What you need to implement a data analytics program

Data analytics is a generalized term that can be a catch-all for more specific applications including business intelligence platforms, data governance, forensic data analysis, advanced statistical modeling and more.

“Data analytics can empower business leaders to make better decisions, not by replacing intuition or business expertise, but rather by augmenting or supplementing it,” says Jonathan Poeder, Director of Data Analytics at Clark Schaefer Hackett.

Companies face challenges when developing an analytics program. But businesses that do not integrate data analytics into their decision-making process are in danger of being at a competitive disadvantage within their industries. 

Smart Business spoke with Poeder about data analytics programs and what companies need to understand before attempting to implement one.

Why is data analytics important?

Analytics involves shaping data structures into a useful format and applying mathematical techniques to extract meaningful information — to find the signal in the noise.

Storage technologies have become more robust, which means companies can cost-effectively track petabytes of information if needed. Extracting data that can inform decision-making on a specific problem is very challenging and can become a barrier that prevents many companies from attempting to develop analytics capabilities. Business leaders see the value of that information, however, so there’s a strong incentive to pursue methodologies and techniques to identify reliable, data-driven insights. 

How common is it that a company is effectively capturing and analyzing data?

Data analytics, for some smaller businesses, might mean using Excel spreadsheets or utilizing a simple business intelligence platform. Companies can use these tools and grow, but often struggle to transition to something more robust that requires sophisticated expertise to develop and operate. 

Larger businesses tend to have a higher level of sophistication, but they still face challenges. For instance, a business might have a rich database under a third-party platform through which they manage products and services. However, staff often lacks the training or know-how to utilize the full potential of the data.

Code customization that would shape data to enable targeted advanced data analytics is a skill set frequently lacking in organizations. The business is then constrained by what the platform will provide. Regardless of a company’s size, if leadership does not understand and support the value analytics brings to a business, it will stunt the company’s growth potential.

What do companies misunderstand when it comes to data analytics?

Data analytics can seem esoteric. Business owners and executives want data to be more relatable, easier to understand and easier to transform into something meaningful. But it’s a deep and complicated field. The difference between perception and reality can create a disconnect between data analytics experts and the C-suite.

Executives might not understand the level of work that goes into extracting useful data from a database. They also might not understand some of the implications of various findings, or struggle to manage the analyst in ways that allow the analyst to provide data of maximum value to the organization. These are just a few of the reasons that organizations struggle with implementing a data analytics program.  

Who can help a company that wants to better utilize, or implement, data analytics? 

It can be challenging and expensive to get a data analytics program in place and operating effectively — from leadership to infrastructure to talent. Just hiring an analyst won’t cut it. There is a lot more to building the infrastructure, getting the right data, and implementing a data analytics program than just hiring a data scientist. For these companies, the best strategy is to start with an external consultant. Talk to an organization with data analytics expertise to see what options exist to leverage data analytics assets to gain efficiencies and grow.

Insights Accounting is brought to you by Clark Schaefer Hackett

How is your 2018 tax strategy holding up? Use it to plan for the future.

The Tax Cuts and Jobs Act created many changes to deductions. The tax reform increased the standard deduction to $12,000 for single filers and $24,000 for joint filers, while limiting itemized deductions and creating a new qualified business income deduction.

Melissa Knisely, tax department senior manager at Ciuni & Panichi Inc., says it was challenging to plan for 2018 before the end of 2018 and even into the beginning of 2019. Tax advisers didn’t have some of the regulations, so they didn’t know the rules, either.

However, as individual and business returns are being completed, a few trends are beginning to emerge.

“We have been doing a lot of planning around timing of deductions and deferring or accelerating of income. Those are the three biggest things we’re seeing with personal returns,” Knisely says.

The results have been unique to each person’s situation.

“You really can’t make a prediction based on one scenario, like we have been able to do in the past,” she says. “We’ve had to look at everybody’s situation individually. They are all different.”

Smart Business spoke with Knisely about some of the changes under tax reform and how taxpayers can use lessons from 2018 to plan for the future.

Which deduction change is catching business owners and executives off guard the most?

One of the biggest changes is the cap on state, local and real estate taxes. For example, if a taxpayer paid $5,000 of state tax, $2,000 of local tax and then $15,000 in real estate taxes in 2018, they cannot deduct more than $10,000 for all three of those together. Previously they would have been able to deduct all $22,000 of the tax that was paid during the year.

Under tax reform, they may not benefit from all of the tax that was paid during the year and it could cause them to no longer itemize their deductions.

How are fewer itemized deductions affecting other areas like charitable contributions?

Since the cap on taxes may have caused them to no longer itemize deductions, taxpayers may have to adjust other deductions accordingly.

One option is to bunch charitable contributions together, enabling them to itemize one year and take the standard deduction the next year.

Another other option is to pre-fund charitable contributions by setting up a donor-advised fund. They get the deduction in the year that the donor-advised fund is funded and then they are able to direct the contributions to charities from there.

What should taxpayers do to determine which year is best to have more deductions and itemize?

Taxpayers, and their tax advisers, will want to look out a couple of years to try to plan for when they think they’re going to have more income versus when they are not. Does it make sense to accelerate income into the current year or to defer it to the next year?

Many of the changes under tax reform go through 2025, so now that tax advisers have more answers to the questions than they had at year-end planning, they can help taxpayers adjust accordingly.

How can people get a jump on next year’s taxes before they put away the 2018 return?

If in the past they have not owed and now they do, what’s the reason for that? It may be as simple as they didn’t have enough withheld from their paycheck.

Also, if people are waiting to do their returns until later in the year, they may want to accelerate their timing, so they know where they stand. While an extension of time to file may be necessary, taxpayers should try to get that information sooner rather than later.

Insights Accounting is brought to you by Ciuni & Panichi Inc.

You can’t afford to ignore your retirement plan responsibilities

In today’s environment of rising regulatory scrutiny, retirement plan sponsors must keep up with complex legal requirements, while trying to design effective plans that retain employees.

“Regulators such as the Department of Labor (DOL) actively review plan Form 5500 filings for evidence of noncompliance, inaccurate reporting and excessive fees, especially since electronic filing makes it easier to perform queries,” says Tiffany White, CPA, shareholder at Clark Schaefer Hackett. “The DOL can assess significant penalties for late tax filings or fees to go through a correction program to fix qualified plan violations. Worse, penalties can be assessed at a personal level for plan trustees for a breach of fiduciary duty. And in almost all cases, corrections can be costly, time consuming and disruptive to business.”

Smart Business spoke with White about complying with audit requirements and strengthening your retirement plan.

What can employers do to help keep the plan from becoming a liability?

Effective plan governance is the best defense to manage plan risk. So, you should:

  • Establish a plan committee for general oversight, designate an employee as plan administrator to take care of day-to-day plan operations and ensure fiduciary education is provided regularly.
  • Hire qualified service providers to deliver needed expertise. Be sure to assess the quality and level of service as compared to the fees charged. Hiring the right expert protects the plan sponsor and might not mean the lowest-cost provider.

Timely, accurate reporting is vital. Qualified plans need to file a Form 5500 and provide various notices each year. Keep a calendar of due dates, and carefully review draft reports for completeness and accuracy.

Common Form 5500 errors include marking incorrect boxes, providing incorrect data, incorrectly reporting expenses and filing the form late. Also, large qualified plans — generally, plans with more than 100 eligible participants — need to attach audited financial statements. Hiring an auditor experienced in plan audits can help ensure reporting requirements and fiduciary responsibilities are met.

Another best practice is conducting internal checkups. The most common plan audit errors are not following the plan’s definition of eligible compensation to calculate contributions, not implementing auto-enrollment features correctly and not remitting participant contributions on a timely, consistent basis. Circumstances that can increase risk and may require additional oversight and checks of controls include:

  • Changes in third-party administrators (TPAs) or custodians.
  • Changes to payroll companies or adding new earnings codes or fringe benefits.
  • Adding a new division of employees or mergers/acquisitions.

How much can be done in house? How much should be contracted out?

Plan sponsors should determine if they have the internal capabilities. At minimum, have a designated plan administrator to coordinate and work alongside internal human resources and payroll departments and external TPAs, investment advisers, plan auditors and plan attorneys to help keep all parties informed and requirements met.

If external expertise is needed, hire qualified service providers after a thorough evaluation and selection process. The plan sponsor must remember, however, that monitoring service providers is still required as part of the fiduciary responsibility.

How does cybersecurity play in this?

Retirement plans, which have a high level of assets, are a target for cyberattacks. Plus, plan sponsors and service providers utilize personal information, such as Social Security numbers, date of birth, home address, salary, passwords and general payroll information.

Plan sponsors need to consider controls over data not only on the company’s network, but also for every service provider that receives data related to the plan or payroll. This includes obtaining an understanding of the security for data transmissions, how data is stored and how data is protected at each service provider.

A useful resource is the 2016 Department of Labor Advisory Council Cybersecurity Report. Another way to manage risk is through cyber liability insurance coverage, which can help offset some of the significant costs associated with a data breach.

Insights Accounting is brought to you by Clark Schaefer Hackett

Explaining Section 199A, the new qualified business income deduction

The Tax Cuts and Jobs Act of 2017 created a new tax break, Section 199A, where individuals and certain noncorporate taxpayers can deduct up to 20 percent of qualified business income (QBI) on their 2018 federal income tax returns.

It applies to flow-through entities, such as an S corporation, partnership, limited liability corporations and sole proprietorships, where QBI is taxed on the individual, estate or trust return, and subject to higher tax rates. The idea is that with the C corporation rate down to 21 percent, Section 199A allows flow-through entities to operate on a similar playing field.

“Section 199A will reduce the amount of taxes they pay on trade or business income. But it can be a very complex calculation, figuring out your QBI and what limitations apply. It’s not just a simple 20 percent deduction,” says Donna Deist, CPA, MST, senior manager at Ciuni & Panichi Inc.

Smart Business spoke with Deist about how Section 199A will work, now that the IRS has issued the final regulations.

What is considered eligible income?

QBI will include income, gains, deductions or loss from trade or business conducted in the United States. QBI, however, doesn’t include capital gains or losses, qualified dividends, guaranteed payments made to partners, or reasonable compensation paid to owners or taxpayers for their services to that trade or business.

You mentioned that the 20 percent is subject to limitations. What are those?

Once your taxable income exceeds certain thresholds, the 20 percent deduction is subject to limitations. If your taxable income is anywhere between $315,000 and $415,000 for married filing jointly, or $157,500 to $207,500 for all other taxpayers, such as single, head of household, estates, trusts, etc., then you’ll phase out of being able to deduct the 20 percent and will need to phase in the use of the wage and property limitation to determine the amount of the deduction.

Once your taxable income is higher than $415,000 for a joint return or $207,500 for other returns, the wage and property limitation is fully used. To calculate the 199A deduction, you’ll determine which is greater:

  • 50 percent of the W-2 wages for that trade or business.
  • 25 percent the W-2 wages of that trade or business, plus 2.5 percent of unadjusted basis immediately after acquisition (UBIA) of property. (This is directed at those in real estate who usually have much lower W-2 wages, if any at all.)

Then, you must weigh the greater of those two against 20 percent of QBI and take the lesser deduction on your tax return.

In addition, once your taxable income is in this high-income bracket, service providers no longer qualify for the Section 199A deduction. This mostly applies to doctors, lawyers and accountants, but all high-income service providers should check the qualifying list.

How do you think taxpayers will handle the complicated wage and property limitation?

This wage and property limitation requires a complex calculation, but those who have higher taxable income normally work with a tax adviser who can help. People in the real estate business, especially, will have to obtain more information, such as the UBIA, which is basically the cost of the property. However, only some property qualifies.

Even though the pass-through entity doesn’t have to calculate the deduction, it has the responsibility to keep records and report all of the information needed by the owners, shareholders or partners, so they can make the calculations on their returns. That includes W-2 wages and UBIA.

What about when taxpayers have multiple flow-through trades or businesses?

It may be more beneficial for you to aggregate or combine trades or businesses, if they fall within certain guidelines.
Aggregating businesses, however, is not something that can change year to year. Once you elect to aggregate those businesses, until the facts or circumstances of a trade or business change so that it no longer falls in the guidelines of being able to be aggregated, you must continue with that aggregation. You can still add other businesses to that aggregation, though.

This isn’t a decision to be taken lightly. So, carefully consider past activities and future plans with your tax adviser to make the right choice.

Insights Accounting is brought to you by Ciuni & Panichi, Inc.

Retirement plans are undergoing a technology transformation, too

Technology is adding efficiencies in every part of the business world, and retirement plans are no exception.

From an emphasis on cybersecurity, to the ability to use robotics process automation, data analytics and bots to eliminate time spent on collecting, scrubbing and aggregating data, employers need to consider how these new tools can be used in their organization.

“The technology is available, so it’s often a matter of helping people recognize how it could apply,” says Kim Flett, managing director of compensation and benefit services at BDO USA, LLP. “We spend a lot of time educating plan sponsors on what technology is out there now, and we’re only going to see more innovation over the next 10, 15 years.”

Smart Business spoke with Flett about how cybersecurity, automation, data analytics and bots are converging with retirement plans.

Why is cybersecurity so critical for retirement plans?

Retirement plans and the $28 trillion that they currently hold in the U.S. are major targets for cyber hackers. Cybercriminals target entities that manage vast amounts of assets and personal data — two characteristics inherent in retirement plans, which include confidential information like participant Social Security numbers and birthdates.

By law, fiduciaries to 401(k)s and other retirement plans have a duty to act in the best interests of the participant, and protecting sensitive information is part of that job.

What can employers do to improve their data protection?

Retirement plan sponsors and the vendors that service them, like the Fidelities of the world, are increasingly moving to multifactor authentication. This is where people log in with a passcode and then get a text alert where they have to verify the code.

Employers also shouldn’t be afraid to question the cybersecurity of any investment adviser, service provider or third party that touches their retirement plan. The data need to be secure whether it’s stored directly with the employer, at a third-party service provider or while it’s transmitting between the two.

While there’s no way to completely eliminate the threat, employers should:

  • Identify what information could be at risk.
  • Monitor what service providers are doing to address risks at their organizations.
  • Review existing frameworks and current industry developments through resources provided by the American Institute of Certified Public Accountants, the Department of Labor and others.
  • Understand their organization’s broader cybersecurity plan and identify ways it should be tailored to address the unique risks that retirement plans and participants face.

How are automation, bots and data analytics starting to be used with regard to retirement plans?

With retirement plans, there can be a lot of mundane tasks like consolidating data from forms in order to store the 401(k) or payroll records. Bots, which are software robots, can take on these types of tasks.

Employers also may be used to calling vendors and asking a person on staff for a beneficiary or distribution form. Increasingly, the employer or participant may be contacting a virtual assistant, like an Alexa of the 401(k) plan, to get the information they need.

In addition, retirement plans can get complicated when a company has multiple divisions, employers working in different states or more than one payroll company. Data, for example, have to be compiled and sorted and then sent off to the third-party administrator or vendor where the 401(k) plan is invested so that it can do the year-end testing. Thanks to data analytics, programs can be designed to help extract all of that data, so employees don’t have to do data entry or other manual-intensive tasks.

Bots and data tools can become big time savers, so it’s important to investigate how automation might add efficiency to your retirement plan processes.

Insights Accounting is brought to you by BDO USA, LLP

Understanding FASB changes to not-for-profit reporting standards

The not-for-profit reporting model changes from the Financial Accounting Standards Board (FASB), effective now, are the first since 1993 and are intended to address inconsistencies in financial reporting. The changes offer creditors, funders and board members better information regarding the financial status of not-for-profits.

Smart Business spoke with Brian Todd, a shareholder at Clark Schaefer Hackett, about the FASB changes, who they affect and the opportunities they create to tell a better organizational story. 

What is the impact of these changes?

Every not-for-profit will have some type of change to incorporate in their reporting. For example, functional expenses, which break down salaries and occupancy costs, will require more detail to explain how much money serves the organization’s mission and how much goes toward overhead. How not-for-profit executives allocate their time — from mission-critical services to administrative functions — can be subjective. The new reporting model changes will give organizations a chance to describe how they’re allocating those costs.

Another change is liquidity measurement, which is both a qualitative and quantitative disclosure. It’s qualitative in explaining how an organization regularly manages liquid resources and what financial assets it has on hand to fund operations for 12 months. The quantitative aspect is cash, receivables and investments, which are reduced for any restrictions to determine the net liquidity position. 

The classification of net assets is another big change. Before FASB issued the new not-for-profit reporting standards, net assets were classified according to three categories: unrestricted net assets, temporarily restricted net assets and permanently restricted net assets. The new FASB changes collapse these three categories into two: net assets without donor restrictions (formerly unrestricted) and net assets with donor restrictions (which combined temporarily and permanently restricted). 

Why change the reporting model?

Ultimately, the changes were made so that donors and stakeholders could get a better understanding of how funds are used in a specific organization and make better financial comparisons across organizations. Take, for example, a not-for-profit’s statement of functional expenses. Social services organizations were required to report functional expenses at a great level of detail, while other organizations, such as private high schools and chambers of commerce, didn’t need as much detail. The differences in reporting requirements made it hard for donors and other stakeholders to compare organizations across the not-for-profit spectrum. The FASB changes aim, in part, to create consistency while painting a clearer picture of how much money is allocated to an organization’s mission.

Generally, how are these changes expected to affect not-for-profits? 

Not-for-profits will have the chance to provide more clarity around their expenditures with added disclosures and breakouts. Ahead of reporting, they should review how they’re allocating expenses, so they can position their organization in the best light.

The most significant consideration will be liquidity measurements, as those who are looking at these numbers want to know how much an organization has on hand. This will help organizations demonstrate their short and long-term financial strength. The change gives organizations a chance to tell the whole story through liquidity measurements and breakouts. To the same end, it’s also worth having the organization’s board reconsider its reserve policies so that they don’t reflect negatively on reporting. 

What should not-for-profits do to adjust to the changes?

Talk to an accountant. Discuss liquidity measurements and how best to track and break out functional expenses, where financial statements should be updated to reflect changes in terminology, and so forth. 

Rather than fight these changes, embrace them. They offer new opportunities for organizations to share the details of the good work they’re doing. Ultimately, it should make financial reporting easier and clearer for readers, which can lead to more donor engagement.

Insights Accounting is brought to you by Clark Schaefer Hackett

How to put your company in the best position to raise capital

Today’s investment environment in Ohio, especially in its major cities, is very strong. Investors — individuals, companies and firms — have a lot of cash and want to grow and they’re looking for opportunities to put their money to work.

“There’s a big appetite for investments,” says Michael Stevenson, managing partner at Clarus Partners. “Making the right pitch to the right people can make that money accessible.”

Smart Business spoke with Stevenson about raising capital at different stages of a company’s life cycle.

What are the most common reasons businesses and startups raise capital?

Established businesses typically raise capital ahead of an expansion, when they’re looking to buy a business, start a new service or launch a new product. There are also balance-sheet needs, for instance when a company wants to shore up its balance sheet for a potential sale, so it pays down its debt with capital. Established companies also use capital to diversify their ownership holdings, providing aging owners more latitude to put their money elsewhere while giving other investors an opportunity to buy in.

Owners of startups often invest a lot of their own money into their fledgling company. As they grow, their working capital needs increase, but their money is tied up elsewhere, so they’re in an illiquid position and they need outside capital to shore up their working capital and pay employees.

What types of capital are being sought?

Existing businesses are pinning their capital hopes to Small Business Administration or commercial loans. These are the top choices because existing businesses have the equity to back a line of credit or term loan. Their cash flow, or the increase in cash flow expected from the capital injection, gives the lender the confidence that the loan will be paid back within the term.

For startups, they’re looking for angel investors, which typically want to invest in a company but don’t want an ownership stake. Rather, they want 20 to 30 percent return in exchange for taking the risk.

Who should businesses and startups seek advice from before raising capital?

Accountants can put together a plan that accurately quantifies and identifies the company’s capital needs, which is important because investors and banks need a number when looking to back a venture, and they need a rationale to commit.

An attorney can help the business as it builds and shapes its management team, which is important because banks and investors are throwing their money behind people, particularly people who they believe can manage the business to success.

It’s also good to involve an attorney in the formation of the business plan. They’re skilled at telling concise stories with information that’s the most relevant to potential investors.

How do startups connect with investors?

Startup owners need to go out into the community — via chambers of commerce and other economic development organizations — to make connections. They’ve got to get out and tell their story to people in the community. It increases the chances that they’ll meet an investor looking for an opportunity.

What should startups keep in mind when pitching investors?

Whatever the business thinks its capital needs are, double it. A startup doesn’t want to be in a position, having received an investment, of having to go back to the investor and ask for more money. That hurts the business owner’s credibility and makes it seem as if he or she doesn’t have a complete understanding of the company’s needs.

Also, investors want the business’s story. The numbers are important, but revenue streams and markets change so rapidly that forecasts become useless. It’s better to differentiate the business from others in the same space. Prepare a deck when raising capital to tell the story of the company.

It’s really important to have a full and complete understanding of the business. Owners need to be able to answer investors’ questions quickly and completely to prove that they understand the business and the marketplace in which it operates to convince finicky investors that the company is worth the risk.

Insights Accounting is brought to you by Clarus Partners

How to navigate the benefits and risks of opportunity zones

Opportunity zones have captured the attention of many. This program, developed under the federal tax reform, is a tax incentive to develop distressed areas. Investments are made through a qualified opportunity fund for the purpose of investing in these assets.

“There’s quite a bit of interest, seeing what’s on the market, what it’s going to cost and the projected benefits,” says Jim Komos, tax partner-in-charge at Ciuni & Panichi, Inc. “I think it’s going to reawaken projects that didn’t make economic sense before.”

Smart Business spoke with Komos about this innovative program, which is designed to promote development in economically distressed areas by delivering tax benefits to investors.

How are opportunity zones different from programs that have been tried before?

To create opportunity zones, states took census tracts with low property values and decided where they want to encourage development. It’s broader in scope than prior programs. Empowerment zones or renewal communities might have picked 40 or 50 qualifying areas. More than 8,000 opportunity zones have been identified throughout the U.S. and its territories.

The program also isn’t subject to as much bureaucracy as other programs, such as the earned income tax or new market tax credit. Opportunity zones are much simpler.

Who benefits from opportunity zones?

Property owners and residents are one beneficiary. Property is worth more and residents may see their neighborhoods spruced up with new facilities or construction redevelopment. In some cases, business owners who have been wanting to move may now be in an opportunity zone. This program could open up the market.

Developers and investors benefit in three ways:

1. They can defer taxation on capital gains for up to 10 years if they invest in an opportunity zone. However, those gains must incur within six months of the investment. Many investors are looking at opportunities within the zones prior to incurring a gain — selling a property — and creating the related opportunity fund.

2. If they stay in that fund for at least five years, 10 percent of that gain is eliminated. If they stay for seven years, another 5 percent is wiped off the books.

3. If they have gains on their opportunity zone investment, it will not be taxed. For example, an investor buys a factory for $1 million, and then sells it for $2 million 10 years later. That $1 million appreciation will not be taxed.

What restrictions could limit who can benefit from opportunity zones?

Along with making sure the opportunity fund application is filed by the developer, there are some investment restrictions. In most cases, 90 percent of the property, or the assets in that fund, have to be qualifying assets. There are different definitions of qualifying assets, whether it’s an operating business or real estate. (Real estate is a little more restrictive.) Generally, investors need to be improving the property or bringing new business into the area.

Where are the opportunity zones in Northeast Ohio?

Broadly, most of the downtown areas of major cities fall into the opportunity zones. That means much of downtown Cleveland, quite bit of downtown Akron, Youngstown, Warren, etc. But, surprisingly, there are other areas like around Warrensville Heights that also fall into an opportunity zone. For a full listing, including a map broken down by address, visit this opportunity zone resource page from the U.S. Department of the Treasury.

What are some risks to be aware of?

This is a hot topic, but investors need to be careful. They should work with people who know what they’re doing to ensure their investments will actually qualify for the exclusions and deferrals.

In addition, investors shouldn’t overpay or get taken in by high fees. Too often, people are so excited about the tax benefits and deferring the tax, they don’t realize they’re paying too much for the property. Or, if they’re investing through a developer, the developer takes too much for himself — rather than getting 20 percent of the upside, maybe he’s taking 30 percent. So, investors must make sure, overall, it’s a good economic investment.

Insights Accounting is brought to you by Ciuni & Panichi, Inc.

How to ensure you’re getting the most out of your accountant

Accountants are often brought in to a business as an adviser to address issues that are too complex or outside the wheelhouse of the business owner or executives. But not all accountants are created equal.

There are signs business owners should be aware of that indicate an accountant isn’t doing as much as he or she could to help move a business forward. And when those signs become apparent, it’s time to part ways.

Smart Business spoke with Kirk Trowbridge, CPA, director at Clarus Partners, about the signs a relationship with an accountant isn’t working out, how to sever that relationship and what traits to look for in the next accountant.

What should business owners consider as they look to evaluate the work their accountant is doing?

A good place to start is to ask other service providers you currently have a good working relationship with and whose opinion you value if they could recommend an accountant.

For example, you could ask your attorney, banker or financial adviser for a list of potential accountants who they would recommend. You can then setup face-to-face meetings with the accountants on the list and determine if the person has the possibility to be a good fit to work with your organization. You can ask the accountants that you are interviewing for references from clients they currently service. It’s a good idea to ask for references from their clients that are operating in similar businesses in terms of size and industry.

What are some common signs that a relationship with an accountant isn’t working?

If you cannot get your phone calls or emails returned in a timely manner, it is usually a sign that the accountant does not value you as a client.

Another sign is if you ask your accountant questions that are specific to your industry and they are not able to answer the question or at least get you an answer in an acceptable time frame. Not every accountant is going to know the answers to every question on the spot, but they should have the resources and ability to get you an answer.

Once it’s determined that an accountant isn’t right for an organization, how do you suggest the company end the relationship?

It depends on how long of a working relationship you have had with the accountant.

If you have been working together for a long time, a meeting to inform the accountant that your organization no longer fits them is a good idea. It’s not necessary to give a lot of details about why you are making a change. It’s a good idea that you put something in writing informing the accountant that you will no longer need their services as of a certain date. That way there can be no confusion on when the relationship ended.

If you have only been working together for a short period of time, informing the accountant in writing is fine, but putting a date as to when you will no longer need their services is recommended.

How can companies ensure their next accountant is a better fit?

Do your due diligence. Interview more than just one accountant. Ask to meet other people in their firm. Ask to meet the other people that will be working on your account as well. Ask for an engagement in writing that specifies exactly what work the accountant will perform and the expectation of when that work will be completed. Know what the accountant expects of you as well. What information will you provide to them and in what manner? Make sure both sides know and are in agreement as to their role, and what is expected in this relationship.

Using the right accountant can be a big asset to your organization. The right accountant can both provide accurate and timely financial statements and tax returns, and can be a valuable part of your team and assist you in helping your organization be successful.

Insights Accounting is brought to you by Clarus Partners

As the Wayfair decision takes hold, companies need to take action

The U.S. Supreme Court Case, South Dakota v. Wayfair Inc., overturned the physical presence standard for sales tax that had been in place since 1992 in Quill Corp. v. North Dakota, and replaced it with an economic standard.

The guidelines established by South Dakota’s Supreme Court, which are anticipated to be adopted by states across the U.S., require out-of-state retailers to collect and remit sales tax if the retailer has delivered more than $100,000 of goods or services into South Dakota or engaged in more than 200 transactions for the delivery of goods or services to South Dakota. Companies that meet just one of the two guidelines have established nexus for state sales tax purposes. 

Currently, there are more than 30 states that have enacted sales tax legislation similar to South Dakota’s, though Ohio is not among them. It’s expected that most of the remaining states will enact similar statutes. 

Smart Business spoke with Keri Boergert, a principal with Clark Schaefer Hackett CPAs & Advisors, about what businesses will need to do because of the Wayfair decision.

How does a business know whether it needs to comply with the laws coming out of the Wayfair decision? 

Many companies are interested in the case and are reaching out to law and accounting firms to understand the potential impact on their businesses. State and local tax experts can help companies perform an analysis to determine whether additional compliance is needed. 

One of the first steps in determining whether the company faces additional compliance requirements is looking at the amount of sales and the volume of transactions the company has historically had in each state. Most states are following the guidance set forth in Wayfair.  

In Wayfair, the court ensured that the obligation to remit sales tax would not be applied retroactively. Therefore, even though a company might review its sales and transaction footprint historically, the application should be applied prospectively according to each state’s effective date. 

How does this decision affect businesses?

Wayfair is causing significant compliance requirements for businesses that have never even set foot in a state. The number of sales tax returns could increase as more states adopt the new thresholds. This could change a company’s tax filing burden from one home state to dozens of states. 

It’s a much different experience filing in one state versus 25. Every state has different filing requirements — annual, quarterly or monthly. This adds layers of compliance and tracking that might not have previously existed for a company.

Many businesses may not even be equipped to deal with the changes and may have to consider special software that integrates with their accounting system to analyze transactions. Considering an outside state and local expert is the best course of action to provide software guidance and determine when to file. 

What are the consequences of not complying with new laws?

If a company has created sales tax nexus and therefore has a collection and filing responsibility and does not comply, the company will take on the risk for the sales tax liability. As with other state taxes, there is always a risk of examination by state agencies and if examined, the company will not only be liable for any potential tax due, but will also face penalties and interest. Depending on the magnitude of the potential exposure, the sales tax liability could put a business at serious risk. 

What else should businesses know about this decision? 

Online retailers, distributors and remote sellers that traditionally may not have had a physical presence in a state will most likely be impacted. However, other industries, such as manufacturing, may be impacted because of increased collection and retention of exemption certificate responsibilities. 

The move from a physical to an economic presence for sales tax collection is a sweeping change that has the potential to affect many businesses. Now is the time for companies to take a hard look at their business footprint and engage with experts to assess the potential impact.

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