Blog

Post image for Have you Heard of IC-DISC?

Have you Heard of IC-DISC?

by Cody Vincent on October 17, 2016

Is your business exporting goods or services overseas? If so, have you heard of IC-DISC?

An IC-DISC, or Interest Charge – Domestic International Sales Corporation, is an export tax incentive available to companies who export their goods and services overseas.

The IC-DISC allows U.S. companies to set up separate domestic entities, which act as commission agents for the company’s export sales. Three good reasons for setting up an IC-DISC are:

  1. The commission is fully deductible
  2. The IC-DISC pays no federal income tax
  3. The IC-DISC acts as a Subchapter C Corporation in that it distributes its income to its owners as a qualified dividend. The result is a permanent reduction in tax of up to twenty cents on every commission dollar (taking the difference between the top ordinary income rate (39.6%) and the top qualified dividend rate (20%)).

While the tax savings are true, thousands of businesses fail to take advantage of the incentive offered by setting up an IC-DISC. What businesses can benefit from the IC-DISC? I find it easiest to think of three types of businesses that potentially qualify for the IC-DISC tax benefit:

  • A company that directly exports goods it manufactures.  Example:  I manufacture a pet product in Florida and ship to Australia.   Note:  What counts as a manufactured good is also broader than many people realize – it can include software, films and many agricultural products.
  • A company provides architectural or engineering services that are conducted in the U.S. for a building built outside of the U.S.  Example:  An architectural firm based in Florida designs a building that is built in Germany.
  • A company manufactures a good that is included in a product that is exported.  This is probably the largest missed opportunity for businesses when it comes to the IC-DISC.  IC-DISC tax incentives are also available in a situation where a company makes a component part that is included in a good that is exported.  Example: Company Y makes hoses that are included on an engine that is shipped to Australia.

The White House and Congress agree that a key to our nation’s economic recovery is strengthening our manufacturing sector and encouraging exports.  The IC-DISC is tailor-made to encourage exactly such activity – providing a tremendous tax incentive for small and medium business owners who export either goods or services.   For those interested, please contact myself or your LBA tax professional for further details.

by Cody Vincent, CPA

Post image for Ch-Ch-Ch-Changes

Ch-Ch-Ch-Changes

by Barbara Finke on October 5, 2016

The next few years will mean major changes to the way businesses report under generally accepted accounting principles (GAAP). It’s an exciting time! Well for your accountant and banker it is. In the last three years alone, FASB has issued 50 Accounting Standard Updates (ASU) ranging from minor to extensive, compared to only 31 in the three prior years.

The top three updates that should be on your radar are:

  1. ASU 2016-14 Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities
  2. ASU 2016-02 Leases (Topic 842)
  3. ASU 2014-09 Revenues from Contracts with Customers (Topic 606)
    • See also the updates to this update under ASU 2015-14, ASU 2016-12,2016-11,2016-10,2016-08

Is your head spinning?  Should you immediately contact your financial advisors or send your accountant to weeks of training in anticipation? Well, yes and no. Each of these updates could have significant impacts on your bottom line and financial reporting. ASU 2016-14 applies only to not-for-profits so if your entity is a for-profit business, simply be aware of this change should you be personally involved with not-for-profit entities. The other two updates will impact not-for-profits and for profits alike and your organization should gain a basic understanding of each. Please reach out to your financial advisor sooner rather than later to discuss the potential impact to your financial statement reporting, bank covenants or other financial metrics. There are proactive changes you can make to your contracts and accounting systems to help handle these changes.

Read More…

During my 28 years in public accounting, I’ve had the opportunity to work with organizations from numerous industries – construction, pharmaceutical development and manufacturing, technology, consumer electronics, media and healthcare, to name a few.  As a young accountant, I was quickly taken by the nuances of the construction industry and how it can differ radically from other industries – not just as it relates to percentage of completion accounting for contractors – but by the dynamics of the various interwoven relationships that any successful contractor needs to deftly navigate if they want to be successful.  At the time, I didn’t know a surety from a performance bond from a bonding agent, and I recall very clearly how I came to realize how the success of the clients I worked with depended not only on their ability to successfully run their organizations operationally, but also on how well they were able to manage the myriad relationships involved in securing financing for their various ongoing projects.

One of the unique attributes of construction contractors is that a successful contractor is just one or two bad estimates away from being a struggling contractor.  When a contractor bids $10 million on a project and they later learn – after the project has been awarded and started – that the project estimate was understated by $2 million – that is the difference between profitability and significant financial struggles.  It’s one of the reasons that traditional lenders such as banks may tend to be more hesitant to work with contractors.

Because lenders are in the business of protecting their financial interests, and because one of the ways they protect those interests with construction contractors is by working with teams of service providers that have relevant industry experience, it’s important that an accountant working with a contractor has significant relevant industry experience.  Having a thorough understanding of the nuances of percentage of completion accounting as applied to a construction contractor is an absolute requirement for any accountant working in this industry.  Inaccuracies or errors on financial statements are highly detrimental to a contractor’s ability to secure ongoing financing and may even preclude their ability to get bonded for particular jobs.

Lenders and financers are keenly interested in historical gross profit by project / job over time, because percentage of completion accounting is very much driven by the contractor’s estimates.  To the extent the estimates are unreliable or overly aggressive, for example, the timing of revenue recognized will trend in a way that causes concern about the contractor’s ability to provide accurate financial statements. A knowledgeable accountant will keep a close eye on historical gross profit trends on a job-by-job basis, and in the process will provide sound advice regarding the accounting for estimates, costs to complete and the overall percentage of completion process.  Additionally, they can proactively work with the contractor to present their financial statements in a way that provides the specific types of information that lenders will specifically look for from a contractor, thereby reducing or eliminating the multiple iterations of questions that are likely to occur from a lender when they are presented with contractor financial statements that aren’t appropriately tailored to the industry-specific accounting requirements.

One of the attributes I love about my job more than any other is that my work is the exact opposite of a repetitive-motion job.  Every day can bring something completely different, and working with construction contractors presents a combination of technical and relationship-driven issues that require constant thought and problem-solving, which in turn provide significant added value to the contractor, which ultimately strengthens the underlying relationship.

Post image for Handling Market Volatility

Handling Market Volatility

by David Albaneze on September 8, 2016

Conventional wisdom says that what goes up must come down. But even if you view market volatility as a normal occurrence, it can be tough to handle when your money is at stake. Though there’s no foolproof way to handle the ups and downs of the stock market, the following common-sense tips can help.

Don’t put all your eggs in one basket

Diversifying your investment portfolio is one of the key tools for trying to manage market volatility. Because asset classes often perform differently under different market conditions, spreading your assets across a variety of investments such as stocks, bonds, and cash alternatives has the potential to help reduce your overall risk. Ideally, a decline in one type of asset will be balanced out by a gain in another, though diversification can’t eliminate the possibility of market loss.

Focus on the forest, not on the trees

As the market goes up and down, it’s easy to become too focused on day-to-day returns. Instead, keep your eyes on your long-term investing goals and your overall portfolio. Although only you can decide how much investment risk you can handle, if you still have years to invest, don’t overestimate the effect of short-term price fluctuations on your portfolio. 

Look before you leap

When the market goes down and investment losses pile up, you may be tempted to pull out of the stock market altogether and look for less volatile investments. The modest returns that typically accompany low-risk investments may seem attractive when more risky investments are posting negative returns.

But before you leap into a different investment strategy, make sure you’re doing it for the right reasons. How you choose to invest your money should be consistent with your goals and time horizon.

Look for the silver lining

A down market, like every cloud, has a silver lining. The silver lining of a down market is the opportunity to buy shares of stock at lower prices.

One of the ways you can do this is by using dollar-cost averaging. With dollar-cost averaging, you don’t try to “time the market” by buying shares at the moment when the price is lowest. In fact, you don’t worry about price at all. Instead, you invest a specific amount of money at regular intervals over time. When the price is higher, your investment dollars buy fewer shares of an investment, but when the price is lower, the same dollar amount will buy you more shares. A workplace savings plan, such as a 401(k) plan in which the same amount is deducted from each paycheck and invested through the plan, is one of the most well-known examples of dollar cost averaging in action.

Making dollar-cost averaging work for you

  • Get started as soon as possible. The longer you have to ride out the ups and downs of the market, the more opportunity you have to build a sizable investment account over time.
  • Stick with it. Dollar-cost averaging is a long-term investment strategy. Make sure you have the financial resources and the discipline to invest continuously through all types of market conditions, regardless of price fluctuations.
  • Take advantage of automatic deductions. Having your investment contributions deducted and invested automatically makes the process easy and convenient.

Don’t stick your head in the sand

While focusing too much on short-term gains or losses is unwise, so is ignoring your investments. You should check your portfolio at least once a year—more frequently if the market is particularly volatile or when there have been significant changes in your life. You may need to rebalance your portfolio to bring it back in line with your investment goals and risk tolerance. Rebalancing involves selling some investments in order to buy others. Investors should keep in mind that selling investments could result in a tax liability. Don’t hesitate to get expert help if you need it to decide which investment options are right for you.

Don’t count your chickens before they hatch

As the market recovers from a down cycle, elation quickly sets in. If the upswing lasts long enough, it’s easy to believe that investing in the stock market is a sure thing. But, of course, it never is. As many investors have learned the hard way, becoming overly optimistic about investing during the good times can be as detrimental as worrying too much during the bad times. The right approach during all kinds of markets is to be realistic. Have a plan, stick with it, and strike a comfortable balance between risk and return.

I have two primary things that I have tried to instill in my children: (1) Pay attention to your surroundings and, (2) If it sounds too good to be true, then it probably is. They have heard me tell them to pay attention to their surroundings since they were very young. As they have grown into teenagers and young adults, I find myself explaining more and more about things that go on in the “real world”. Unfortunately part of our “real world” includes a bunch of scam artists and cons.

Every day I hear advertisements on the radio or see billboards or internet ads for help with bad credit. Unfortunately bad credit is a fact of life for many consumers. Even more unfortunate is that many of those consumers are targeted by scam artists making promises they can’t keep and profiting from them. Scammers will say they can “wipe away” bad credit or have ways of disguising your credit history.

While there are legitimate organizations out there that truly are trying to help consumers, there is really no way to totally erase bad credit information from your credit report. According to the Attorney General’s Office of the State of Florida, “accurate information which is within seven years of the reporting period, or ten years if the information related to bankruptcy, cannot be erased from a credit report.” The AG further states “If you have a poor credit history, time is the only thing that will heal your credit report.”

Scams often include companies who charge a fee promising a “new credit identity” and providing a nine-digit number that looks like a social security number, sometimes called a CPN or credit profile number. Often, these numbers are stolen social security numbers from other consumers. Some scams direct victims to apply for an EIN, or Employer Identification Number from the IRS. EIN’s are legitimate numbers used for businesses, but may not be substituted for a social security number. This practice, known as file segregation, may be a federal crime.

The Federal Trade Commission indicates that the following are signs a company or individual may be operating a credit repair fraud scheme:

  • Insists you pay them before they do any work on your behalf.
  • Tells you not to contact the credit reporting companies directly.
  • Tells you to dispute information in your credit report – even if you know it is accurate.
  • Tells you to give false information on your applications for credit or a loan.
  • Doesn’t explain your legal rights when they tell you what they can do for you.

The Credit Repair Organization Act (CROA) makes it illegal for credit repair companies to lie about what they can do for you and to charge you before they have performed their services. The FTC enforces the Act and offers a wealth of information for consumers. With the advent of social media and increased technology, opportunities to scam consumers has skyrocketed. Our increased use of email and social networking has increased the amount of personal information floating around in the cyber-world. Consumers need to be prudent with their personal information and be wary of promises of quick fixes to bad situations.

Thinking about purchasing a veterinary practice?  Here are some items that should be considered.

Lifestyle

As a business owner, the number of hours, as well as what you do during those hours, is significantly different than that of an employee. Being a business owner is not a 9-to-5 job. In addition to treating patients, a business owner is responsible for marketing, HR, accounting, practice management, vendor negotiations, etc. or at least in charge of putting the right people in place to make sure those responsibilities are handled appropriately.

Purchasing an existing practice versus starting a new practice

When deciding whether to buy into, or outright buy, an existing practice or to start your own practice from scratch, there are many things to consider. Starting a new practice will allow you to decide on the location, design and tailor the facility to your specifications, and has the potential to quickly gain equity, assuming the practice grows aggressively. However, starting your own practice typically incurs higher startup costs, especially when constructing a building from the ground up. In addition to financial cost when starting a practice from scratch, there will be a significant amount of time and energy devoted to getting the practice up and off the ground. As the owner, your take-home pay may be little to none in the first few years.

Evaluating opportunities for growth

When looking at a potential practice to purchase, one thing to consider is what opportunities are there for growth to exist.

  • Are there services that are not currently being offered that you could offer to generate more revenue?
  • How many hours is the current business owner currently putting in, and are you willing to work that many, or more?
  • Are there services that are being offered but not marketed correctly?
  • Are there other veterinarians in the general location of the practice that could hurt potential sales and growth opportunities?
  • Is there space for expansion, if necessary, at the current location?

All of the above should be considered when looking at a practice and determining an appropriate purchase price.

Getting your advisory team in place

Typically, when evaluating a veterinary practice purchase, it is recommended that you hire an attorney, an accountant, and possibly a veterinary business broker or business valuator. While it is not required, it is preferable and definitely to your advantage because of the experience these professionals have in dealing with veterinarians and veterinarian practice purchases. Also, be sure that you have a good relationship with a banker who has experience with the vet industry and lending to veterinarians. In addition to these professionals, it is often times advantageous to have a mentor who is a veterinarian business owner, especially if you are young with limited business experience. It is important to ”know what you don’t know” and to rely on these professionals for help in reviewing agreements, determining tax and other aspects of the purchase as well as advice on other business management issues, as necessary. Having this team in place allows you to make sure that all of your bases are covered and provides you with an outside set of eyes to make sure that you’re getting the best deal possible and have considered all aspects.

Deciding on an entity structure

Once you have determined that you will move forward on purchasing a practice, a decision must be made as to what type of legal entity your practice will be. Once again, there are many factors to evaluate in determining whether an LLC, Corporation, Partnership, or some other alternative, would be the most beneficial to your business. It is highly recommended that you work with a certified public accountant (CPA) and/or an attorney to determine which structure is best for your unique situation, as not all practices or businesses are the same.

The points above are just some of the considerations when deciding to purchase a veterinary practice, or any business for that matter. In a future article, I will discuss even more points to consider when purchasing a veterinary practice. In the meantime, if you have questions about any of the above, please feel free to contact me at 904.224.9911 or .

Jason Lafser, CPA, CFE
Tax Principal
Leader of LBA’s Veterinary Services Team

One of the questions we are asked on a regular basis is whether or not a practice’s compensation plan is “fair” and incentivizes each physician. I usually respond with another question, “What are you trying to incentivize?” The answers I receive usually are related to a perceived deficiency in a certain physician in the practice. The question is often asked by either a more senior, higher producing physician in the practice or the practice administrator. Common answers are:

  • Increase production
  • Increase profits
  • Timely chart documentation
  • Reach out to referring physicians
  • Use more of our ancillaries (be careful of Stark issues)
  • Follow practice procedures
  • Take more or less call

We then would work to add a component to the compensation plan which would account for any of these additional factors. But is just tweaking your current model enough?

Evaluating Physician Compensation Models

Health care systems and ACOs are transitioning traditional fee-for-service (FFS) compensation systems to value-based, pay-for-performance programs, shared savings and compensation plans, global or bundled payments, episode-of- care reimbursement and quality compensation plans. This doesn’t mean that FFS and collections are not a part of the compensation model.

Just that other factors are being added to the compensation plans. When evaluating a compensation system, physicians should ask the following questions:

  1. If separate services are bundled into an episode for a single payment, how will physicians be compensated for their portion?
  2. What compensation incentives are present for improved quality, better care coordination and outcomes?
  3. Are there withholds or disincentive features?
  4. What is the degree of risk that a physician has and how does this affect compensation?
  5. What percent of base compensation is based on quality factors?
  6. Is compensation based on obtaining all or none of the incentive amount?
  7. Is the compensation system based on work relative value units (wRVUs)?

Do you have the data?

If your practice isn’t tracking the same data that is being used by Medicare and insurance payers your practice will be at a disadvantage.

  • Are you tracking patient quality?
  • Do you perform patient satisfaction surveys?
  • Do you research which facility for your procedures has the lowest cost and highest quality?
  • Do your patients have better outcomes and shorter hospital stays than the competition?
  • If you refer patients to another provider, how do that provider’s cost and quality measures stack up?
  • Do you prescribe lower cost prescriptions?
  • Do you track the of outcomes coordinated patient care?

The payers are using this type of information plus many other metrics when evaluating your practice’s contract rates or even whether to retain your practice in a network. Not only should the practice be reviewing statistical data and how the practice compares to its competitors but it should incentivize physicians to maximize your scores when contracting with payers.

If you haven’t reviewed your compensation plan in a while maybe it is time to take a fresh look. There is not a perfect system and what works for one practice in a specialty may not work for yours. By not reviewing the compensation system you may be putting your practice at a disadvantage in recruiting, succession planning, contracting and ultimately profitability.

By Jim White, CPA

 

Whether they’re snatching your purse, diving into your dumpster, stealing your mail or hacking into your computer, they’re out to get you. Who are they? Identity thieves.

Identity thieves can empty your bank account, max out your credit cards, open new accounts in your name and purchase furniture, cars and even homes on the basis of your credit history.

And what will you get for their efforts? You’ll get the headache and expense of cleaning up the mess they leave behind.

You may never be able to completely prevent your identity from being stolen, but here are some steps you can take to help protect yourself from becoming a victim.

Check yourself out

It’s important to review your credit report periodically. Check to make sure that all the information contained in it is correct, and be on the lookout for any fraudulent activity.

You may get your credit report for free once a year on each of the three national reporting agencies: Equifax, Experian
and TransUnion. To do so, visit www.annualcreditreport.com and choose one of the three agencies. Add a calendar reminder to check a different agency every four months to keep current on this information.

If you need to correct any information or dispute any entries, contact the three agencies directly. Freezing your credit is the best way to protect yourself against fraudulent activity. You can do so by visiting the website for each agency listed previously, and implement a credit freeze for two years for only $10 per site.

Secure your number

Your most important personal identifier is your Social Security number (SSN). Guard it carefully. Never carry your Social Security card with you unless you’ll need it. The same goes for other forms of identification (for example, health insurance cards) that display your SSN. Don’t give it out over the phone unless you initiate the call to an organization you trust.

When you toss it, shred it

Before you throw out any financial records such as bank statements, cancelled checks, or credit card receipts, shred the documents, preferably with a cross-cut shredder. If possible, receive encrypted statements via email rather collecting paper through the mail.

Update your Passwords

Online security experts recommend changing your internet password and login information every three to six months. Make sure you use a strong password, as this provides the first line of defense against unauthorized access. A password is considered strong if it has the following: six to eight characters containing letters (upper and lower case), numbers and symbols.

It can be quite difficult to remember new passwords every few months. Using a password manager can save you the trouble of having to remember the login information on all of your online accounts. Consider using Dashlane or 1Password for cross-platform password managers.

Take a byte out of crime

Whatever else you may want your computer to do, you don’t want it to inadvertently reveal your personal information to others. Take steps to help assure that this won’t happen.

Try to avoid storing personal and financial information on a laptop; if it’s stolen, the thief may obtain more than your computer. If you must store such information on your laptop, make things as difficult as possible for a thief by protecting these files with a strong password.

“If a stranger calls, don’t answer.” Opening e-mails from people you don’t know, especially if you download attached files or click on hyperlinks within the message, can expose you to viruses, infect your computer with “spyware” that captures information by recording your keystrokes or lead you to “spoofs” (websites that replicate legitimate business sites) designed to trick you into revealing personal information that can be used to steal your identity.

If you provide personal or financial information about yourself over the Internet, do so only at secure websites; to determine if a site is secure, look for a URL that begins with “https” (instead of “http”) or a lock icon on the browser’s status bar.

Be diligent

As the grizzled duty sergeant used to say on a televised police drama, “Be careful out there.” The identity you save may be your own.

By Kaitlyn Pandzik Weatherly, CFP®

This information is provided by The LBA Group for the personal use of our clients. It should not be construed as investment, tax or legal advice. Please be sure to consult your CPA or attorney before taking any actions that may have tax consequences and contact The LBA Group | LBA Wealth Management regarding any investment decisions. Source: Broadridge Investor Communication Solutions, Inc. Copyright 2016.

Xero has recently released a dashboard that cannot be found in any other like-market cloud based accounting applications. It is an Assurance Dashboard!

This dashboard does not replace the value or expertise of a traditional audit, but instead empowers the business owner to manage the process in real time.

Some of the highlighted features include:

User Heat Signatures: Allow the user to monitor who has logged in and at what level of frequency. Wowzer… I really neglected my Demo Company in April. Oops!

Dashboard 1 - SH Blog

 

Looking for more detail at the daily level? No problem for this dashboard! It produces a daily summary for every major action within Xero by each user.

 

Dashboard 2 - SH Blog

 

As for bank accounts, users are able to monitor if/when statement lines have been deleted and/or if something was manually reconciled. Neither activity is necessarily an indicator of fraud or theft, but both are usually great indicators that a part of the process (reconciling) needs adjustment. This becomes a great opportunity to inquire about any coding or processing concerns. In a non-demo company (i.e. in real life) it would even show which user deleted the transaction.

Dashboard 3 - SH Blog

Invoices & Bills: the process of generating invoices – a true means-to-an-end (getting paid). Ah, bills. If you don’t open them, you don’t have to pay them, right? Sorry, wrong.

Nothing screams process compliance like being able to monitor that your accounting staff (bookkeeper, controller or outsourced accountant) is getting the data in timely. With this feature you can even monitor posted backdated activity.

Dashboard 4 - SH Blog

This new dashboard is also a great tool for monitoring activity that had to be captured post month-end close.

Dashboard 5 - SH Blog

This tool is only available to Xero users who are currently set up with advisors privileges and is included in the monthly subscription fee.

What is even more important than the feature itself, is to recognize that application developers have greater opportunities to provide massive features, in the cloud, at nominal costs to small business owners.

Life is good in the cloud!

by Stephanie Holt

Employers who sponsor 401(k) retirement plans for their employees are often faced with low participation rates and failed annual nondiscrimination testing. One method for increasing overall plan participation is to add an automatic enrollment feature to the 401(k) plan, which, in its most basic form, automatic enrollment simply provides that all employees will be automatically enrolled into the plan at a specified rate of deferrals (for example, 3% of pay).

The Pension Protection Act of 2006 identified three (3) basic types of automatic enrollment 401(k) plans:

  1. Automatic Contribution Arrangement (ACA) – This is the basic automatic enrollment 401(k) plan. Under this plan, (a) employees are automatically enrolled at a specified rate of pay unless the employee submits an election form to defer at a different rate; (b) contributions are invested in a Qualified Default Investment Alternative (QDIA), unless the employee elects other investments; and (c) employees must be provided an annual automatic enrollment notice.
  2. Eligible Automatic Contribution Arrangement (EACA) – This automatic enrollment plan also requires annual notices to employees, but does not require use of a QDIA investment fund. The EACA also (a) allows a 90 day grace period for automatically enrolled participants to revoke their plan participation & withdrawal their contributions from the plan and (b) provides an extended six-month period for making ADP/ACP test failure refunds.
  3. Qualified Automatic Contribution Arrangement (QACA) – This automatic enrollment plan provides an exemption from annual ADP/ACP testing similar to a safe harbor plan. All employees must be enrolled at a minimum deferral rate of 3% of pay and are subject to an annual 1% escalation of the deferral rate to at least 6% of pay and no more than 10% of pay. The employer is required to make an annual contribution to the plan which must be fully vested after the employee accrues 2 years of service with the employer. The annual notice requirement applies to the QACA, but the use of a QDIA and 90 day grace period for revoking participation are optional.

The implementation of an automatic enrollment feature to your 401(k) plan could be the solution to low participation and annual test failures. But, automatic enrollment can be a complicated feature due to the many options available under federal regulations. It is highly recommended to consult with a qualified retirement plan professional before implementing this feature in your plan.

By Bob McKendry, CPC, QPA, QKA, CFP®