Thank You for a Successful Tax Season!

Thank You for a Successful Tax Season!

It’s Tax Day! Today we are celebrating all those who filed with us this season. We would like to take this opportunity to say THANK YOU for choosing Smith Schafer for your professional service needs. We are truly grateful for your business.

Also, THANK YOU to our great employees, whose dedication and hard work have brought us through another successful busy season!

We appreciate our staff’s hard work and dedication YEAR-ROUND. Outside of tax season, we conduct audits, prepare financial statements, assist with bookkeeping tasks, prepare payroll returns, conduct business valuations and assist with strategic planning and budgeting.

Oftentimes, business owners do not think about taxes until the end of year. It is not a surprise given the time demands and attention needed to run the business, manage issues and maintain strong client relationships. While all of these are important, it is essential to invest time in addressing strategic consulting and tax planning. This exercise may help your company reduce income tax liabilities and make tax saving moves throughout the year. Remember, not only can a tax planning strategy reduce taxes in the current year, but it can also help with tax reduction in future years as well.

Tax planning is best implemented on a year-round basis. For this reason, it is essential to consult with a qualified advisor who can optimize your position NOW. Interested in assessing your tax planning opportunities? Smith Schafer is here to help you.

Tips to Prevent Employee Theft

Tips to Prevent Employee Theft

Learn How to Prevent Theft in Your Business

Not all crooks roam the streets at night. Some might be roaming your company hallways, stealing cash, forging or altering checks and pilfering your inventory and property. Even worse, they may be stealing intellectual property, such as confidential documents or trade secrets. What can you do to prevent employee theft?

Here are 18 crime busters:

1. Talk openly with your employees about theft and dishonesty. Set an example for ethical behavior.

2. Be suspicious of any employee with a sudden financial change. (Has someone started buying expensive clothes, gifts, or cars?)

3. Prosecute offenders. It helps deter further crime. Articulate a zero tolerance policy in your employee handbook.

4. Have the bank send all canceled checks and bank correspondence to a different address (for example, a post office box or your home).

5. Require employees to sign out and sign in equipment. When a staff member leaves the company, make sure laptop computers, cell phones and other equipment are promptly returned.

6. Periodically change locks on doors and file cabinets. And change computer passwords regularly, particularly after someone leaves the company on bad terms.

7. Keep a close eye on petty cash. Be skeptical about excessive voids, credits or damage claims. Investigate all missing documents. Do not let employees think no one notices when something is missing.

8. Visit frequently and unannounced your warehouse or storage areas. Look for suspicious patterns. For example, do certain employees always park near the door?

9. Randomly check deliveries to your business and your customers. There may be hidden stolen goods in them.

10. Never accept photocopies of documents like invoices and delivery tickets.

11. Look into unexplained employee absences. At the same time, be suspicious if a staff member never takes a day off. That could mean an employee is afraid that theft will be detected if he or she is not around to cover it up.

12. Spot-check phone bills for calls to unrecognized business numbers.

13. Conduct unscheduled audits. Pull purchase records from the company files and ask the person in charge if they compared prices. If not, why?

14. Require full documentation. Ask for receipts, delivery times and notes on the condition of goods when they arrived.

15. Pay only for what you receive. Remind staff members that the company does not pay for items not ordered, even if an invoice is submitted.

16. Get professional help. Ask your insurance agent to visit your business and check it out before buying a substantial theft insurance policy. Smith Schafer can perform an internal control study and make recommendations to segregate employee duties in a way that minimizes illegal activities and reduces theft.

17. Hire a bonding company to bond your employees, if possible.

18. Establish an anonymous tip program that allows employees to report questionable behavior.

These are only some of the steps your company can take to help prevent internal fraud.

If you discover suspicious activity and do not have concrete proof, get legal advice before confronting an employee. A false accusation could irreparably harm employee morale and could result in a lawsuit against your company.

For more information on this topic, contact your Smith Schafer professional or check out our Audit Service Page.

Buying Another Construction Company? Quick Guide on Best Practices

Buying Another Construction Company? Quick Guide on Best Practices

Buying another construction company can be an attractive way to grow your revenue base.

A merger or an acquisition allows you to:

  • Add a new subcontracting specialty,
  • Acquire an experienced labor force to reach new markets, and
  • Deepen your penetration into the market your firm already serves.

But there is more to mergers and acquisitions than agreeing on a purchase price and signing the paperwork. For example, which employees should be made privy to the transaction? And how do you account for the purchase of your new division or subsidiary? Your legal, tax and accounting advisors can help you navigate the M&A process and employ the latest “best practices.”

Confidentiality

Buying another construction company can be an exciting proposition. It may be tempting to spread the news that your firm is “in the market” for a merger or an acquisition. You might even think this will boost morale within your firm, because your employees will share in your sense of impending conquest and enthusiasm.

However, best practices in the M&A process caution against discussing your purchase intentions or any of the details of a pending buyout. This is true whether an offer has been made or accepted — or if the purchase is only in the planning stage.

Employees see mergers and acquisitions in a completely different light than owners and key executives. Employees might become afraid, spread rumors and gossip, and speculate about “what-if” scenarios. Even the slightest leak in the acquisition process can snowball into a huge time-waster for your employees and can cause a public relations nightmare. It might also cause unrest among suppliers, customers, lenders and bonding companies.

Accounting for the Purchase

While you might not share your acquisition plans with employees and other stakeholders, never leave your accounting and legal professionals in the dark. They can be invaluable resources throughout the acquisition process. After all, would you ask your accountant to design a second story addition to your home? Of course not! Accounting for a business combination is a specialized function that should involve your accounting and tax professionals. Do not be fooled into oversimplifying M&A decisions. An accountant who specializes in business valuations is uniquely suited to help with buy (and sell) transactions. Below are some examples of key accounting considerations in business combinations.

  • Mark the Dates

The closing date for a business acquisition is pretty obvious. It is the date the papers are signed and control transfers from the acquired firm to your firm. However, from an accounting standpoint, the closing process may not be “over” for another year. Additional accounting evidence may unfold in the months following a merger or an acquisition. Hindsight could impact how you report the transaction.

It is important that at the first year-end after the business acquisition you consult with your accounting and tax professionals, who will make provisional entries that represent estimates of the remaining assets, liabilities, revenues and expenses that will be recognized in the coming year as a result of the M&A transaction. This proactive step may prevent you from having to restate your tax returns (or your financial statements) in a later year, which could be costly.

  • Consolidated Financial Statements Required

When one construction company buys another, separate locations may continue to be maintained and the newly acquired company continue to operate as a separate and distinct business unit. In fact, there may be significant liability, morale-boosting and administrative advantages to letting the newly acquired company continue to account for its own sales and expense transactions using the existing accounting systems and personnel.

However, from a tax perspective and to be compliant with standard practices for financial reporting for banks and bonding companies, it is often necessary to create and maintain a set of consolidated business and accounting records.

Some refiguring of the values of the assets and liabilities held by the target firm on the date of acquisition may be necessary. Once these new values are calculated for the consolidated financial records, any leftover intangible value may be booked to “goodwill.”

The goodwill account is a fixed asset that appears on your consolidated financial statements after a merger or an acquisition. It generally will not be questioned as long as your accounting, finance and tax professionals document the transaction thoroughly, completely and accurately.

Do It Right

Mergers and acquisitions provide exciting opportunities for growth. But these transactions can also be daunting, especially for construction firms who decide to handle legal and financial matters in-house. To bring you innovative solutions, our Construction and Real Estate Group stays on top of industry issues, trends, tools and technologies to ensure we give you the best possible advice. Smith Schafer professionals have serviced the construction and real estate industry since 1971. To learn more about how we can help, please contact a Smith Schafer professional.

2019 Tax Deadline Calendar

2019 Tax Deadline Calendar

Tax Deadlines

Tax reform brought many changes to the tax code, however it did not change the statutory due dates for filing taxes. See below for important tax deadlines through the remainder of 2019.

April 15, 2019

  • Individual Tax Returns Due
  • Individual Tax Return Extension Form Due
  • C-corporations Tax Returns (operating on a calendar year) Due
  • C-corporations Tax Return Extension Form Due
  • Estates & Trusts Income Tax Returns Due
  • 1st Quarter 2019 Estimated Tax Payment Due
  • Last Day to make a Contribution to a IRA, Health Savings Account, SEP-IRA or Solo 401(k) for the 2018 Tax Year.

June 17, 2019

  • 2nd Quarter 2019 Estimated Tax Payment Due

September 16, 2019

  • 3rd Quarter 2019 Estimated Tax Payment Due
  • Extended Partnership Tax Returns Due
  • Extended S-corporation Tax Returns Due

September 30, 2019

  • Extended Estates & Trusts Income Tax Returns Due

October 15, 2019

  • Extended Individual Tax Returns Due
  • Extended C-corporation Tax Returns Due

Business Valuation & Succession Planning

Business Valuation & Succession Planning

How much is your business worth and what are your plans for the long run? These are questions every business owner will face at some point. Business owners invest many years of time, energy, and personal funds to build a business. Planning for your exit is often one of the hardest things a business owner must do. Contemplating the business you built or help to develop without you is complex, difficult and emotionally challenging. When succession planning is executed properly, it allows for the orderly transition of management while protecting the exiting owner professionally, emotionally and financially.

What should business owners do to prepare for business succession and how can they maximize the value of their business? 

  • The first step is determining a realistic value of the business. This is accomplished by having a valuation performed on an as-is, on-going basis of the business. Some owners may want to determine the annual value of the business for legal reasons, such as a buy/sell agreement, and others may want to be updated on an as-desired basis in order to keep track of the value of their estate.
  • The simplest and least expensive way to determine a value of the business is to engage a valuation expert to perform a Calculation of Value engagement. This calculates the value using the same general methodology of a more comprehensive Opinion of Value engagement, without the increased reporting requirements and therefore, without the increased fees for the service.
  • Another benefit of the Calculation of Value engagement is the professional’s assessment of the main drivers of value for the business. This may help the owner determine ways to increase the value of the business before they decide to transfer the ownership. The business owners may also use the information to help determine the best type of transaction for their economic needs.

Business Succession

  • Business succession transactions may be accomplished by gifting the ownership to family, key employees, or other individuals. Gifting is most common with family successions.
  • The business may be sold to employees, third parties, or may be combined with some amount of gifting. This type of transfer of ownership will be approximately the value determined when the business was valued as an as-is, on-going basis.
  • Businesses may be sold to a strategic buyer (someone already in the industry). A transaction with a strategic buyer usually occurs at a value higher than the amount determined with the traditional Calculation of Value engagement. The buyer may incorporate the revenue streams into their existing business and will be able to achieve increased profit and cash flow by consolidating specific overhead expenses. Example: Two facilities may not be needed and common business functions, such as administrative may be consolidated and the costs may be absorbed by the increased revenue. A specific Calculation of Value engagement may be performed to determine an estimated value of the business if it is sold to a strategic buyer.

CONTACT US

Determining the value of your business and incorporating this information into your overall financial, retirement, and estate planning, will help you manage the wealth of your business. To help business owners through this process, Smith Schafer offers business valuation and succession planning services designed to help businesses create and execute a successful transition strategy.

Smith Schafer works with companies, in multiple industries, to uncover the true value of their companies’ tangible and intangible assets. Whether you need help creating a succession plan or conducting a business valuation, our professionals can guide you.