In the accounting and tax sector, new repair regulations, safe harbor laws and Affordable Care Act compliance issues brought business owners scrambling to comply, keeping certified public accountants busy with research and aiding clients.
Repair regulations set to affect small business
Burying your head in the sand won’t make the new federal repair regulations go away. In fact, avoidance will only make things worse.
With that in mind, here’s the lowdown on what your business needs to know about — to remain in the good graces of the Internal Revenue Service.
Effective Jan. 1, these tangible property regulations, commonly known as “repair” regulations, affect anybody with fixed assets — from a beginning investor with only one rental house to owners of multi-million-dollar corporations, said Dave Mason, CPA and partner at BKD.
They cover how and when a business owner can deduct expenses for purchasing or repairing tangible assets, and whether these assets must be capitalized — recorded as a long-term asset to delay tax recognition of the expense.
There are several key changes in the final regulations that differ from the 2011 temporary regulations.
In the past, the way a company capitalized or depreciated an item on its financial statement used to be disconnected from the tax return, Mason said.
For instance, if repair expenses are treated as deductible items on a financial statement, then the repair may have to be capitalized on the tax return.
Beginning Jan. 1, a company’s position on its financial statement impacts its options on tax returns. In other words, if you don’t want to analyze the fact-based tests in the regulations, then you can elect annually to follow your book minimum capitalization policy.
If that sounds intricate — it is.
This isn’t exactly something one can calculate in between meeting with clients and managing employees.
Behind the numbers: When it comes to female CPAs, statistics are not black and white
At first blush the numbers seem alarming: 40 percent of all CPAs are women, but only 21 percent make it to the level of partner in their firms.
The American Institute of Certified Public Accountants and the Accounting & Financial Women’s Alliance both stress the importance of firms having more women shareholders and partners.
But there is a story behind those numbers that local female CPAs have lived, and it is more complicated than a glass ceiling. Those numbers show that the demands of being a certified public accountant are tough, requires travel, long hours — especially during tax season — and more than a number-crunching mentality.
The result: Not every female CPA aspires to partner.
“You can look at the numbers and say either ‘women are not ambitious or they are not getting a fair shake.’ That is not the case,” said Deborah Helton, partner at BiggsKofford CPAs.
Becoming partner in a firm is a huge commitment, said Judy Kaltenbacher, tax partner at Stockman Kast Ryan + Co. Today’s CPAs are business advisers with pressure and deadlines, and not everyone who starts in the industry has the gumption to stay.
In 1995, a national firm closed shop in Colorado Springs and some of its employees formed their own firm, Stockman Kast Ryan + Co. They had a different view on flexible schedules and didn’t want to lose good women — no accounting firm could afford that, as all predictions were saying that need for accounting services was growing. The U.S. Department of Labor predicted there would be a 22 percent increase in accounting and auditing jobs from 2004 to 2014.
In 2010, Kaltenbacher made partner. Of Stockman Kast Ryan’s nine partners, three are women, including one in the audit department. Among the firm’s 11 managers, eight are women. Nationwide, women now make up about 43 percent of senior managers.
Kaltenbacher feels she made the right choice for her and her family. It took her longer to make her way up to partner. But she wouldn’t change it.
“To me, you give 110 percent every minute, whatever the hours you are working,” she said.
“You don’t give up. I see that a lot — if someone is not happy, rather than try to make a difference, they just leave.
“If I had given up, I don’t think we would have flexible schedules.”
Last April, at the age of 30, Helton became a partner at BiggsKofford. She’s the only woman and the youngest partner at her firm.
Kaltenbacher once thought that by staying home part-time with her children she wouldn’t have it all, and she was OK with that.
“I realized it was a matter of redefining what ‘it all’ meant,” she said. “I look back on life and say, ‘Did I have it all?’ Yes. I did.”
And no statistic, she said, can reflect that.
Employers have options for ACA
For employers who like to delay the inevitable, there’s some hope. Compliance with Affordable Care Act mandates has a few options to postpone one’s fate.
Between 2014 and 2015 lurk dramatic differences in mandates. Starting on the first day of 2015, companies with 50 or more full-time-equivalent employees must offer health insurance coverage with essential health benefits.
With the mandate delayed, next year amounts to a free pass for employers: Companies of any size do not have to offer health insurance. That being said, for employers who already do offer health insurance, the rules of the game have changed.
As politics and government continue changing, the writing on the wall won’t cease, especially as much of the 2,500-page health care reform bill hasn’t been defined. One thing seems certain in the competitive culture of attracting, hiring and retaining top-notch employees: Insurance makes a difference.
“Offering benefits to employees allows [a company] to remain an employer of choice,” said Jeff Ahrendsen, senior vice president and client executive, HUB International.
Any company, no matter how small, can benefit from monitoring KPIs
All too often, accounting becomes an afterthought — a nuisance that must be cranked out quarterly or at the end of the year. A different perspective, however, could change that attitude and boost business performance.
In reality, accounting — by way of key performance indicators (KPIs) — ought to be a daily part of business, akin to greeting customers, managing employees or taking cash to the bank at the end of the day.
Often, small businesses lack current accounting information. Data might come from last quarter or last month, and owners may or may not maintain access to those numbers.
Ideally, though, accounting information would be kept up-to-the-minute — or daily, at least. In addition, each industry or business owner has a different objective — being profitable, providing jobs or preparing for sale — that should drive KPIs. While trying to achieve objectives, though, there needs to be balance.
Large companies already track exactly what’s sold when, for how much, to whom or what part of the country, etc. Yet with small to midsize companies, there’s a “huge disconnect between real-time data — how many oranges they sold this hour — and quarterly financials,” said Chris Blees, CEO of BiggsKofford.
“Most small business owners don’t know what they could or should analyze and measure,” Blees said. Although at any given time a business owner usually knows how much he or she pays for rent or utilities, such expenses aren’t key performance indicators.
“If you’re identifying and tracking your KPIs well, then when your CPA or internal accountant hands you your financials, your reaction ought to be, ‘No kidding,’” Blees said.
If not, it would be “like a driver looking in a rear-view mirror to see a pothole, when he already saw it coming and ran over it,” he added.
Whereas key performance indicators are the dashboard or windshield, financial statements are the rear-view mirror — one already knows where the business has been and how it’s doing.
In addition, most successful business owners and CEOs join trade groups. Car dealers, for instance, have a long-standing tradition of comparing themselves to competitors, said Dave Kast, CEO of Stockman Kast Ryan + Co.
“They are the best example of measuring themselves against their peers.”
At the end of the day, accounting may seem downright tantalizing, once the uses and benefits are understood. Crunching numbers only for tax time has long since become passé.
“It’s the rare guy who can run a business by the seat of his pants,” Kast said. “Usually, the successful ones are tracking their key indicators.”