Scott Gregory, Your Trusted CFO

Are Your Computers an Asset or an Expense?

Not too many businesses today can get away without having computers.

However, the success of some businesses can be based on how they view their investment in them. Do they treat them as an asset and take care of them or as an expense and drive them into the ground?

I'm not referring to the accounting treatment of the purchase in this case. Rather, this is about the intangibles that relate to the computers.

THE ASSET APPROACH

Successful businesses recognize the tremendous amount of productivity computers can bring to their staff. Because of that, they invest in optimizing the value of the asset and:

• Have a well thought out computer replacement plan - are the computers cycled out and replaced every 3 years? 4 years? Replacement costs are planned for in advance, not after the computer had croaked.
• Arrange for proper care and maintenance - they are proactive in making sure their security software is up-to-date and routine maintenance and clean-up is done
• Realize that employees can't be productive if they are always waiting on a slow computer or slow internet connection
• Have a solid data backup plan in place that is tested on a regular basis

THE EXPENSE APPROACH

Businesses that take this approach view their computers as more of a "pain in the butt" and...

• Drive their computers into the ground - "it still works, doesn't it?". Too bad it takes 15 minutes for it to boot up, preventing an employee from getting to work each day. Think about how fast 15 minutes of lost time every days adds up over the course of a year. Not to mention that the computer will likely crash at the worst possible time.
• Consider proactive maintenance a waste of money - until they get zapped by a virus which shuts down their computer network for a day or two. How much did that outage really cost them?
• Usually pay little or no attention to their data backup - until their hard drive gets toasted and they realize they just lost all of their critical accounting data.

Which approach do you take in your business?

There are a tremendous amount of hidden costs in the expense approach. These costs may not show up directly in a profit and loss report, but they are out there.

Is it time to rethink your approach?

Share your thoughts and post a comment below...

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Scott Gregory provides CFO and controller services to service, manufacturing and distribution businesses in Northeastern Ohio.

He is very fluent in the following dialects often heard yet rarely understood by business owners:

• "Accounting-speak"
• "IT jargon"
• "Inventory gobbledygook"
• "Banking banter"
• "Internet and e-commerce cyberbabble"

Put his twenty-five years of experience to work in your business. Contact Scott today.

Ohio Sales Tax is Due When the Invoice is Created, Not When it is Collected

I know this going to come as a surprise to many businesses in Ohio that are responsible for collecting sales taxes...

Your sales taxes are due to the state based on when you invoice for them, NOT when you collect the taxes from your customers. In "accounting-speak", this means that the taxes are due on the accrual basis (when invoiced), not on the cash basis (when paid by your customer).

Skeptical? Take a look at the FAQ page from the Ohio Dept of Taxation.

In the event that your customer does not ultimately pay the sales tax you have advanced to the state, there are methods available to recover that tax.

I feel your pain. I hear the question all the time - "why should I have to pay the state before I get paid?"

Thought you should know about this...please don't shoot the messenger.

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Scott Gregory provides CFO and controller services to service, manufacturing and distribution businesses in Northeastern Ohio.

He is very fluent in the following dialects often heard yet rarely understood by business owners:

• "Accounting-speak"
• "IT jargon"
• "Inventory gobbledygook"
• "Banking banter"
• "Internet and e-commerce cyberbabble"

Put his twenty-five years of experience to work in your business. Contact Scott today.

Streamline Your Accounting: Stop Driving to the Bank

C'mon, be honest...

Hauling yourself to the bank to make your deposit every day is a pain in the shorts, isn't it?

As long as your business takes payment by check (and not by coin or currency), you can stop making that daily trip to the bank. How could that could be?

Ask your banker about a product called Remote Deposit. It also goes by Remote Banking, Remote Office, and a host of other names, but the idea is the same. You turn your office into a remote branch of your bank (if only you could print money there too!)

Here is an overview of how Remote Deposit works:

• The bank sells (or rents) you what is called a remote capture terminal. It is a small piece of hardware that sits on your desk. You feed your checks through the terminal, and the image of the check is then stored for processing.
• You use the bank supplied software to then transmit these images securely and directly to the bank to complete your deposit.

What's in it for you?

• No longer waste countless days over the course of a year driving to and from the bank and hanging out in line to make the deposit
• Most banks provide a longer business day when using remote deposit. For example, instead of having deposits after 3pm posting to the next business day, many allow same day deposits up to 5 or 6pm the same day.
• Acceleration of your cash flow so that you can use available funds more aggressively to pay down debt and reduce interest expenses.
• Convert the time you spend on non-value added banking activities into value-added and revenue enhancing activities (i.e. chasing customers down for overdue payments, helping to get quotes and estimates out the door, etc.)

Is there a cost for Remote Deposit?

In most cases, there is a cost to purchase or rent the terminal as well as a monthly cost to maintain the remote deposit service.

Naturally, if you are an extremely small business, this concept may not be cost-effective for you. However, if your business has any steady recurring volume of checks, it may pay for itself relatively quickly. Besides, there is a cost to the way you are currently handling your bank deposits - you just don't see it leaving your checkbooks each month!

With some negotiation, you can usually find a way to lower some of these costs as well.

Additional Resources on Remote Deposit:

• Handy Remote Deposit Calculator - see how much you could save.
• RemoteDepositCapture.com - learn more about this idea
• Background on Remote Deposit from Wikipedia

Are you using Remote Deposit in your business? Let us know how its' working out for you by posting a comment below!

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Scott Gregory provides CFO and controller services to service, manufacturing and distribution businesses in Northeastern Ohio.

Ohio - a Business Friendly State? You be the Judge...

From the tales of the "sad but true" department...

I recently became aware of a local small business that got not one, but two surprises in their mailbox from two different state taxing agencies. Actually, they weren't really surprises, but nightmares in an envelope!

The first letter they received was from the state bureau of unemployment advising them that their unemployment tax rate for the new year was increasing from .8% for the year to 11.8%.

You read that right...

Their unemployment tax rate was going from .8% to 11.8%. (that is from point 8 to 11 point 8!)

W-T-F?

You see, this business, like many others last year, had some turbulence in their cash flow during the year. They happened to make a late payment on their unemployment taxes during the quarter that the state set their rate for the next year. Once that happened, they got caught up in the machine.

Be aware - they did not skip the payment. They paid it in full about 60 days late when cash became available and they also paid the interest that was billed to them for the late payment.

IT GETS BETTER...

Shortly after they had that little explosive dropped into their cash flow planning, they received another letter from the state bureau of workers compensation.

Because one of their payments was 60 days late during the year, this business was told they were being dropped out of their group rating program for workers compensation for one year.

Important note - the state allows you to be 59 days late, but not 60. If you hit the magic 60 days, lights out.

Like the unemployment situation, the late payment was ultimately made in full on the 60th day. The business was not a habitually late payer for either of these tax programs.

End result of this little snafu?

Their workers compensation rate INCREASED 450% for the new year.

THE APPEALS ARE UNDERWAY

Naturally, this business has begun the appeals process with both state agencies. They have already lost the first round of the workers compensation battle.

Why they lost? Because the state is so far in debt, that they passed a law last year that said these penalty rates are in place for a year when late payments are involved. Few, if any, exceptions to be granted. Too bad...so sad.

MORAL OF THE STORY: Don't be late on your payroll taxes. Ever.

If you do business in the state of Ohio, you could be next...

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Scott Gregory provides CFO and controller services to service, manufacturing and distribution businesses in Northeastern Ohio.