Audit, Client, Consultant Relationship

At some point, most successful businesses or businesses with significant potential must go through an audit to verify historical activity and results for investors, shareholders, or potential buyers.   However, because so many businesses are stretched thin in terms of staffing and specialized expertise, audits sometime become significantly burdonsom on a Company. These scenarios often result in delayed completion of the audit, unnecessary difficulty in completing the audit, and impaired independence for the auditor.  Companies lacking bandwidth will have to find time to devote to an audit; and those lacking expertise will have difficulty in completing the work in acceptable ways.  Regardless, often times what happens is the auditor assists the client (adjusts balances, writes financial statemens, etc...) to the point where their independence is impaired.  If an auditors independence is impaired, they are precluded from issuing an opinion.  The burden of knowing if an auditors independence is impaired can't be on the auditor alone.  If a company's auditor is determined to be not independent at a later time, their audit report can be disqualified and the Company may be subject to re-audit at the companies expense.

To remedy these situations, wise executive teams hire expert consultants to assist in the audit preparation and oversight.  By hiring a qualified consultant, companies can negate bandwidth and expertise issues, that will in turn resolve most independence issues.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Prepare your Financial Information to go Public

If you are thinking about taking your company public in the coming years, you should start preparing far in advance. Why?

As part of going public you will be subject to putting at least two years worth of books and records together in accordance with US Generally Accepted Accounting Principles (”GAAP”).  That information must be audited before being submitted to the SEC and available for public observation.

Any auditor will tell you it’s much easier to audit a company when you only have to audit the previous year.  Any time the audit period extends two to three years back there are various issues that are generally encountered, including: 1) missing records, 2) turnover in employees, 3) regulatory filings that will require amendment (think taxes), and the list goes on.

If you contemplating going public in the future, start a conversation with all the stakeholders that will be needed: your management team, board of directors, legal, financial consultant, and auditors.  Having these groups on the same page will ensure that everyone is working as a team to an end goal.  Being proactive in your approach will have better results than if you are reactive.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Accounting for Software Development

There are two types of software that are developed for a business: 1) internal-use software, and 2) software developed to be sold, leased or marketed (“software to be sold”).   The accounting and capitalization requirements for these two different types of software is very different.  Here is a high-level comparison of how each type of software is capitalized. For internal use software, there are three stages defined by accounting guidance: 1) preliminary project phase (i.e. planning, evaluating alternatives, conceptual formation); 2) application development (i.e. design, coding, integration with hardware), and; 3) Post implementation phase (i.e. testing, maintenance).   The capitalization of costs should start after the preliminary project phase, and is contingent on management committing to funding the continued development of the software, and the completion of the project being probable.  Costs should cease to be capitalized after the project is substantially finished (generally, close to the start of the post implementation phase).  All costs outside of this capitalization window should be expensed as incurred.  The costs qualifying for capitalization are also restricted, but that is a whole blog unto itself.

For software to be sold to third parties, the accounting guidelines are completely different.  Accounting guidance requires that costs associated with the development of software to be sold are charged to expense as incurred, until the point in which technological feasibility has been established.  Technological feasibility is established once an entity has completed planning, designing, coding, and testing the software to ensure that the software will work for its intended function.   As a general guideline, sometimes technological feasibility is considered established once software enters beta testing.   Capitalization must cease when the software is ready for general release to customers.  Accordingly, the window for capitalization is extremely small, and often, startup companies expense all costs during development.

Based on the above highlights, internal-use software generally carries a higher asset value on the balance sheet of companies than software to be sold (assuming the costs incurred to develop both are the same).

If your startup is developing software, it would be wise to contact an accounting consultant with software accounting experience to review which category your software falls into and what costs qualify for capitalization, if any.   In addition have your CTO track and document the progress of the project.  The accountant will need to line up expenses with the progress of the project to correctly account for the software.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Minimize Business Taxes Before Year End

Minimize Taxes before year end If you find that your Company has been profitable during the year and it is looking at a hefty tax bill after the year end, there are a few things you can do to minimize your businesses taxes.  Note however, that you should consult your CPA to determine if these action items are right for you.

1. Make payments - Pay all your payables and payroll before year end.  Remember, cash expenditures during the year qualify for deduction.  If you normally would run payroll on January 2, consider running that payroll on December 31 instead.
2. Prepay - Prepay certain expenses normally due on the first of each month.  Traditionally, recurring bills such as rent and insurance are due on the first of the month for the following month.  Take advantage of prepaying these items to push the deduction to the current year rather than the next year.
3. Buy equipment – Certain types of businesses can accelerate depreciation for tax purposes during the year of purchase.  For instance, if you have a construction related business and buy a qualifying truck, you can accelerate the depreciation on that truck and take the total value as a deduction to businesses income.

Remember that your businesses may have NOL (Net Operating Loss) carry-forwards and getting extra deductions in a given year may not be needed.  In addition, law changes can effect when and how you should spend money.  Contact your CPA to determine what is best for your company.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Stock Options for Startups

Stock options have made a lot of people rich, and given a lot of people headaches.  In the startup community, stock options are necessary to attract talent, provide value, and retain critical human capital.  But there are more pitfalls in accounting for options than Minnesota has lakes. Accounting guidance states that stock options, whether issued in public or private companies, are valued at the grant date.  Calculating the fair value of an option for a public company is rather easy if you know what you’re doing, but private companies aren't so lucky.  In order to determine the fair value, one of the inputs you will need to know is the value of underlying stock on the grant date.  However, if there is no buying/selling in a freely trading market, how is one to know what the fair value is?  Here are a few suggestions to calculate the value of your startups common stock if you don't have a formal valuation done by an expert:

1. What is the per share value of the last sale to a third party.  When a willing third party buyer and willing seller exchange cash or other value for shares, the value of those shares can be considered fair value.
2. Use metrics within your industry.  Did two of your competitors just sell their companies for 2x top line revenue or 5x EBIDA.  If you have comparables that can be applied to your company that is also a good starting point.  Make sure to discount as appropriate for lack of marketability, etc.

The bottom line is when you start issuing options; contact a qualified accountant to assist you in stock option accounting.  Lawyers can draft option plans, and may be able to advise you on some tax issues, but accountants are needed to tell you how those options affect your company.  As a final word of wisdom, contact your accountant before issuing options, rather than after.  Suggestions on the strike price and potential dilution can significantly improve the functionality of those options without negatively impacting the company.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Raising Money for Inflection Points

As a business gets off the ground and ideas are swirling in the air, startup founders start committing significant time to raising money.  The question is how much money should a startup raise?  Most founders will answer “as much as possible,” however, that is often the wrong answer for investors. Some founders think it’s important to get a high valuation in hopes of more money coming in the door upfront.  This can also be another potential pitfall.  Valuations are great, but the market sets the price of your company.  A valuation can be high, but the market may indicate and act otherwise.    A company will never raise more money than the market is willing to invest.

What founders should be focusing on is infection points in their business.  When raising money, there should be a reason as to why you are asking for $5M compared to $1M.  An investor needs to know where that $5M is going to get the company.  If a company can only accomplish half their goal with $5M, than that $5M is already lost money to an investor.  If a company can have a finished product ready for market with that $5M, that is an inflection point in your business that an investor can get behind.

As you map out your business, think long-term and realize that your business likely won’t get big money up front.  It will take a few small tranches of money, until larger sums are realized.  Accordingly, think of fundraising like a road trip.  Plan your path and know where you need to take a pit-stop (i.e. get more money).  Think about each tranche of money and how it will relate to an inflection point in your business (i.e. working prototype, completion of code development, finished product, commencement of revenue, etc…).  Think about how much of a runway you need to reach each inflection point and how much money will be required to get there.  Creating a plan and a road map will help investors understand that you have a structured plan to execute an idea.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Small Business Fraud Series - Importance of Physical Cash and Inventory Counts

As your small business grows, your internal control structure must grow with you and a sound control environment becomes more critical. One of the most important controls in a small business is conducting surprise counts of assets in which are easily susceptible to theft such as cash and inventory.

 Cash - For retail or cash transaction heavy businesses, periodic cash counts are vital to an effective fraud prevention process whether performed by an internal audit department or by management. Generally, the simplest procedures are the most effective. Some procedures in which can assist in the identification of fraud include reconciliation of deposit slips to the vouchers provided with cash payments, reconciliation of cash receipts to cumulative cash register readings, spot audits of cash drawers, etc. A good program to follow when performing cash counts can be found here. This program can be tailored to your specific needs.

Inventory - Depending on the product, inventory is generally the most susceptible asset to fraud. Inventory counts can be made periodically or perpetually. Periodic counts are generally performed quarterly or on an annual basis whereby 100% or close there to of the inventory is counted. Perpetual accounts, referred to as cycle counts, are generally performed throughout the year with only a small percentage of the population being counted at each count. Inventory counts are important as they can assist in the identification of missing, misplaced, excess, obsolete, etc inventory. A link explaining steps to a successful inventory count can be found here.

To be successful in these areas designate a specific individual with the responsibility of these task. This individual should be independent to the cash and inventory process. Consistently and following up is important.  You must make a commitment to the procedures in order to assist in the deterant of fraudulent behaviors.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

IRS Makes Offer in Compromise Rules More Flexible

The Internal Revenue Service ("IRS") recently announced, under release IR-2012-53, that they were making the terms to accept offers in compromise more flexible under the expansion of their "Fresh Start" program. An offer in compromise is an agreement between the IRS and the taxpayer in which settles the taypayer's liabilities owed. The IRS makes the determination as to what the taxpayer is capable of paying through review of the taxpayer's current income and assets. Under the expanded program, the IRS in calculating the taxpayer's collection potential, will now look at only one year of future income for offers with obligations paid in less than five months, down from four years. For offers for repayment in six to 24 months, two years of future income will be reviewed, down from five under the previous program. All accepted offers of compromise must be paid within 24 months.

Other changes announced were: allowing taxpayers to repay student loans, pay stated and local delinquent taxes and expanding the Allowable Living Expense allowance category and amount. These amounts are used in calculating the taxpayers future income. See the release above for specific information.

The modification to the offer in compromise program will allow taxpayers in which are having a difficult time meeting their financial obligations to obtain some relief from the IRS. It is always best practice to contact an attorney or CPA prior to negotiating with the IRS. Please contact dbbmckennon for a free consultation regarding your options and look here for information if you are contacted by the IRS or any other government agency.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality professional services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Crowd Funding (JOBS ACTS) passed, Now What?

The JOBS act allows entrepreneurs to raise capital for start up and small companies through crowd funding online. However, regulations will not be implemented until January 2013. The Securities and Exchange Commission (“SEC”) has 270 days to figure out how to regulate funding which targets non-accredited investors.  The following is a partial list of the items in which you can do to get ahead while waiting for the law to be implemented: • Incorporate you business;

• Start writing your business plan, or refining it, if you already have one. This will assist you determine the amounts of financing you are looking to raise. In addition, a well thought out business plan outlining your current and future business expectations will alleviate many questions in which may arise during a due diligence process;

• Get you accounting records complete and accurate. Good accounting will benefit you when attempting to present the viability and growth of your business. The more information you are able to generate on a timely basis will provide additional credibility. If you plan on raising funds under $100,000, the officer of the company needs to certify the financial statements and state they are accurate. So you will want to ensure the records are adequately prepared;

• Get your CPA and/or accountant involved to assist in the process.   If you plan on raising $100,000 -$499,000, then you need to have the financial statements reviewed by an independent public accountant. Any funding over $500,000 requires audited financial statements. It is never too early to get this process started. A first time audit/review can take any where from 30 - 60 days depending on the size of the organization.

If you have questions in connection with crowdfunding or would like to gain additional information regarding this topic. Please contact dbbmckennon at one of its two offices located in Southern California or via email. dbbmckennon is a full service CPA firm specializing all financial and tax compliance areas. In addition to providing audit and tax services, dbbmckennon provides bookkeeping and interim controller/CFO type services to assist small business owners in the management of their operations.

Crowdfunding Update

Last week we posted that the House of Representative and Senate passed their own crowdfunding bills and were heading to reconciliation. Rather than debate the differences, on March 27, 2012, the House of Representatives passed the Senate's version of the bill which was initially passed on March 22, 2011. The bill has now been sent to President Obama for signature. The following are key provisions of the Senate's bill related to crowdfunding:

• Allow entrepreneurs to raise up to $1 million per year through and SEC approved portal.
• Free people to invest a percentage of their income. For investors with an income of less than $100,000, investments will be capped at the greater of $2,000 or 5% of income. For investors within an income of more than $100,000, investments will be capped at 10% up to $100,000.
• Require crowdfunding portals to provide investor protection, including investor education materials on the risks associated with small issuers and illiquidity.
• All investment offerings on the platform must be registered in advance with the SEC through a filing of basic information about the corporation and its principals. Fundraising up to $100k requires very minimal financial statement filings and allows for pre-revenue businesses to still raise up to $100k. Fundraising from $100k to $500k requires review of financials by a public accountant. Fundraising from $500k to $1M requires audited financials.
• Crowdfunding investors are excluded from shareholder caps (currently at 500, though likely to be increased soon) for purposes allowing a private company to stay privately held. *Companies will be able to raise crowdfunding from as many people as they want.
• The investor cannot resell the stock for a year, except back to the issuing company, an accredited investor, through a subsequent registered IPO, or to their family. *This is consistent with non-public offering re-sale restrictions.

If you have questions in connection with crowdfunding or would like to gain additional information regarding this topic. Please contact dbbmckennon at one of its two offices located in Southern California or via email.

Small Business Fraud Series – Importance of Bank Reconciliations

As your small business grows, your internal control structure must grow with you and a sound control environment becomes more critical. One of the most important controls in a small business is preparing timely bank reconciliations at the end of every month, at a minimum.  Bank reconciliations are a comparison of the Company’s records to the bank’s records.  At any given point in time, there are likely to be reconciling items such as outstanding checks or electronic transfers.  Without bank reconciliation, you may not have a clear idea of how much cash is available in your account. You might bounce checks and incur overdraft charges. With electronic check clearing, you don’t have much time to get funds into your account when you write checks. Bouncing checks could be damaging to your business reputation or may cause you to lose a key supplier if not fixed in a timely manner.

Designate a specific individual to perform monthly, weekly, or daily bank reconciliations depending on the volume of account activity.  You must go through every transaction in your account and make sure you and the bank agree on the transaction and investigate any unusual items. The key is to keep a real-time tracking of accounting records and bank balances to protect against overdrafts as well as identify fraudulent activity in a timely manner.

For additional complimentary information regarding thisitem or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Crowdfunding and Financial Statement Audits

In the past weeks, the House of Representatives and Senate have passed back and forth legislation labeled the Jumpstart Our Business Startups (JOBS) Act.  This bill, among other things, allows companies to go through crowdfunding websites, such as kickstarter, to raise capital. The specific limits and restrictions are still being worked out.  For an explanation of crowdfunding follow this link.

At dbbmckennon, we have been keeping a close eye on this revolutionary piece of legislation that we believe, will potentially provide additional startup capital to smaller companies in order to bring their product or service to market.  As Certified Public Accountants (CPA), we too often see small companies fail or never reach their potential due to the inavailability of capital or lack of capital on acceptable terms. We believe this piece of legislation will relieve some of those difficulties.

At dbbmckennon we are uniquely positioned to provide the audits and/or reviews that may be required by this legislation, depending upon the level of funding  are seeking out.  Our business has and always will focus on the needs of small businesses, much like the ones that will benefit under the JOBS act.  In addition, our customers will get the assurance that they are working with a world class CPA firm that is registered with the Public Company Accounting Oversight Board (PCAOB) which allows us to audit public companies in which report to the Securities and Exchange Commission (SEC).  There is no higher level of qualification a CPA firm in which performs audits can obtain.  Our latest PCAOB report, reflected no comments, indicating that the quality of our work is in the upper echelon of all CPA firms nationwide.

As independent auditors, we enjoy seeing small businesses with an idea, a little money, and a big dream.  We look forward to being partners with all the small companies that will benefit from the JOBS act. If you have questions in connection with crowdfunding or would like to gain additional information regarding this topic. Please contact dbbmckennon at one of its two offices located in Southern California or via email.

dbbmckennon to sponsor The Elite OC seminar

On Wednesday, March 28, 2012, dbbmckennon will be sponsoring The Elite OC's Seminar - Building and Growing a Business - The Tie Between Entrepreneur & Leader. The event will kick-off with a light breakfast and schmoozing (7:00-7:30am), followed by an interactive session with three of Orange County's most respected Entrepreneurs + Leaders (7:30-9:00am). These 'Entre-Leaders' will share their wisdom with us and answer questions on how to successfully build and grow a business:

ANDY FATHOLLAHI - Chief Executive Officer, Incipio

ERIK HALE - Founder, Locale Magazine

BRYAN ELLIOT - Founder, Linked Orange County

This is an amazing opportunity to engage with three key OC-leaders, while also giving back to the local Make-A-Wish Foundation through the optional donation of a backpack or toy for children 3-18 years old.

**Attendance is free and seating is limited so please RSVP and arrive early enough to check-in and grab a seat!

Fletcher Jones Motor Cars at 3300 Jamboree Rd, Newport Beach will be hosting the event. For additional information please contact dbbmckennon or visit The Elite OC.

IRS Releases the Dirty Dozen Tax Scams for 2012

The IRS released their annual "Dirty Dozen" ranking of tax scams to remind taxpayers to use caution during tax season to protect themselves against a wide range of schemes.

The three most common schemes to watch out for are:

Identity Theft – The IRS is increasingly seeing identity thieves looking for ways to use a legitimate taxpayer's identity and personal information to file a tax return and claim a fraudulent refund.  If you believe your personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit.

Phishing – This scam is typically involves unsolicited emails or fake websites that poses as a legitimate site and attempt to get the victim to enter valuable personal and financial information.  These emails can appear to be legitimate, but it is important to keep in mind the IRS does not initiate contact with taxpayers by email or request personal or financial information.

Return Preparer Fraud – It is important you hire a trusted tax professional to prepare and file your tax returns. Questionable return preparers have been known to skim off their clients' refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds.

You can find the complete IRS Release of the Dirty Dozen Tax Scams for 2012 here along with additional information on how to contact the IRS if you feel you have been a victim of a tax scam.

For additional complimentary information regarding this item or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

SOX 404(b) Exemption Could Extend to Larger Companies

What is SOX 404(b)?  Section 404(b) of the Sarbanes-Oxley Act ("SOX") requires public companies to have an independent external auditor attest to internal controls over financial reporting, also known as an integrated audit.

What companies are exempt?

Currently, issuers (entities reporting before the SEC) with a public float of less than $75 million or annual revenues of less than $50 million if the public float of the issuer is zero  are exempt from SOX 404(b). However, economic conditions and businesses have contributed to applying pressure to extend the exemption to companies with public floats of less than $1 billion.  It has been also proposed to raise the threshold to $350 million from $75 million.

When might a change in exemption occur?

On February 16, 2012, the House Financial Services Committee opened discussions related to the "Reopening American Capital Markets to Emerging Growth Companies Act." During the markup period for this bill, an amendment to a separate bill was offered to exempt all companies with public floats of less than $1 billion from SOX 404(b).  Although the amendment was withdrawn, the committee chair stated the issue would be considered later this year.

The partners and staff of dbbmckennon, support an amendment to SOX 404(b) to lessen the burden on public companies by increasing the public-float levels from $75 million to in the range $350 million and $1 billion.

We encourage our clients and readers to write to their respective congressional leaders in support of raising the 404(b) public float requirements to $1 billion.  Our firm wrote our congressional leaders during the fight to exempt public companies from 404(b) in support of the $75 million public float, while our competitors and the AICPA did not support the exemption.

Auditor Explained!

Most people are shocked to find out that Certified Public Accountants do more than just tax compliance. dbbmckennon is a full service CPA firm in which provides other services including audits of private and public companies. Individuals within our firm in which perform these services are referred to as "auditors". Most people when they hear that you are an "auditor" automatically associate you with bad things, such as an IRS auditor. What most people don't realize, is that we are the type of auditor in which is there to protect them and their investments. Most auditors have a difficult time explaining to the friends and family what they actually do. If you find yourself not quite grasping what an auditor does, the Center for Audit Quality has created a short video explaining such. You can find the video here. For additional complimentary information regarding our services or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact here.

What’s that new number on your W-2?

You may see a something new on your W-2 this year; employer health plan costs. The Patient Protection and Affordable Act  requires many employers to report the cost of qualifying employer-sponsored health coverage. The new requirement is optional for the 2011 W-2’s (physically issued in January 2012) as employers make modifications to their payroll systems to accomodate the addition information. Starting with 2012 W-2's (physically issued in January 2013) most employeers in which issue in excess of 250 W-2's annually will be required to provide such information.

The costs on the W-2 encompass the costs to the employer for coverage under any group health plan that the employer makes available to the employee. The reporting by the employer provides the US Government to ensure the minimum health care costs are being expended by the employer in accordance with the Act. The amounts are not included in employees' gross income. These costs disclosed exclude long-term care, coverage under separate dental and vision plans, disability insurance, HSA plans, etc. The costs disclosed will include both the employee and employer portion paid.

For additional complimentary information regarding this item or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact here.

Five Accounting Resolutions for 2013

Improving your company should be a constant effort.  Here are fie resolutions to make for 2013 to improve your company's accounting and business.

1. Outsource the work that doesn't benefit your top or bottom line – Business owners should not spend one, two, three or four or more hours a day doing administrative work that doesn't directly impact the company’s growth and future.  Business owners are the face of the company and shouldn't spend all their time behind a computer and a stack of paper.  Outsource the accounting work to a qualified accountant that can take over receivables, payables, and general oversight of the company’s accounting needs.  Use a payroll company that can also help you with HR related issues.  Don’t try to wear all the hats in the organization.
2. Review – Create a monthly or quarterly review process.  Review margins, receivables, payables, and cash forecasts.  Sometimes business owners aren't as profitable as they think they are.  You may get a great margin on a sale, but are you thinking about your overhead costs, how long the product sat on the shelf, etc?  Are your prices to low/high?  Your product/service may need price adjustments.  Reviewing these items regularly will ensure your company doesn't fall behind needlessly.
3. Automate – As your business expands, make sure that efficiencies are found where available.  Credit card processing, storing bank information for clients, or automating payments can assist in becoming more efficient.  Upgrading your accounting software or billing practices can also help.
4. Plan – Speak with your CPA a few times throughout the year not just at year end.   Planning with your CPA can help minimize taxes.  Planning expenditures, creating retirement plans, and taking advantage of certain deductions can all help minimize taxes.
5. Take action – Most resolutions never get off the ground.  Make a concerted effort to do at least one thing that will help your accounting in 2013.  The first step is usually the hardest!

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

2011 Tax Filing Deadline Extended to April 17, 2012

Tax Day is typically April 15, but this year the IRS has moved the filing deadline to Tuesday due to April 15 falling on a Sunday and Monday being Emancipation Day, a District of Columbia celebrated holiday. Tax payers may start submitting their 2011 tax returns beginning January 17, 2012. Filing electronically is the fastest and most reliable way for taxpayers to file returns. Although April 17, 2012 is the deadline this year, taxpayers should contact their preparers early to plan ahead. Those taxpayers needing a little extra time will still be required to file an extension will have until October 15, 2012 to file. PS - We tax preparers just love when April 15th land on a weekend as it gives us a couple of extra days to complete client returns.

For additional complimentary information regarding this item or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Small Business’ Outgrowing their Accounting System

Small business owners are constantly presented with decisions of whether or not to make investments in property and equipment in order to maintain growth within their businesses. Often decisions are easy as the investment is minimal and will quickly contribute to additional revenue. However, there is one asset that every Company has but virtually no Company wants to invest in: an accounting system.

Start-up and small developing businesses often use an off the shelf accounting system (i.e. QuickBooks, Peachtree, etc). As their business grows, sometimes so do the demands of the accounting department. At some point in the Company’s growth, the chief decision maker often has to consider whether to stick with the status quo, or invest in a new Enterprise Resource Planning system, commonly referred to as an "ERP" system. However, implementing an ERP system isn’t just about cost, it’s also about time and timing. So the real question is, should a Company implement an ERP system in the preparation of additional growth, or after growth has been achieved and the old accounting system has reached its limits?

While there is no one size fits all answer, here are a few questions that can assist in the decision of whether or not to upgrade your accounting system:

• Are cash flows from operations substantial enough to support the cost of implementation?
• Will forecasted growth in the coming years substantiate the need for a more advanced system?
• Will an integrated system provide for better customer service?
• Is the business in an industry that generally requires a more advanced system?
• Are there frequent errors in financial reporting, and if so, are those errors arising from the current accounting system not being able to meet the needs of the Company?
• Are there any contracts or large projects that will create a need for a better run accounting department or more advanced reporting features (i.e. government contracting)?
• Would integration of different departments (accounting, customer services, warehouse, etc.) benefit from a more integrated system? Would that drive additional growth?
• Is the Company centralized or decentralized and would a new ERP system best support that characteristic.

In deciding what’s best for your Company, consider contacting your CPA for advice. CPA’s generally work with many companies across various industries and can inform you about both positive and negative results from Companies that are similar to your own. Sometimes, they can even put you in contact with a client who has recently gone through an ERP transition. There is no better decision than an informed decision.

For additional complimentary information regarding this item or other questions you may have please call one of dbbmckennon's offices located in Southern California or email us here.