Michigan’s Wind Industry

Did you know that the state of Michigan has been the fastest growing wind manufacturing region in the nation over the last two years? You probably were unaware of this good news since it has been lost in the media’s coverage of doom and gloom for the Michigan economy.

The American Wind Energy Association (AWEA) posted a blog titled “Getting the scoop on wind at Michigan supply chain meeting” written by Chris Madison. This article provides a brief summary of the projects that have been announced and the jobs that this industry now supports in Michigan.

To read the rest of article click the following link AWEA Into the Wind Blog.

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.

Gary Field’s Views: Concerns About Michigan’s Economic Future – The Next Big Economic Crisis

Dick Morris targets not only the United States, but also the State of Michigan in particular, when he indicates that we aren’t far removed from the crushing wave of the economic tsunami now sweeping over Greece and other members of the EU. To those of us that have resided in Michigan most of our lives and watched the financial mismanagement that comes out of Lansing, financial collapse has always seemed inevitable. Though it seemingly took forever for the auto industry to melt down because of “Bad Management” it ultimately did and the State’s economic crisis isn’t far behind.

President Obama’s goal of “spending this country’s way to wealth” has failed miserably and can only add to the “EU effect” here in the United States. Locally we can expect a similar effect as our soon to be Ex Governor’s management style has been equally irresponsible.

Taking this to the private sector for a minute, when a client of ours leverages by borrowing so that they can continue to invest in the business, if the return on investment which is driven by sales isn’t there, the client must cut costs, including payroll and related benefits, in order to survive. The client simply cannot “deficit spend its way to prosperity” forever. Its bank, at some point, will stop “papering over” the deficits with more money and the client will ultimately be bankrupt. When there is no longer an adequate return on investment and as a result positive cash flow, the private sector does what it must to survive; manage the expense side of the equation. Our clients understand “The only way they can take you out of the game is if you run out of cash.” State of Michigan under its current leadership has been more about taxing and spending versus cutting.

In addition to the federal government funding which has been used to feed the insatiable appetite of the unions in this state, the other source of funding which is drying up is debt sold by the State and its Municipalities. More and more, sophisticated investors are less and less inclined to buy what is quickly becoming regarded as junk bonds from either source. Case in point: Two months ago we were charged with investing one million dollars for a client in Michigan Municipals. However, the market has become so fragile that the money remains in cash as we look to a safer venue.

Morris points out, just as Athens has turned to Berlin, bankrupt states like Michigan will turn to the federal government to guarantee their debt. That my friends will be a pivotal point in this great country’s future in that it will determine whether we become financially responsible going forward by just saying NO or continue as we have recklessly “spending our way to wealth.”

Morris is literally on the money on his analysis and recommendations regarding what the next steps should be and what they mean to the United States of America. This is an excellent piece well worth the read.

To read the entire article please click the following link The Next Big Economic Crisis.

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.

Small Business Administration Scams

In the June 2010 issue of the Journal of Accountancy the “News Digest” reports that yet another scam is being perpetrated against unsuspecting small business owners, this time under the guise of securing funds from the U. S. Small Business Administration (SBA).

Clearly the criminal mind, whether operating on Wall Street, inside the worlds largest commercial banks, or at a local level all have the same purpose in mind;  separate you from your money. Case in point, a headline on yesterday morning’s Detroit News read “Mortgage fraud ring hit $100m, FBI says.” This of course reminds me of a very old quote (the original version of which is supposedly linked to a Mr. T. Tusser in the year 1573) “A fool and his money are soon parted.”

The News Digest does a very nice job of summarizing the “abusive marketing practices” being used to prey on unsuspecting small business owners. Beware!

To read the entire article please click the following link Small Business

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.

Auditory Response

The risk of an IRS audit is increasing, particularly for small to medium-sized businesses. To a large extent this is driven by an administration that has so leveraged this country financially that they have had to add thousands upon thousands of revenue agents to aggressively pursue taxes as a revenue source. The result will be more audits of both business and individuals.

Many accounting firms are reporting a doubling or tripling of the frequency of audits within their client bases. To prepare for the likelihood of an audit, it’s helpful to review the audit process.

In general, the IRS only has three years to audit a tax return. However, the IRS can ask that the company voluntarily extend the audit period. Therefore, the first step in the audit process is deciding whether or not to give the IRS more time when statutes are about to expire.

If the company refuses to extend the audit period when statutes are about to expire, the IRS may get very picky in auditing the return, disallowing all questionable items on the return. A better strategy would be to offer the IRS a limited extension period, say of 6 months. If a limited extension can be secured, and it usually can, it will force the IRS to get things done more rapidly and minimizes the time they have to scrutinize the return in great detail. In addition, to limiting the time frame of the extension, it is advisable to limit the extension to specific items on the return, rather than extending the audit to cover the entire return

After the extension step, if any, the audit process continues with a meeting between the IRS examiner and your tax adviser. Many times the IRS will require the taxpayer, or its representative, to be present at the initial meeting. The meeting can be used to lay the ground rules for the audit and give the tax adviser a clear idea of what items the examiner is interested in. During this meeting, a good tax adviser will ask for a target date of completion, designated one person in the firm to act as liaison with the IRS, and create a rapport with the examiner.

The IRS examiners will agree to just about anything that will make their work easier and speed the process, without sacrificing the integrity of the audit. For example, Numerico offers to send information to the examiner before the actual meeting to expedite resolving the items the IRS will be looking at and to reduce the amount of time the examiner needs to spend on-site. The pro-active stance helps to reduce auditors’ mistakes and misunderstandings, as well as the tax assessments the company being audited would face as a result of those mistakes. Also, it is more difficult to correct an auditor’s mistake once it has been written up.

Now that the meeting has been set, let’s look at basic audit defense strategy. For the most part, the groundwork has already been laid and the key issues are clear. It’s important to settle these key issues right away, to avoid wasting time. When settling the issues, approach them directly. This is the part where your tax advisor is most effective. IRS examiners are not in the habit of making trades, i.e., overlook item A and we’ll concede items B and C. Therefore, all “gray areas” that the IRS will be focusing on must have proper documentation and it must be presented properly to the examiner to get them to pass on it. A tax adviser with a good reputation and experience in the auditing process can save a company thousands of tax dollars by handling your case pro-actively.

Tax problems are discussed with the adviser before being written up in the audit report. Once the details have been ironed out and the audit is over, the examiner must deliver a written report. From this point, the company has 30 days to bring the case to the IRS Appeals Office, if necessary. The difference between the audit and the appeals is the element of negotiation. You can make deals with the IRS during the appeal process.

Once a case is taken to Appeals, all tax disputes must be resolved. The Appeals Officers judge each case on its technical merits and the risks vs. cost of litigation. This is why Appeals officers are able to negotiate; to avoid costly litigation and the setting of legal precedents. About 85% of all appeals cases end in voluntary settlements.

The appeals process is fairly simple, but requires thorough preparation. A detailed, persuasive presentation of your case should be written up; you won’t meet the person who reviews your case beforehand. Be sure that the Appeals officer understands your position on all issues before attempting to negotiate. Also, as this is a negotiation process, you should only present reasonable arguments to the Appeals Office. Disputing every detail of your case, especially if your argument is weak, is a poor way to begin a negotiation.

To survive the audit process, present a strong case, a good set of books, and retain quality representation. IRS agents are like commissioned-salespeople in that careers are made (and broken) on the amount of revenue (tax assessments) the individual agents produce. If you understand this and pro-actively move through the audit, process, the agent will realize that you’re no “easy sale” and that they should look elsewhere.

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.

Straight Talk from Gary Field, CPA

Those of you that have been around long enough are no strangers to government attempts to force national health care down your throats. Recall that no sooner was that fine upstanding American Bill Clinton put into office, January 20, 1993, he named our now Secretary of State, then First “Lady” Hillary Clinton to head a task force on national health care reform. Attempts to institute these reforms were abandoned in September 1994. I wrote the following about the then government grab for power;

The combination of the presidential election and legitimate calls for less expensive health care for all has thrown Congress into another feeding frenzy. This time it’s over national health insurance, so hang on to your wallet. Most of Congress supports some form of “pay-or-play: scheme.

Under the “pay-or-play”, employers either provide government determined minimum health insurance or pay a payroll tax to enroll employees in a federal health insurance plan. This would do nothing more than soak employers, taxpayers, and cut the quality of health care. Their proposal would result in throwing money at costly “cures” that are worse than the ailment. The last thing taxpayers need is a new government program twice the size of Medicare.

As an employer, my vote goes to health care for all without government intervention. That would benefit 31 to 36 million Americans currently uninsured. To solve the health care problem, let’s start with a positive logical approach that clearly defines the bigger problems and provides reforms which are not politically motivated.

• Monopolies in the provision of care must be broken to lower costs. Something is wrong with a system that has been pushing up health care costs at an average of nearly 9% a year for the last decade. That’s nearly twice the rate of inflation.

• Participants should share in more of the costs. As a group, we have become health care junkies. We don’t have a truly free market system as long as medical insurance drives demand, and patients are unwilling or unable to learn the true price of services they’re buying.

• The escalating burden of malpractice suits must be stopped. Witness plaintiffs in hot pursuit of Eli Lilley, maker of the anti-depressant drug Prozac: or Upjohn, maker of the popular sleeping pill Halcion and most recently Dow Corning as maker silicone gel breast implants. Forbes magazine labels this litigation cost a “tort tax”. According to a recent article, tort claims cost the country $117 billion dollars in 1987. Medical doctors, faced with the threat of malpractice, have resorted to defensive medicine, particularly in the form of redundant testing.

• The medical profession has to be held accountable and to a higher standard. Although most business people compete on price, doctors rarely do. The absence of effective economic controls, as would naturally occur in a free market, creates anomalies. For example, Detroit’s rate of caesarean birth, which is five times more expensive that vaginal birth, is double that of Minneapolis. For this country as a whole, C-sections have increased 500% in the last two decades. To my knowledge, there’s no medical evidence that can explain this interesting phenomenon. Are Detroit C-section rates higher than Minneapolis’ because C-sections pay better on Medicaid fee schedules when compared to normal deliveries? I have to wonder.

• Since the inception of the Canadian system in 1971, the real cost of per capita health care has gone up and now exceeds that of the largest HMO’s in the U.S.

• The average hospital stay in Canada is 42% longer than in the U.S. Therefore, the system is no more efficient.

• Canadians are flocking to the U.S. to get health care they cannot get at home. In many cases, medial appointments must be scheduled one year in advance. Plan your illnesses carefully!

Other countries that have had a brush with national health insurance are now moving in the opposite direction. The father of Quebec’s health care system now advocates privatization and competition; Sweden is introducing “managed competition” and New Zealand is ending a forty year experiment with socialized medicine by giving people tax incentives to purchase private insurance.

Clearly, national health insurance is an attempt to make the federal government responsible for our well-being. Although there is a mindset that buys into that, I believe they are the minority. Lawmakers encourage our irresponsibility because the platform sells. However, allowing the government to assume responsibility for health care can only end in frustration. The government will simply take increasing levels of control while leaving us with 100% responsibility and accountability for our lives. That is one more reason why as government grows larger, their populations grow more frustrated and unhappy. In fact, government control has culminated in endless taxation, endless regulation, enormous bureaucracy and the lowest level of public service ever experienced.

Congress must learn that solutions to social problems can be found in the tried and proven mechanisms of free market, not by clogging the system with further governmental controls or by bleeding taxpayers through a government-administered national health care plan. I believe my proposal could help us achieve all of our objectives at a much lower cost.

In my opinion, the arguments against national health care haven’t changed much.  What has changed since I wrote this piece 15+ years ago is that the American people have lost their way and greed and impatience have become an even bigger part of our lives. Specifically the American people have become more inclined to let government take more and more control of our individual freedoms and allowed scoundrels, like the “leaders” on Wall Street and the Obama administration pillage the United States Treasury.

While there is no doubt that the health care system needs help, it is still, bar none, the best system in the world. It is equally clear that the current administration with its attitude of “From each according to his ability to each according to his need” is hell bent on forcing national health care down our throats whether we like it or not.

God help America.

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.

Is it a Rat Race?

Business is war. It’s a jungle out there. Never give a sucker an even break. Nice guys finish last. It’s a dog-eat-dog world. We’ve all heard at least one of these bits of wisdom in our lives. Some of us even use them on a regular basis to describe business or personal philosophy. Though they are effective and hard-hitting, there’s one basic flaw. Each one of these statements is premised on the idea of business or personal relationships as a fight to the death.

Though the idea of life as an endless struggle or fight for survival is romantically appealing, it’s not very efficient. Those who go through life in this way waste so much energy and time waging short-term battles that they lose the long-term war. In this case, the long-term war is productive change.

Though you can force some productive change through continual frontal assaults, there are more efficient means of accomplishing your objectives. It is shortsighted to handle all challenges with the same tactic. Different situations require different methods. By understanding the environment around the situation, you can use tactics that blend into and solve the conflict harmoniously.

If a conflict is solved in a way that creates discord (future conflict), then the situation hasn’t been resolved. You may think you have come out on top, but the conflict will usually be revisited, with much more intensity. Your short-term gain will produce long-term pain, either for you or for the other parties involved.

A basic law of the universe is that “for every action, there is an equal and opposite reaction”. The universe demands that equilibrium is maintained. Imbalances have a way of righting themselves, with the unknown variable being the time it takes for resolution. If we push a situation toward further imbalance, the time table is accelerated. The greater the imbalance becomes, the greater the force against us.

The principle of avoiding negative conflict, yet accomplishing your objectives, is the essence of a martial art called aikido. In aikido, the aggressor’s strength is never met head-on. Instead, the aikidoist, yields to the force in such a way that it is unable to cause harm and, at the same time, the force is redirected, usually to the opponent’s detriment. This is like redirecting the flow of a river instead of opposing it. Much less energy is expended, equilibrium is maintained, and the objectives are met. This principle works in most every situation.

All things in life have a balance. By approaching all situations in life as confrontations and attacking relentlessly, we eventually, upset many balances. This is not to say that you should never use a direct attack. However, by looking at the environment (which shapes the situation and its outcomes) and considering alternatives, we can accomplish our objectives and maintain a healthy, natural balance.

Employee Time Theft – You Can’t Afford To Ignore It

Do you have an employee who is always late? One who makes or receives personal phone calls daily or one who sneaks out a couple of minutes early on a regular basis? What about an associate that is on their cell phone texting through out the day or who clicks off the computer screen as soon as you walk into their office? If you do you have an employee that is stealing time pure and simple.

Have you ever stopped to consider what these types of employee time theft are costing you? An employee who robs you of 5 minutes per day 5 days per week is stealing the equivalent of approximately 2.8 days per year assuming an 8 hour work day.

If you pay an employee $15 an hour and that employee is stealing 2.8 days per year, it’s costing you $396 per year considering a factor for payroll taxes and employee fringe benefits.

If your employee steals an hour a day 5 days per week the cost of the theft has just skyrocketed to 33 days per year and $4,680 again considering a factor for payroll taxes and employee fringe benefits.

How can you control expensive employee time theft? Clearly state policies in the personnel guide and have employees sign it to be sure they have read the guide and understand the policies. The guide should include policies on personal phone calls, cell phone use, internet use and working hours as well as policy relating to tardiness.

Let your employees know how much you are willing to tolerate—you can disallow personal phone calls except in the case of an emergency. Talk to “tardiness” offenders—tell them their pay will be docked or worse—remind them that everyone in the office is a professional, and professionals don’t punch a time clock. Make it clear that cell phone use of any sort or “surfing the net” will not be tolerated UNLESS it is business related.

The key is to be aware of the situation, bring it to the employee’s attention, specify the ramifications should they fail to modify their activities, and consistently enforce the penalty you have set. If it’s clearly a matter of policy, you take the emotion out of your reaction and simply make a good business decision.

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.

How to Succeed Where Others Have Failed

Stop anyone you meet and ask “what’s the biggest mistake a new business owner can make?”  Odds are they won’t know. A more insightful respondent (perhaps one who knows from personal experience) might mention “undercapitalization” or “lack of cash flow”.  They’re usually right. But the truth is, the biggest mistake is usually not one but a combination of the following maladies: “being overly optimistic when projecting revenue”, “having a weak (or nonexistent) business plan”, “pricing problems”, “a failure to seek professional advice”, “rushing to market”, “insufficient experience”… the list goes on.

On the other hand, ask them what makes an entrepreneur succeed, and you should hear statements like “owner’s self-confidence”, ”emphasis on service (quality) rather than price”, “working hard”, ”luck”, “devoting full time to the business”, “industry expertise”, and “making a significant capital investment”…

The point is, to succeed, you need not only the desire, but a well-rounded understanding of the pros, the cons, and how to exploit or avoid them.

A prudent business owner does his homework by considering the possibilities mentioned earlier and determining, in advance of their occurrence, how to avoid the “pitfalls” and ensure success. One of the keys to success is turning to experts for professional advice.

If you make a practice of turning to objective professionals early on in the planning process, you’ll increase your likelihood of finding the avenues which will lead to your success.  For example, a good banker can be very helpful in identifying credit needs, an insurance agent in identifying risks that need covering, an attorney concluding on the appropriate business form (sole proprietor, partnership, LLC and “C or S” corporations) and CPA can advise as to cash flow needs, accounts receivable control, tax planning direction and much, much more. Consider bringing your local banker, insurance agent, attorney and CPA on board sooner than later. By doing so what you will find is you can focus on what you do best – managing your business – knowing you’ve got a team working with you to handle matters outside your realm of expertise.

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.

Save Yourself

Even smart people make mistakes. Many people who have picture perfect careers are taking photographs with the lens cap on when it comes to their personal finances.

Or, if they have the lens cap off, they are too busy taking pictures to pay enough attention to the subject matter – their personal financial affairs. Either way, the result is – they make mistakes – big mistakes that can cost them a great deal of money.

AMONG THE WORST MONEY MISTAKES IS:

*NOT SETTING GOALS. Rather than saving what is left after paying the bills (which for many may be close to nothing) make a commitment to yourself to save a specific amount of money – and then do it.

The first thing to do is set easily attainable short-term goals that are going to have a positive outcome. For example, decide how much money you want to save in one year and cut it up into bite size pieces.  Allocate a fixed amount of your net income as savings and pay yourself first. Use the remaining cash to figure your personal budget. Be realistic so you don’t fall into the trap of saying “since I can’t save xxx dollars, I might as well not save any…” and “… I don’t know where all my money goes, but I don’t have any left for savings…”

Be successful in reaching your savings goal by creating a workable savings plan. Take your annual savings goal and divide by twelve. Then promise yourself that every month you will save that amount. Allow yourself some flexibility while guaranteeing your success. If you get paid bi-weekly, plan to save an equal amount out of every check, while allowing for minor setbacks – promise yourself you will make up any deficiency from one paycheck by the end of the month – to reach your monthly savings goal.

The key is to set realistic, attainable goals, make them manageable, and keep a promise to yourself. Once you get started on a positive savings trend you won’t want to quit, and before you know it, you will have reached your goal… just in time to set another one.

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.

He Who Hesitates is Last!

As a business owner, the quality of your decision-making determines your success or failure. By decisions, we don’t mean what suit you’re going to wear or whether to go to the gym or not. Those are choices. In a decision, the issue you’re facing is unconventional. This means there’s going to be some uncertainty, particularly when the stakes are high.

In today’s business environment, decision-making is becoming more complex. There are many more variables to consider, which makes dealing with a new situation even more difficult. But there are ways of honing our decision-making skills to simplify the process.

Knowing your objectives is one of the most important, but often overlooked, ways to sharpen your skills. The more you are aware of your core values and objectives, the easier your decision-making will be.

Attachment to one outcome will limit your effectiveness as a decision-maker. The problem-solving process should unearth many viable alternatives. Your job is to decide which solution is best in light of the facts. If you’ve pre-selected an outcome, without considering other options, you run the risk of making the wrong decision. This can be costly in the business world.

Involving those people affected by the decision helps clarify objectives and eliminates some alternatives right away, simplifying your choices. Further, if the wrong person is making the decision, you can be assured that the potential for failure is much higher. Decisions are always best when made by the people closest to where the decision will be implemented.

Gathering too much information is a common problem in decision-making. Generally, only 20% of all decisions need to be put off to gather more information. How do your know when your have enough information? Ask yourself this simple question, “how much impact will additional information have on my decision?” Once you’ve answered that, consider the costs of gathering the additional information and add the costs (if any) associated with delay.

So what’s the solution to poor decision making? Practice. Start with small decisions, strengthening your skills, and move up to the bigger decisions. As your skill level increases, so will your success rate. And always remember, it’s your choice.

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.