The 1,099 Hassles of 1099s

The 1,099 Hassles of 1099s

Preparing and filing 1099s is one of those IRS requirements that can really annoy accounting teams, requiring far more hours and effort than they can afford to give to such a mundane task. While there probably aren’t quite 1,099 hassles to 1099 preparation, it certainly can feel like it when you’re scrambling to get them all prepared and filed on time.

 

The many challenges associated with 1099s include:

  • Identifying contractors

    If your business or nonprofit hires independent contractors, freelancers, or vendors, and you pay them more than $600 in business-related payments, then you need to prepare and file IRS Form 1099-MISCs for them. That may sound simple enough, but there are lots of caveats, including that 1099s are only needed for provision of services, not goods, and are only for business services, not personal ones. Then, too, if the contractor provides materials as well as services, you have to separate the two.

 

  • Collecting W-9s

    You need to collect Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, from all of your qualifying providers. It makes a lot of sense to get this upfront, but for various reasons that’s not always possible. Even if you have a good process in place to request the W-9 in a timely manner, some contractors are slow to provide it or don’t fill it out correctly, leading to last-minute requests and corrections.

 

  • Avoiding errors

    Contractors need to update their W-9s every year; if you rely on last year’s, the information may be out of date. As mentioned, even when you receive an up-to-date W-9, the contractor might make mistakes, so you have to ensure that the official name and the taxpayer information number (TIN) listed on the W-9 are correct. If you have to make corrections after filing, the IRS imposes penalties that get more painful the longer it takes for you to recognize the error.

 

  • Meeting deadlines

    The end of the calendar year is an especially busy time, and unfortunately it happens to be the exact time when 1099 demands hit. Organizations have to send 1099s to recipients by January 31 of the year following provision of services, and a copy also has to go to the IRS by February 28. Just to make things a little harder, individual states may have additional requirements and different deadlines for reporting and filing 1099s.

 

Reduce your 1099 struggles

Because preparing and filing 1099s is such a tedious process, many organizations are choosing to outsource the function. If you want to discuss 1099 filing requirements or explore the possibility of outsourcing the function, contact Insero & Co., a public accounting firm with decades of experience working with both nonprofits and businesses. Together, we can explore ways to streamline your accounting functions, so your employees can spend more time on business-critical tasks.

 

 

The 1,099 Hassles of 1099s

Dissolving Your Business? 6 Steps That’ll Help

Dissolving Your Business? 6 Steps That’ll Help

Closing a business is often a difficult and complicated choice to make. Usually, the decision to close has little to do with the financial performance and more to do with a change in ownership or the death or injury of a key owner. Regardless of the reason, it’s helpful to follow a systematic dissolution strategy whenever possible. Here are some steps to include as you prepare your plan:

  • Get expert advice. Dissolving a business can be a stressful and fragile process. The best place to start is by creating a buy-sell agreement long before you get to the end. By agreeing beforehand, many future problems can be avoided. If your business does not have a written agreement, get help from competent professionals (including attorneys, bankers, and others) to iron out the details.
  • Vote to dissolve the business. A sole proprietor may only need to consult with a spouse or trusted advisor. With a partnership, corporation or limited liability company, more than one business associate must agree to the dissolution. Organizational documents or a state’s business statutes often mandate the level of agreement required (a simple majority or two-thirds majority, for example), so you’ll want to consult applicable rules.
  • Fill out dissolution paperwork. Let your state and local governments know that the company is ceasing operations. The forms you need should be posted on your secretary of state’s website. Especially when a partnership or corporation is dissolved, formal filings should prevent future confusion about ownership and liabilities.
  • Cancel licenses, permits, and insurance policies. Most businesses are required to obtain city, county and/or state licenses to operate. The appropriate agencies must be notified of the dissolution. Insurance brokers should also be told to cancel business liability, health care and other company policies.
  • File a final tax return. Even if the business only operates for a portion of the year, you’ll need to notify the IRS that the company’s annual tax return is its last one.
  • Notify interested parties. You’ll need to inform lenders, suppliers, service providers and customers. Lenders will be eager to find out how you plan to repay loans. Suppliers will want to know when to make final deliveries. Utility companies will need to know when to turn out the lights and shut off the water. Customers should also be given plenty of notice about final orders and ongoing projects.

These important steps will help effectively move along your shutdown process. If you have questions about preparing your business, contact us today.

As always, should you have any questions or concerns regarding your tax situation please feel free to contact us.

 

man with laptop frustrated over dissolving a business

 

As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions, please contact us directly.

Fix These Common Customer Service Mistakes

Fix These Common Customer Service Mistakes

If your company provides stellar service and outstanding products, your loyal customers can grow exponentially through social media, online reviews and more traditional outlets. On the other hand, when customers complain, your company’s reputation can be damaged.

Fortunately, your team can build solid customer relationships by fixing these common customer service mistakes:

  • Mistake #1: Ignoring customers. When busy, it’s easy to develop checkout lines or call- ing queues. This frustrates all customers, both those with concerns and those that simply want to order. The net result is everyone is unhappy! Fix: For call volume, consider creating a simple auto-response recording to quickly get customers to the right area. For online ordering, make it easy for online customers to get to someone that can solve their problem. For retail, show all customers that you care. Never give the impression that they’ve intruded upon your valuable time. Make eye contact. Smile. Invite their feedback. And constantly monitor employees looking for opportunities to develop improved communication.
  • Mistake #2: Minimizing legitimate complaints. Sure, there are a lot of complaints out there that may not be resolvable, or even based on fact. But sometimes customers have mistaken notions about your products or services. Fix: Resist the temptation to ignore feedback. With every complaint, ask whether concerns might highlight an opportunity to improve. When complaints seem to arise from several sources and focus on a particular issue, pay attention. If a product doesn’t work as advertised, consider discussing the issue with suppliers.

  • Mistake #3: Defensiveness. Customers need to feel that the company is trying to address their concerns. Even if your employees feel personally attacked, they should never lash out. Fix: Train workers to remain calm. It is best to listen, repeat the complaint back to the customer, and then ask confirmation that you understand their issue. Next, ask a clarifying question. This will help deescalate any tension. Most people respond better when the situation is handled calmly and respectfully.

 

businessman holding a cell phone making customer service mistakes on a call

 

As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions, please contact us directly.

Audit & Accounting Update: November 2019

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest financial reporting insights. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Accounting

2019 Effective date reminder
Our Effective Date Reminder lists pronouncements issued as of Nov. 1, 2019, which became effective on or after Jan. 1, 2019 for most entities or have not yet become effective for all entities as of November 1, 2019.

Updated white paper: Changes to revenue recognition for franchisors
This updated version of our white paper,  Changes to revenue recognition for franchisors, will further assist franchisors in applying the new revenue recognition model in Topic 606, “Revenue from Contracts with Customers,” of the Financial Accounting Standards Board’s Accounting Standards Codification (ASC).

Recognizing costs in construction and production-type contracts
As nonpublic entities continue to work through their implementation of the new revenue recognition and related cost guidance (FASB ASC Topic 606 and Subtopic 340-40), the impact of the new guidance on costs for construction-type and production-type contracts is becoming an area of focus. The revenue recognition guidance in legacy GAAP for these contracts (ASC 605-35) also provided guidance on how entities within its scope should account for contract costs, which is different from the guidance in ASC Subtopic 340-40, Other Assets and Deferred Costs – Contracts with Customers.

Updated white paper: Changes to revenue recognition for franchisors

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/financial-reporting-insights.html

As always, we hope you enjoy this edition of our newsletter and we look forward to receiving your feedback. Should you have any questions regarding the information contained in the attached materials or our service offerings, please contact us directly.

5 Tips to Better Manage Your Cash Flow

5 Tips to Better Manage Your Cash Flow

It seems straightforward: Your business or nonprofit needs to know what you owe others and what they owe you. That’s your cash flow, and managing that cash flow accurately and consistently is one of the basic elements of accounting.

 

Look more closely at cash flow management, and you’ll find that it’s not so simple. As with every accounting process, there are good and bad ways to go about it. There are processes that work well and others that will cause you trouble—if not today then down the line. There are also advanced elements that can help separate your organization from the competition.

 

Let’s look at five tips for managing your cash flow not only to get by but to be more efficient and productive.

 

Step 1: Establish firm collections practices

When do your clients or customers pay you? If your answer is “it depends” or “it’s a long story,” you probably need to strengthen your accounts payable practices. Make sure your policies are clear, and make sure someone is keeping an eye on receivables—you might want to assign a single person to the task. That person should contact customers if they are late with payments, and persist as necessary to collect all your receivables as quickly as possible.

 

Step 2: Pay on time, but not early

It’s good business to pay your bills on time, every time, but that doesn’t mean you should pay a large bill the day you receive it. Check the payment terms—net 30, net 90? Then establish a process to ensure the bill is paid toward the end of the available term. This is assuming, of course, that you have cash on hand to pay the bill—if you don’t, that’s a more serious cash flow problem than the ones we’re addressing.

 

Step 3: Invest in the right software

Especially as your organization grows, it’s wise to invest in advanced accounting solutions such as Sage Intacct, the best-in-class cloud ERP platform. Sage Intacct’s cash flow management software provides a complete picture of your cash position on a secure, customizable dashboard accessible from anywhere. You can view all payments and all transactions across bank accounts and credit cards, and across every location and entity—and it’s ready for you in real time.

 

Step 4: Forecast your future

Look for accounting software that offers predictive forecasting capabilities, which provide access to accurate, automated cash flow forecasting across your entire organization, at the click of a button. The best solutions can generate models of your projected revenues and expenses related to sales, capital investments, and other information. The result is a crystal ball of sorts—a comprehensive picture of what lies ahead so you can better manage your cash flow.

 

Improve cash flow management

Better cash flow management processes can help you grow your organization with confidence. Insero & Co. helps organizations evaluate best-in-class software solutions to streamline cash flow management and other accounting practices.

 

Manage Cash Flow with printed reports from finance system

Tax Update: November 2019

TRENDING IN TAX

IRS proposes regulations for the switch from LIBOR
Guidance would facilitate transitions of existing debt and derivatives to alternative benchmark rates without creating taxable exchanges.
Replacing a key benchmark interest rate, the London Inter-Bank Offered Rate (LIBOR) is a stated goal of financial regulators. LIBOR rates are quoted for many different currencies, including U.S. dollars, and are referenced in lending and derivative transactions throughout the world. Trillions of dollars of transactions are based, in whole or in part, on U.S. dollar LIBOR.

EU’s VAT action plan ‘Quick Fixes’
More than $750bn VAT revenue has been lost across the EU over a 5-year period from VAT fraud and more significantly to noncompliance.
U.S. businesses with operations and transactions across the European Union (EU) are required to comply with EU VAT rules and regulations.  U.S. businesses that, directly or through subsidiary operations, are involved in the movement of goods across EU borders will be impacted by these upcoming changes. Failure to comply can lead to penalty exposure and further scrutiny by the tax authority.

 

IRS proposes regulations for the switch from LIBOR

 

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
https://rsmus.com/what-we-do/services/tax/additional-tax-resources/tax-ideas-insights.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news as well as updates pertaining to the Tax Cuts and Jobs Act. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Monitor Inventory to Keep Cash Flowing

Monitor Inventory to Keep Cash Flowing

Skillful inventory management is often one of the biggest factors in maintaining positive cash flow. Consider these techniques for controlling your company’s inventory to improve your cash position:

 

  • Track inventory turnover. The inventory turnover ratio measures the number of times inventory is sold and replaced in a given time period (annually, quarterly or monthly). It’s calculated by dividing cost of goods sold by average inventory. Let’s say you’re a retail business that has $5 million in cost of goods sold. At the beginning of the year, your inventory balance is $600,000; at year-end, it’s $400,000. That means your average inventory is $500,000 (the sum divided by two). To get the annual inventory turnover ratio, you divide the cost of goods sold by this average. So in this example, the turnover ratio would be 10 ($5 million divided by $500,000). On average, you’re selling and replacing inventory 10 times each year. Compare historical ratios and industry averages to get a clear picture on the state of your inventory management. Low or deteriorating turnover ratios may indicate that your business is carrying excess inventories. Research to find out why.

 

  • Scrutinize aging inventory. An aged stock or inventory aging report lists items grouped by the length of time they’re being held in inventory. Like an accounts receivable aging report, an inventory aging report enables you to quantify the cost of specific slow-moving inventory items. A way to calculate this is to take the number of units on hand and then determine how many months of sales it will take to sell out of the item. If certain items aren’t selling, they may be obsolete or beyond their shelf life. You may need to write down values in the company records, provide discounted sales, or write off specific items by removing them from inventory.

 

  • Consider just-in-time (JIT) inventory management. JIT is designed to increase efficiency, reduce costs and minimize waste. Companies order goods only as needed. Depending on your business, JIT might be used to lower inventory holding costs, reduce problems with order fulfilment, and improve cash flow. Given the risk of being out of stock, JIT can work for your business if your products can be manufactured or supplied quickly, and your company’s order fulfillment system is efficient.

 

By skillfully managing inventory, your firm can continue to generate positive cash flow, satisfy customer demand, and invest in new opportunities.

 

Charts and graphs of cash flow and inventory management

 

As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions, please contact us directly.

Cross-training: Essential for Small Business Survival

Cross-training: Essential for Small Business Survival

Have you considered cross-training your employees to ensure more than one person knows all key functions? Cross-training can be a win-win situation for you and your employees. Large companies often use it to prepare managers for future promotions. But in small companies, it can be the difference between success and failure.

Why companies cross-train

Cross-training provides greater flexibility in scheduling, especially when dealing with unexpected workload and staffing issues. It also helps employees develop expertise in other areas and increases their awareness of the company’s roles and functions — helping them better understand where they fit into the big picture.

For employees, some of the biggest advantages include:

  • Learning new skills
  • Working more efficiently and effectively with other departments
  • Feeling more invested in the company
  • Enjoying growth opportunities

Create your cross-training plan

How you implement cross-training will depend on the size and nature of your business. Consider prioritizing the departments that need and/or want cross-training the most. These departments may be understaffed or have many new employees. Look for important functions that are currently dependent on a single person’s knowledge. These areas should be a focus of your cross-training program.

If you’re considering cross-training your team, here are a few tips to help you prepare:

  • Document your key processes. You cannot cross-train if you don’t know the process. These written processes will turn into training documents as you implement your program.
  • Communicate to your team. It’s essential to get everyone involved before you start a cross-training program. Help your team understand why the company is cross-training employees. Reasons may be to prepare for organizational growth or new industry standards, or to adjust to a changing structure around roles and responsibilities. Then continue to communicate with your team throughout the program with status updates and team meetings about progress and next steps.
  • Present cross-training as an opportunity. Your employees may be more resistant to cross-training if it feels like it’s an obligation or a threat to their roles. You can help them feel motivated by highlighting the benefits, like honing different skill sets and having a better understanding of how their contributions positively impact the business.
  • Start with a small pilot program. Test the waters with a select group of employees to get a better understanding of what works and what needs to be tweaked. You can then expand the program later as you gain insight and experience.
  • Determine cross-training hours. Figure out how much time can be dedicated to cross-training for each team to still run efficiently. This may include carving out a few hours each day, or setting aside full days for a certain period of time to focus on cross-training. If your business is seasonal, ramp up cross-training during your low seasonal period.
  • Listen to feedback. You may learn that some employees have already started practicing cross-training on their own. You can use this kind of valuable feedback to fine tune the program.

Keep in mind that some employees may resist having to train others, and productivity may suffer in the short term. But remember the cost of not cross-training. If you lose a key employee and no one else knows how to do their tasks, your business may be in trouble.

 

Cross-training: Essential for Small Business Survival

 

As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions, please contact us directly.

The Cost of Having the Wrong People on Your Financial Team

What’s the True Cost of the Wrong Fit?

Hiring a full-time employee to join your financial team is like entering a marriage—it is, you hope, a long-term commitment that will benefit both parties. When that relationship unexpectedly falls apart, the cost to businesses and nonprofits is higher than you might think, not only in hard costs but also in lost morale and other soft costs.

 

The hard costs

Every new employee is an investment and a costly one at that. Before the hire, hours are spent reviewing resumes, conducting interviews, and performing background checks. After the hire, days or weeks are devoted to training the new employee, and if the employee doesn’t work out, you have to go through the costly search and training process all over again.

 

In addition, if a hire isn’t meeting expectations, that means your organization is suffering from poor productivity, as well as suffering opportunity costs related to what the employee should be doing well but isn’t. On top of that, there’s the added cost of intervention—meeting with the employee, developing plans for corrective action, and redirecting other employees from their responsibilities to cover for the poor performer’s faults.

 

Soft costs

Those hard costs are only the beginning. If your new hire is disengaged or burned out, if they have bad work habits or bad morale, it’s likely, if not inevitable, that their attitude will spread to the rest of your financial team.

 

If you’re lucky, you’ll notice the issue right away and take steps to correct their behavior or remove them from your organization before they damage your culture. Often, though, months go by in which managers struggle to pinpoint the issue and then devote precious time and resources to figuring out which actions to take. Throughout that process, negative attitude could be spreading.

 

What are your options?

All of this is not to suggest that you should never hire a new employee. Rather, recognizing the extremely high cost of the wrong fit will hopefully inspire you to devote more time and energy to establishing excellent hiring practices that reduce the likelihood of making a hiring mistake. You might also consider outsourcing some financial responsibilities as an alternative to hiring full-time employees.

 

Make the right decision for your organization

Insero & Co. is a public accounting firm with decades of experience working with both nonprofits and businesses. Whether you need recruiting assistance or business consulting, our experts are available to help.

 

Cost of Having Wrong People on Your Financial Team

The Dos and Don’ts of IRS Audits

The Dos and Don’ts of IRS Audits

Every year the Internal Revenue Service audits a number of U.S. businesses. Knowing how to prepare for and handle an audit can minimize stress and even provide opportunities to improve company operations. In some cases, audits may even lead to smaller tax bills.

 

Tips for an IRS business audit

Regardless of the type of IRS audit you and your business is involved in (correspondence, office or field audit), the best way to deal with an audit is to know what to do and not to do. Consider the following:

 

  • Be professional

    •  Do: Auditors have a job to do, and it’s in your best interest to show them respect. If you’re called to their office, show up on time, dress appropriately and have requested documents in hand. If auditors visit your place of business, encourage staff to answer questions honestly and completely. Within reason, it’s acceptable to ask for more time to locate a particular record. If you can’t find supporting documentation, say so.
    •  Don’t: Avoid arguing with the auditor. Ask for clarification if needed, but don’t question every document request. If you disagree with the auditor state your case and understand you have appeal rights should the disagreement become costly.

 

  • Be organized

    •  Do: If you keep business records on a computer, know how to create and print easy-to-follow reports. Prepare for the audit by laying out checks, invoices and other records in a logical fashion.
    •  Don’t: Dump a box of receipts into an auditor’s lap. The easier it is for an auditor to find what they need, the shorter the time period required to complete the audit. Remember, the longer an auditor spends with your records, the more likely he or she will find something amiss.Also keep in mind that it’s rarely a good idea to create records during an audit. Exceptions may be if you’re honestly trying to reconstruct transactions from memory or your records don’t exist (for example, after a natural disaster or fire). IRS agents are often suspicious of hastily prepared documents that smell of wet ink.

 

  • Be honest

    •  Do: Make a straightforward effort to justify deductions. If you can’t locate a specific record, look for alternative ways to support your tax return. For example, if you’re claiming a deduction for depreciation but can’t locate the paperwork, redo the calculation for the auditor. A vendor, landlord or mortgage company may have copies of pertinent records if yours have gone missing.
    •  Don’t: Never create numbers that can’t be corroborated or reasonably explained.

 

  • Ask for help

    •  Do: Get an expert in your corner if you’re facing an audit.
    •  Don’t: Ignore your need for help. Remember, auditors conduct audits all the time. This is a rare event for you. Too many businesses provide more information than is needed, opening themselves for a higher tax bill. Make sure this is not you!

 

For U.S. businesses, tax audits are a fact of life. By knowing what to expect, you can be prepared if the IRS comes knocking. contact us for assistance.

As always, should you have any questions or concerns regarding your tax situation please feel free to contact us.

 

The Dos and Don'ts of IRS Audits

 

As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions, please contact us directly.