Ten Ways to Protect Your Business, Part 2

 The following article was published by
the American Institute of Certified Public Accountants (AICPA).

operating your business5. Managing Business Risk
Risk management involves protecting yourself against potential loss or less than expected return. A tool typically used to manage risk is insurance, including —

• Group life
• Group health
• Casualty and theft
• Disability
• Workman’s compensation
• Key man
• Automobile

It is critical to have periodic appraisals done of your business by a CPA who is skilled in this area.

6. Managing Your Workforce
As a business owner, it’s important to set a philosophy and standards of performance and clearly communicate them to your employees. Some practices to put in place include a time recording system, a new employee orientation program, training program that includes policies and procedures dealing with internal controls, and a performance measurement system.

Monitoring your employees’ performance and providing regular evaluations based on a consistent set of standards will put any employee on notice about his or her performance if it is less than desired. It is also critical to document your discussions in the event legal action is taken against you based on accusations of bias or favoritism.

7. Leveraging Technology
Moore’s Law states that processing speed will double every 18 months, so it pays to make sure technology serves the needs of your business. As an added incentive to leverage new technologies, the federal government allows businesses to write off up to $100,000 on new equipment purchases through 2005.

If you have limited capital and are concerned about the rapid changes in technology, you may want to consider leasing. Leasing technology equipment allows you to expense the equipment rather than purchase a depreciable asset, all while freeing up your capital to purchase additional PCs or other critical assets.

maintaining your business8. Succession Planning
More than 70 percent of family-owned businesses do not survive the transition from founder to second generation. In most cases, the “killers” are taxes, management or family discord. These are issues that a good family business succession plan will cover. In developing a succession plan, consider —

• Transferring management to one person whether your child or a non-family member
• Transferring equal shares of business ownership to family and non-family members
• Planning ahead a minimum of five years is recommended to determine whether there is any interest in continuing the business on the part of family members
• Developing strategies for minimizing taxes upon your death so that business assets do not need to be liquidated to pay any estate tax liability

9. Protecting Against Fraud
As a result of the increasing use of technology, businesses now more than ever need to take steps to protect them- selves against fraudulent activity ranging from identify theft — such as stolen bank account numbers — to the illegal generation of documents such as sales invoices, purchase orders and bank statements. It’s a good idea to conduct periodic audits of operations, processes and accounting procedures to ensure the proper functioning of all controls and to uncover any irregularities.

Make sure to —
• Check your credit report every six months to see if there are any early warning signs
• Install proper firewalls, virus protection and encryption for your business’s computer system
• Shred all unnecessary financial documents

10. Using Professional Advisers
Choosing the right professional advisers is critical in reaching business goals. CPAs are widely used by many types of companies because of their financial expertise and knowledge of how businesses can be managed profitably and positioned for growth. An attorney understands the issues concerning the legal structure of your business, contractual arrangements with suppliers and distributors, leases and litigation protection.

Whether you’re seeking a CPA or an attorney, here are some screening questions to ask.

• How long have they been practicing? (ask for references)
• What is their experience level with your type of business?
• How are their fees determined?
• How much time will they need to handle the service and when can they begin?

You should also establish a strong working relationship with your lender so that you can get the financing you need to establish or expand your business.
As a business owner, your time may be better spent focusing on the business’s core purpose rather than financial and operational issues.

Working closely with your CPA throughout your business’s life cycle may help you realize your dreams of business success.

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About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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