, every employer should have an E&C program in place. The extent and scope of the program depend on the size of the company and the industry in which it operates and the regulatory nature of its business. Economic crimes can occur in businesses ranging from sole proprietorships to multinational conglomerates, and judges look at them seriously in today’s corporate environment no matter who commits them. So, smaller companies should take the same steps as larger ones to protect their key personnel, although their programs can be scaled-down versions that are tailored to their specific needs.

There is no such thing as a generic E&C program, since each employer operates in a different environment. But, all businesses have to adhere to the same guidelines if they want to avoid potential prosecution, especially if they are engaged in business internationally, working in sensitive business areas, such as waste, water or environmental industries, or industries with significant political elements.

MARK JONES is a partner with Porter & Hedges LLP and has been involved in the establishment of numerous E&C programs for varying sizes of companies and industries. Reach him at (713) 226-6639 or

Friday, 25 April 2008 20:00

No ‘I’ in team

Typically, people who start their own businesses have learned a trade. They may understand the operational side of running a company, but they may be unfamiliar with the business details involved. If all they know is the core business and they don’t understand all the factors that impact operations, such as financing, legal, accounting, tax and insurance liability issues, they have to rely on professional advisers for guidance.

And, they do not always have the time to become experts in those areas. Time notwithstanding, they have to protect their companies, mitigate their risks and take advantage of opportunities. The most effective way for business owners to do that is to form appropriate teams of advisers in both their start-up and strategic planning periods.

Smart Business spoke with Roger Gingerich, CPA/ABV, CVA, a principal with Skoda Minotti, about advisory teams, who should participate and how they can help.

Why should owners set up advisory teams?

In the short-term, it is so a business owner can focus on the core parts of his or her business and growth early on. Long term, it is so owners can start thinking strategically and work with people who have ‘been there, done that’ to help them through whatever challenges they might face. Advisory teams are particularly critical for business owners who want to grow a million-dollar company into a multibillion-dollar company. In either case, the advisers and owners should involve themselves in an information-sharing process that can help make sure that, as a company grows, it grows the right way.

Are there different types of teams?

There are two basic structures, the ‘blocking and tackling’ team and the strategic planning or ‘Where are we going from here?’ team. Every small business owner should create the first layer of advisory team. The ‘blockers and tacklers’ come into play when a company is formed and starts to grow. They help owners create the foundations of their companies and drive their internal workings once they are launched. Not every business will need to field a strategic planning team, however.

Who are the ‘blockers and tacklers’?

Depending on the type of company, the players might include an accountant, attorney, banker, bonding agent, financial adviser and insurance agent. These specialists handle all facets of the business of which the owner might not have in-depth knowledge. The ‘blocking and tackling’ team allows owners to concentrate on their core businesses, which is what they are really good at.

When does the strategic planning start?

The strategic planning team doesn’t enter the game unless the ‘blocking and tackling’ team is in place. Remember, the first team addresses the day-to-day or short-team goals and challenges a company faces. Once that team is in place and performing well, owners can start thinking strategically and long term. That is the point at which owners can form their boards of directors or advisers.

Who plays for the strategic planning team?

The strategic planning team is a board of advisers or directors. It is for more sophisticated businesses or companies that are looking to grow strategically. The players might include a customer, a vendor, a specific industry leader who is very familiar with the type of business, and someone who has worked with a similar-sized company and who understands all the challenges a business owner is going to encounter to evolve from a company that is just moving along to one that is planning strategically for the next four to fives years and beyond.

Who quarterbacks the advisory team?

Every team needs a quarterback. In the business environment, it is often the accountant, since a lot of the day-to-day financial operations impact insurance, banking and business transactions. Or, it can be someone internally, such as a CFO, who is working closely with team members and knows when or when not to bring them together. Regardless of who the quarterback is, someone should lead the team, and that someone should be an effective communicator. Communication is essential with an advisory team. And, the communications should not be merely between the client and individual advisers. All the advisers and the business owner have to be on the same page to prevent them from working at cross-purposes, which requires them to communicate frequently and effectively.

What are the risks of not putting these teams in place at any stage?

For one thing, business owners might run into pitfalls or land mines of which they might not be aware without having people with specific expertise to consult. Or, they might miss opportunities. For example, there might be tax law changes that can affect investments into research and development or capital improvements. If the right advisers are not on board, owners can miss tax-planning opportunities that involve tax incentives for research and development or creating jobs.

ROGER GINGERICH, CPA/ABV, CVA, is a principal with Skoda Minotti, based in Mayfield Village. Reach him at (440) 449-6800 or

Sunday, 25 November 2007 19:00

Seven steps to litigation alleviation

Lawsuits can be costly, time-consuming, detrimental to positive public relations and, it seems, inevitable.

Whether a lawsuit is justified or not — and not all lawsuits are — it can tie up a company’s resources that might be better utilized in carrying out the business’s mission. A lawsuit also requires a company to retain attorneys to defend it or to find an alternate way to solve the dispute, such as direct negotiations between the parties or arbitration. The best way for a company to defend itself against lawsuits, then, is to prepare adequately for them.

Smart Business spoke with Jeffrey R. Elkin to learn how a company can prepare for and defend against lawsuits.

What can companies do to prepare for lawsuits?

There are seven basic guidelines that I tell my clients: 1) Follow a simple rule: It is better to do a bad deal with good people than a good deal with bad people. In other words, choose the right business partners. Be careful who you do business with. To the extent possible, companies should do business with people they know and trust. That is one sure way to limit the possibility of being sued. 2) Follow the adage: ‘An ounce of prevention is worth a pound of cure.’ Get legal advice and assistance early instead of waiting for a lawsuit to be filed and then bringing in an attorney. It can be less expensive and usually alleviates the risk of litigation.

Remember, part of a lawyer’s job is to anticipate potential problems and help design ways to avoid those problems. It is much more efficient to do that at the front end of a transaction than wait for a dispute to develop and try to resolve it through litigation. 3) Hire the best people, and work hard to keep them. Often, litigation occurs when companies fail to hire and retain the best employees available. This can be a costly mistake. While it may save money in the short term to hire less-than-stellar employees and hope they work out, it is not always worth taking the risk — especially if the company ends up in court. 4) Make sure that every transaction is properly documented. There is no substitute for a well-written transactional agreement. Such an agreement anticipates the potential issues or problems that the parties may face in the future and establishes, within the document, an agreed way to handle such situations. That is a far more efficient way to handle disputes than through litigation. 5) Address business complaints immediately. Letting a business problem percolate without addressing it usually leads to a lawsuit and increased cost to a company. Try to nip a problem in the bud by dealing with it. Make litigation the last alternative, not the first. 6) Be ready for litigation. Have a document retention policy in place, so that important evidence will be preserved. Train employees in the proper use of e-mails, which are the new ‘smoking guns’ of litigation. 7) Get good legal advice. Do not hire an attorney because he or she tells you what you want to hear. Good advice isn’t always pleasant. What you want is someone with experience who you can count on to be forthright and frank about whatever situation you are dealing with. Mutual trust is essential.

What can an attorney do for a company to help avoid lawsuits?

An attorney can help a company set its house in order before it even opens its doors for business. For example, an attorney can make sure that a business is properly organized and has all the certificates, licenses and other paperwork in place that government or regulatory agencies require. An attorney can also advise on liability insurance and develop training plans to deal with contemporary issues, such as the use and misuse of e-mails.

Why is the use of e-mails becoming more of an issue in business today than it was before?

As previously mentioned, e-mails are the new smoking guns in litigation. Employees are putting comments, observations or thoughts in e-mails that they would not think of including in formal business correspondence — even though e-mails are business correspondence. Electronic information in e-mails is fully discoverable. That means that the opposing party will get a copy of every e-mail. Because employees tend to be more casual, sarcastic, flippant and cynical in e-mails, than they would be in formal business correspondence, e-mails can be very effective evidence. Cases of e-mails coming back to hurt parties when they are preparing a defense are legion because employees are not trained adequately in the purposes of e-mail.

JEFFREY R. ELKIN is a partner in the litigation section with Porter & Hedges LLP. Reach him at (713) 226-6617 or

Sunday, 25 November 2007 19:00

Surprise, surprise

Taxes are a necessary evil for business owners. One problem with business taxes, though, is that tax laws keep changing at the federal, state and local levels. Worse, there are constantly new tax proposals that legislative bodies debate, but that won’t ever become law or are enacted with significant modifications. With tax laws in a state of flux, it makes doing business more difficult.

Often, business owners do not have the time or the resources to keep track of tax law changes, real or rumored, and they do not implement tax-planning strategies on an ongoing basis. These oversights can hurt business owners financially and legally in the long run.

Smart Business spoke with Terry Silver, a partner in Skoda Minotti’s Tax Planning and Preparation Department, to learn about tax changes that might affect business owners during the 2008 tax-planning period, to gain some insights into how they can avoid potentially detrimental surprises and to reinforce the idea that there is no time like the present to start planning their 2007 tax strategies.

Are there any federal tax changes of which business owners should be aware that might affect their 2007 revenue?

So far in 2007, there have not been a lot of changes at the federal level. One tax act earlier in 2007 addressed a provision in the law that affects the purchase of equipment. Business owners can elect to expense equipment they purchase, rather than capitalize and depreciate it over a period of time. That gives business owners an immediate deduction. The rule has been around for a long time, but the dollar amounts have changed. Prior to the change, the maximum that owners could deduct for tax years beginning in 2007 was $112,000. For owners who had spent more than $450,000 for qualified purchases during the year, that amount phased out dollar for dollar starting at that $450,000 level of purchase. Now, for 2007 tax reporting, the $112,000 figure increases to $125,000, and the phase-out begins at $500,000 of purchases. Another thing that will help business owners is that the $125,000 and the $500,000 thresholds will both be indexed for inflation for 2008, 2009 and 2010. These items are probably the most broad-based changes in that piece of legislation.

Another change is the increased deduction for businesses that engage in domestic production activities. The old deduction was equal to 3 percent of the lesser of taxable income or qualified production activities income. That 3 percent deduction has been doubled to 6 percent for tax years beginning in 2007

Taxpayers engaged in research and development should also be aware of the change that could affect whether such expenses should be incurred in 2007 or 2008. The research and development credit was scheduled to expire at the end of 2005, but, late in 2006, Congress extended the credit for 2006 and 2007. As it stands right now, that credit will go away in 2008, but there is always the possibility it might be extended again.

Are there any changes at the state level?

There are a minimal number, which relate mostly to previous legislation. Back in July, 2005, the legislature totally revamped the state’s tax laws to make Ohio more attractive to businesses. They decided to phase out the personal property tax and the corporate franchise tax, respectively, over four to five years and replace them with a commercial activity tax. Accordingly, for the 2008 tax season, business owners will see lower franchise tax rates and a smaller percentage of personal property will be taxable in the current year. At the same time, the commercial activity tax rates will continue to be phased in, so owners will be assessed at a higher rate during the coming year.

Does it matter what type of entity a business is when business owners start tax planning?

Yes. For example, if the business is a regular corporation, or C-Corporation, versus a flow-through entity like a partnership, an S-Corporation or a Limited Liability Company, the focus is a little different. If the business is a flow-through entity, there is no tax at the business level, but the income or loss flows through to the owner. In those cases, the owners’ individual circumstances have to be taken into account. Conversely, with a regular corporation, that is the tax-paying entity, and the owners have to focus on the circumstances at the business level. Those differences are an important consideration for business owners when they are doing their tax planning.

How can business owners stay current on tax changes and how they might affect different types of entities?

One of the best ways is to work with professional advisers. They can provide several beneficial services to business owners. For example, advisers can monitor new or proposed legislation that can affect business owners’ tax positions, run numbers on new changes for them, explain how changes can affect their companies going forward and make sure they are in compliance with tax laws. In short, advisers will help the business owners avoid surprises that could have a significant adverse impact on their revenues and taxes.

TERRY SILVER is a partner in Skoda Minotti’s Tax Planning and Preparation Department, based in Mayfield Village. Reach him at (440) 449-6800 or

Friday, 26 October 2007 20:00

Mending SOX

On July 30, 2002, President Bush signed the Sarbanes-Oxley Act (SOX), which he labeled the most far-reaching reform of American business since Franklin Delano Roosevelt’s administration. The purpose of SOX is clear: It is designed to improve companies’ standards of corporate transparency and accountability and raise the quality of corporate governance and financial reporting. It charges a company’s officers and directors with the responsibility for doing so.

SOX imposes tougher regulatory and enforcement powers upon the U.S. Securities and Exchange Commission and, ultimately, on the 12,000 publicly traded companies affected by its requirements. Not surprisingly, it has generated some controversy.

Smart Business spoke with Peter E. Metzloff, CPA, a partner with Skoda Minotti, to get a clear picture of what companies have to do to comply, how much time they have to do so and whether there will be any changes to contend with as the deadline for mandatory compliance approaches.

What companies need to be compliant?

Only publicly traded companies are required to be compliant. That does not mean other companies and organizations should ignore SOX completely, though.

Is it advisable for other companies to comply even though they are not required to?

That is up to individual organizations’ leadership. Executives should carefully analyze the advantages and disadvantages of compliance. There is a ‘trickle down’ effect among companies that are not required to comply. For example, nonprofit organizations that have people on their governing boards who work for public companies might feel obligated to comply because they think it is the right thing to do. That can be counterproductive, though, because it means less money for the organization’s mission. And, privately held companies that are trying either to position themselves to become public or sell themselves might think about complying with the public company rules. Private company executives in particular have to remember that public companies are less likely to acquire their companies close to year-end and that the first question on anybody’s due diligence checklist is, ‘What about SOX?’

What changes have been made to SOX?

The big change is the effective date. When SOX became law, the government said that only ‘accelerated filers’ — those public companies that have more than $75 million of market capitalization — would have to comply immediately. Those companies have been complying for quite a while now. But the SEC has delayed the compliance requirements every year since 2002 for the smaller public companies, the ‘nonaccelerated filers,’ that have under $75 million of market capitalization. Those delays may be a thing of the past.

When should nonaccelerated companies start their compliance process?

Right now. It appears that in March of 2008 the nonaccelerated filers will have to certify in their public filings as of Dec. 31, 2007, that everything is in compliance with SOX. Since the chairman of the SEC has intimated recently that there is no need for further compliance delays, companies that have delayed their compliance process have to start preparing for those dates immediately — and even now it may to be too late for them to be ready. For all but the smallest companies, preparing documentation for management and the outside auditors represents a significant amount of work. And, for the most part, this is something that companies should not try to do completely by themselves.

How can business advisers help companies prepare for SOX compliance?

One way is to analyze the company’s general and detailed risks associated with producing accurate financial statements. In the past five years, companies have changed their focus on what is important. Lately, they are more likely to concentrate on possible risks during the SOX process. Originally, auditors were looking at what happened at every company location, every type of transaction, everything that had ever gone wrong — everything they could think of. That was very costly and led to a lot of criticism of SOX. Concentrating more on the risks of what could go wrong is a more pragmatic approach, and it is less costly. It comes down to a cost-versus-benefit approach.

Another way business advisers can help is by analyzing the company’s strengths and weaknesses to determine what weaknesses can be improved and what strengths can be made more viable. It is a search for administrative efficiency that becomes part of the SOX process. A third way advisers can help is to emphasize that, in the SOX world, if it isn’t written down, it doesn’t count. They can help clients develop more streamlined documentation that ensures everything that is key is written down, which facilitates SOX reporting and makes it easier for outside auditors to perform their work.

What are keys to successful compliance?

There are two. First, the process has to be directed from the top down. Management has to be involved and in the forefront. Second, and most important, the process has to be in motion now.

PETER E. METZLOFF, CPA, is a partner with Skoda Minotti, a CPA, business and financial advisory firm. Reach him at (440) 449-6800 or