Combating Fraud

In every business, the reality is that fraud can happen. According to the Association of Certified Fraud Examiner’s authoritative annual Report to the Nations, estimates that 5 percent of business revenue worldwide, or approximately $3.5 trillion, is stolen through fraud each year. With the magnitude of fraud, business owners need to be aware of how to help prevent fraud.

It is hard to prevent fraud, because fraud happens when an opportunity presents itself and a person is willing or can justify the actions. Funds can be siphoned off for decades before someone realizes what happened.

When looking for fraud, it is important to know that not all audits or compilation will be looking for fraud. It is not a protection against fraud. The best way to detect fraud is from inside the company through internal controls. By completing an audit of your internal controls, a company can find their weakness and put in place monitoring systems that will discourage fraud. One way some companies have found that have been effective is a hotline for reporting dodgy dealings. Almost 40% of fraud cases are find this way, and training and hotlines do not cost much to establish.

The face of fraud is also changing making it difficult to know where the vulnerabilities come from within the company. The fast pace of the technology can also create issues that could lead to fraud. Here are some technology rules that can help curtail fraud:

• Remind employees that they are at work and should not be using the computer for personal purposes
• Use stronger passwords that are less easily guessed
• Make sure that firewalls are installed for all computers, when using the internet
• Treat phones and tablets like a computer, make sure the virus protection is updated
• Keep track of where your technology goes and who is using it.
• When using the cloud, know what protection and assistance you can except in the event of fraud or legal action.

Overall, the most effective way to combat fraud is to make it clear that it is unacceptable and is not tolerated. Do not blindly trust any employee, set out clearly the expectations and rules of the organization, and remember that the attitude starts from the top down. Set the example for employees and they will rise to the standards.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Steps to Prepare for the Tax Season

The start of a new year is a busy time for any individual. Although the year has just begun, it is time to start preparing for the tax season. By starting the preparations early, it is easier to avoid mistakes and ensure the paperwork is ready before deadlines start coming up.

Gather and Organize Paperwork

Although the W2 forms are not normally sent out or even prepared until the middle to the end of January, the forms are only part of the paperwork involved in taxes. Paperwork will also include the tax deductions, charity donation receipts and other receipts related to taxes.

Gathering as much paperwork and documentation as possible beforehand will make it easier to put the information into the tax documents after the W2 forms finally arrive. Early organization and preparation simplifies the amount of organization that is required later, which makes it easier to complete and submit the IRS forms before the due date.

Write Down Questions

Tax paperwork and preparation can lead to many complicated questions. Taking extra time to write down any questions that arise will prevent confusion when the paperwork is being prepared. The taxes that are related to new events, such as filing jointly after marriage when compared to filing separately, can lead to many questions.

When new situations arise or new tax laws are applied to the paperwork, it is important to write down the questions and find out the answers before working on the paperwork. The preparatory step makes it easier to avoid accidental mistakes.

Review Any Changes to Laws

Laws related to taxes are constantly changing as world events and the situation of the country takes different paths. Since the laws can change when new regulations are passed, every individual should learn about any changes to the filing system or any regulations that might apply to a personal situation.

After learning about any changes, determine if other questions arise. The legal aspects of taxes are often confusing and complicated, particularly when it differs from previous years. If any new questions arise related to legalities, then it is important to add the question to the list.

Look for Mistakes

Financial statements are not always accurate. Before using any financial statements on tax paperwork, it is important to look for and correct any mistakes. Although mistakes are uncommon, catching problems and changing the data to accurate figures will reduce the risk of accidentally filing the wrong information.

With the tax season around the corner, it is important to start taking steps to prepare the paperwork and documentation. Early organization is a key part of simplifying the process and avoiding complications when the tax paperwork is filed.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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How to Reduce Internal Fraud

In all businesses, having effective internal controls is very valuable. How do you know that your practices are effective? What can you as a business owner do to deter fraud in your business? Having effective internal controls will help your business keep up with the fast pace of the changing business practices. The following questions can help companies examine their internal controls to help prevent fraud.

Which businesses need to protect themselves against fraud?

No company, big or small, is immune to fraud. All the companies that have experienced fraud have one thing in common: they did not think that they were susceptible to fraud.

Businesses, especially smaller businesses, require employees to perform multiple tasks are at a greater risk of internal fraud. Businesses that cannot separate “conflicting tasks” increase the chance of fraud. When these tasks are separated, perpetrators are required to work together to steal from the company, which is harder to do then a single person doing all the tasks.

In larger business with more staff, tasks are separate, but perpetrators will still look for loopholes in the system. When owners are lax with monitoring, and given the opportunity weaknesses are exploited.

What Condition Motivates Internal Fraud?

When a perpetrator meets poorly designed and monitored internal controls, fraud happens. Companies should work to design proper controls, and be attentive in monitoring their effectiveness. The controls should be adapted to changing practices in the business, and not be ignored when the business becomes too busy to implement them. Owners need to be aware of internal controls and make them propriety to deter employees who might commit fraud.

How Can Companies Prevent Internal Fraud?

To help reduce the chances for fraud, companies must take a “top down” approach. Modeling and exhibiting the greatest degree of integrity set the tone for the company. Owners that do not uphold any level of integrity with aspects of the company cannot expect their employees to do so either.

When assessing controls, companies should identify areas with the biggest risk. Implement controls to shore up vulnerabilities uncovered in the assessment. Have a certified CPA audit financial records and procedures to determine where weaknesses are in the company. If the CPA specializes in fraud, this is especially helpful in determining what controls should be implemented to prevent fraud. Controls should be monitored and review regularly to truly reduce the likelihood of fraud.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Subtracting Holiday Bonuses From Company Accounts

As the holiday season comes around, businesses are providing year-end bonuses or holiday benefits to employees as an additional reward for hard work. The problem that many small businesses and companies face is accounting for the additional expense. Recognizing the appropriate accounting method is the key to providing bonuses and benefits during the holiday season.

Cash Bonus Accounting

The process of accounting for a cash bonus is relatively simple. Business owners or the appropriate department within a company must determine the bonus amount for each employee and record the bonus in a similar method as regular income.

Payroll departments or an outsourced service are informed of the bonus and make appropriate calculations for withheld amounts. The paycheck is then given to the employee through direct deposit or a check, depending on the normal method of payment.

The company accounting books will reflect the bonuses provided to employees as a company expense along with regular paychecks. Since the process of providing a cash bonus is similar to a regular paycheck, accounting for the special pay is not a complicated process.

Non-Cash Bonus Accounting

Although a cash reward or bonus is commonly provided to employees, a non-cash bonus is another option for business owners. Non-cash bonuses include the expenses of a company party, holiday hams given to employees or similar gifts that come from the company during the holiday season. Accounting for a non-cash bonus is a little more challenging because it is not subject to the same tax laws.

The appropriate way to add non-cash bonuses during the holiday season is through “de minimis” on IRS tax forms. It is included in the costs and expenses of a company, but employees are not taxed for the gift.

Any non-cash bonuses provided to employees are accounted as a company expense or liability. As a result, the business will pay less in taxes due to the increased expense from the holiday bonus.

Although the non-cash bonus is added as an expense to the company, employers need to use caution when providing de minimis bonuses. The IRS has limitations on the number and amount of rewards employers can offer. A large number of non-cash bonuses might result in paying more in taxes.

The holiday season is a time to offer bonuses and special perks to employees. The bonus is a motivation to continue working hard and is not difficult to add to company accounts. Bonuses for the holiday season are added to the company books as an expense, but the taxation requirements will vary based on the type of holiday benefit offered to employees.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Have You Prepared a Production Budget for the Goods You Sell?

Business PlanYou don’t need to be a large manufacturer to use a production budget. If you produce goods, a production budget is essential. It is a management accounting tool that presents the units of items already manufactured and the units that must be manufactured to meet sales goals and therefore, income goals. No standardization exists for production budgets, so you can present it in such a way that works for your organization. For example, you can include cost elements as well as present values in units of currency.

Purpose and Use

A production budget shows the quantity of finished goods that your organization must manufacture to meet the sales goals or product demand. Hence, it contains two key underlying workings; one is the forecasted demand or sales of the product and second is the expected holding of finished goods in the stocks. Both forecasts are crucial because you don’t want to expend more on preparing un-demanded goods than is necessary. You also don’t want to lock your finances in the form of a higher than necessary quantities of finished goods. Clearly the production budget is useful for all kinds of manufacturing businesses where units can be rightly measured, such as cars and computers. It is also useful for small businesses whether you produce a few handmade items or hundreds of trinkets.

Components

A production budget starts off with the “planned number of units of sales,” and then goes on to add the “planned number of units of finished goods” to give the “total number of units to be produced.” From this total, you subtract the “beginning number of units available in inventory” to show the number of units that your company must produce. If you produce more than one item, you will need to create a budget for each. Remember, the idea is to figure out how much of each item you need to produce. So, your budget must be quite specific. Based on these numbers, you can lay out your various budgets to set targets for costs and reduction of inefficiencies. You also can then finalize your manufacturing accounts, detailing the costs incurred and gains obtained.

Management

If your organization relies on its marketing department for the sale of products, you can more effectively manage your production lines by making flexible production budgets. This means that you should constantly monitor demand levels and adjust production and inventory. You should at the very least do this every quarter. You also can rely on market forces and studies of market variables to forecast demand for your products. In this case, your analyses will determine at which level of demand your company will reach its maximum production capacity. You can then decide on alternative options, such as outsourcing or hiring more labor or machinery.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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What The Healthcare Tax Credit Means To Small Businesses

Pamela HalloranThe Small Business Healthcare Tax Credit was first introduced in 2010 to encourage small businesses and tax-exempt organizations to offer healthcare benefits to employees. The qualifying small business is allowed to claim this healthcare tax credit that could help reduce the yearly tax bill.

The healthcare tax credit is available to employers who are providing healthcare for employees on a continual basis as well as to employers who are first-time healthcare insurance providers.

Business Size Matters

In order to qualify for this healthcare tax credit, the tax-exempt organization or small business should have a minimum of 25 full-time employees who earn not more than, on an average, of $50,000 per year. A larger business will not qualify for this credit. According to the Department of Labor, an employee who works at least 30 hours per week for the same employer is considered a full-time employee.

How Much Credit Can Be Claimed

For tax years 2010 through 2013, a qualifying tax exempt organization can claim up to 25 percent of the employees healthcare cost. A qualifying small business can claim up to 35 percent of the health premiums paid for employees.

For 2014 and after, that credit will increase to 50 percent of those premiums for small businesses and 35 percent for tax-exempt organizations, creating a significant tax credit that is a win-win for both employer and employee.

Healthcare Tax Credit Stipulations

The Small Business Healthcare Credit is non-refundable, meaning that it can only be applied to the taxes due for that year. There is no refund check for this credit. However, if the small business or organization does not use all of the qualifying credit for that particular year, it will carry forward to the next year, through 2016.

In order to claim the Healthcare Tax Credit, a small business or organization must file Form 8941, known as the Credit for Small Employer Health Insurance Premiums. This enables them to list all employees, premiums paid, and will calculate the credit for which they qualify and are able to claim for that particular tax year. The amount should also be filed on Form 3800, a General Business Credit form as part of the business credits for that year.

In case of audit, all employers or organizations should have all supporting documentation on file, including receipts of healthcare premiums paid, copies of employee healthcare statements from insurance providers and all employee names, ages and dates of healthcare enrollment.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Tax Advantages of Working from Home

When you are self-employed and working from home, it provides you with the freedom to accept the type of clients you want and work when and where you want. However, with owning your own home business, you will need to take control of any tax situations that would otherwise be taken care of by an employer. The following are some of the tax advantages you can utilize with a home business. Keep in mind some of these advantages do not apply to everyone and it is always recommended that you meet with a professional tax consultant to help you with choosing the best tax advantages for you and your business.

Business start-up costs: when you start a business, the amount of money you spend on business items such as membership kits, merchandizing and advertisements to promote your new business can often be used as a tax deduction.

  • Services used for the business: working from home means you will need a telephone, fax and internet services to conduct business. Many, if not all of these expenses can be used as a tax deduction.
  • Office supplies: all of the supplies such as paper, computers, pencils, desks, printers and fax machines are items that will be necessary for an efficient office and they can be used as tax deductions.
  • Advertising: this is often one of the most expensive costs for a business, but it is a necessary cost. Any advertisements you use including websites, advertisements, business cards and etc. can typically be used as a tax deduction.
  • Gas and automobile maintenance: if you use your vehicle to conduct business such as going to business appointments, luncheons or seminars your gas and maintenance bills can be used as a tax deduction.
  • Mortgage or rent: working from home means you will not be paying a separate rent fee for an office, however, you can deduct a percentage of your homes rent or the mortgage as a business expense for tax deductions.

There are several rules that apply to using items as tax deductions that are typically used for the household. For example, when using a percentage of the rent or mortgage as a tax deduction, you must use one designated part of the home on a regular basis and only for business purposes. The area that you claim for business purposes must be the place where you meet with customers and conduct daily business. Examples include a garage or spare bedroom that has been converted into a home office and the area should have a separate entrance.

These are only a few of the deductions that a home business owner can take advantage of, there are several more deductions that you can utilize during tax time. Keep in mind that a professional tax advisor will be able to guide you through what you will need to get through tax time.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Global Opportunities: Small Businesses Make the Leap

Crowley Halloran Conference RoomIn today’s business environment, the more ways a company can share their product, the better for the company. Markets all over the world hold potential for small business, but what does it take to get into the foreign markets? Can small business take advantage of the global opportunities? The answer is yes. The global economy has never had more opportunities for small business, and with a strong global financial strategy, small businesses are competing in foreign markets.

To succeed globally, small businesses need to create a global financial strategy. Small businesses will face common issues and a few roadblocks in the global market, but having a well-defined plan can make the difference between being successful and failing in the new market

Some questions to consider when creating your plan are:

  • What performance indicators need measured for both financial and operation purposes?
  • How will accounts receivable and payable be set up and managed?
  • Is there enough support for multiple locations and countries?
  • How will the company keep control over the global financial process?
  • How are local tax regulations and requirements managed for each foreign location?
  • How are different currencies handled in foreign locations?

Being able to answer these questions and any other unique question regarding your company is the best way to start.

Some strategies that help in making a successful transition are setting up multi-entity accounting, understanding foreign tax laws and codes, managing multiple foreign currencies, and having local human resources. Businesses with multi-entity accounting have consolidated their business processes. By consolidating business processes, the company will eliminate duplicate work, create a standard workflow, and be able to support the demands of a more complex business model. Hiring a local accounting firm to help with all the local tax codes and regulations would be extremely useful when breaking into the global market. They will be able to navigate your business through the different regulations, and be able to keep up with the different currency fluctuations. They can also be part of your management team that will take care of the day-to-day running of the business.

Ventures into a new market are exciting new opportunities for small businesses. With a proper plan and a good management team, anyone, even a small business, can take advantage of the global business opportunities.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Tips for picking a CPA

Mike Crowley | Crowley Halloran CPA

Michael W. Crowley, CPA - Principal

One of the most critical decisions anyone can make is picking a good-quality, reliable accountant. There are several things to keep in mind when a business owner chooses an accounting firm. Many accountants are excellent, but are they going to meet your business needs?

There are a few basic tips to keep in mind, as a business owner, when choosing a CPA firm:

Certification: The CPA should meet all the states requirements and passed the required exam. It is important that an accountant has met all the requirements and even continues their education to stay certified. It is the best way to know that they are current in all the new procedures and tax laws.

Experience: Make sure the accountant or CPA firm is experienced in the business field that your business specializes in. It is important that they know what the unique business needs are and how to handle any problems that may arise. They should have worked with that business industry before or something very similar.

Size: While the larger, more popular CPA firms may be ok, do not over look the smaller firms. The larger firms can probably take care of all the business needs and more, but the smaller firms will offer a more personalized approach. Many of the larger firms will contract out the smaller firms to work on small accounts anyway, so why not start with the local, smaller firm and go from there. Just make sure they meet the requirements that your business needs.

Get a Referral: One of the most important factors to finding a good, reliable CPA is to get a referral. Ask your friends, family, co-workers and other business owners to see who they would recommend. The best reference usually comes from word of mouth.

Once all the references have been compiled, do some research on the CPA firm and then ask to meet them and conduct an interview. Ask questions and find the right fit for you. Remember your CPA is to be one of your most trusted advisors, so make sure they are the right fit for you and your business.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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