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Recent Articles Perdue Pushes Tax-Break Pitch
25K for 25 Years iLumen Financial Information Network Helps Give Firms a Real-time View of Privately Held Clients' Financial Data Accountants Eye SOX Rules for Small Companies Marketing in Focus Re-Engineering Partner Selection Comments on The Fair Tax Setting and Hitting Growth Goals Tap into Personal Passions with Team-building Easing Sarbanes-Oxley Burden for Busy CFOs The Community Foundation for Greater Atlanta 2005 Practice Innovation Awards FairTax has mixed support among Ga. Businesses S Corporations Are a Better-Than-Ever Tax Shelter Plenty of Accountants in Bartlett's Family Tree? Trust restored? Smaller firms soaking up bigger clients Sound Off- Ruth Bartlett |
Perdue
Pushes Tax-Break Pitch By James Salzer Tax-Free IRA Distributions for
Charitable Purposes By Roger W Lusby III President Bush signed the Pension Protection Act of 2006 on August 17, 2006. Included in this bill is a provision that allows taxpayers who are 70½ and older to make tax-free distributions from their IRAs (or ROTH IRAs) for charitable purposes. The newly enacted law may impact your 2006 and 2007 individual income tax returns. This provision is set to expire on December 31, 2007. Prior Tax Treatment of Charitable Contributions from IRAs Under prior law, if you withdrew funds from an IRA in order to make a charitable contribution, the withdrawal had to be reported as ordinary income and was subject to tax at regular income tax rates. Once the charitable contribution was made, you would then be entitled to a tax deduction offsetting a portion of the taxable income generated by the IRA withdrawal. Current Tax Treatment of Charitable Contributions from IRAs Under the provisions of the new law, a donor who is 70½ or older is now allowed to exclude up to $100,000 from taxable income on any IRA withdrawal which is transferred to a qualified charity either as an outright gift or to a charitable remainder trust, pooled income fund, or in exchange for a charitable gift annuity. In order to qualify for this favorable tax treatment, the following conditions must be met: (1) The IRA distribution must be made directly by the IRA Trustee to a qualified charitable organization or a donor advised fund; and (2) The distribution must be made on or after the date the IRA owner
turns age 70 ½. Example John, who is 71, has an IRA with a balance of $100,000, consisting of deductible contributions and earnings. In 2006, he makes a distribution of the entire $100,000 to a qualified charity. Under the new law, no amount is included in John’s income as a result of the distribution; however, John is not entitled to take a tax deduction for the charitable contribution. Under prior law, John would have been taxed on the $100,000 distribution, and, if he itemized his deductions, would have been allowed a charitable deduction, subject to income limitations and the “phase-out” rules for itemized deductions. Additional Tax Savings The new law also provides an opportunity for additional tax savings by effectively lowering your adjusted gross income and thereby making it less likely that you will lose certain tax breaks pegged to this benchmark, such as medical expenses and itemized deductions. This will also reduce your taxable estate. Furthermore, you will be using IRA funds to make charitable donations, rather than funds from other sources. Required Minimum Distributions If you make a qualified charitable distribution from your IRA in an amount at least equal to your required minimum distribution, you are considered to have satisfied the required minimum distribution rules for that year, even though you were not the recipient of the IRA distribution. Conclusion Charitable individuals who are currently, or expect to be, age 70 ½ on or before December 31, 2007 should consider utilizing their IRAs as the preferred vehicle from which to make charitable gifts. Donors may find that the new legislation simplifies the contribution process while allowing for significant net increases in charitable gifting. We are available to assist you as needed. If you have any questions, please call. With best personal regards. 25K for 25 Years By Mark Meltzer Atlanta Business Chronicle published an article in the Nonprofit Business section written by Mark Meltzer regarding nonprofit business in Atlanta . Meltzer reports Atlanta-based accounting firm Frazier & Deeter LLC is celebrating its 25th anniversary this year by donating $25,000 to benefit "community-based organizations supporting needful families and personal well-being, the arts and the enrichment of the accounting profession." A total of $7,500 will go to the Ronald McDonald House, $5,000 to the Leukemia & Lymphoma Society/Light the Night Walk, and $2,500 each to the Georgia Society of CPAs/Residency Program and Educational Foundation, Atlanta Botanical Garden , American Cancer Society, Children's Healthcare Parade and Festival of Trees and Hands On Atlanta. iLumen Financial Information Network Helps Give Firms a Real-time View of Privately Held Clients' Financial Data When Bob Woosley was a partner at Atlanta-based Frazier & Deeter , he envisioned a tool that provided industry benchmarks that allowed CPAs to compare a client's financial data to standards of the industry and in effect, enable partners to be true financial counselors. He realized his role as an accountant was to advise private businesses, but he felt a frustrating disconnect between himself, his clients and their numbers. “These clients were producing monthly accounting information that I wasn't seeing. I was flying blind during the course of the year, and yet I was positioned to be their trusted business advisor?” he recalls. After years of planning and consulting with industry experts, he developed iLumen Financial Information Network ( www.ilumen.com ), a system that allows private companies to upload their monthly trial balances from any accounting system via their accounting firm's Web site. iLumen's patent-pending technology automates the collection, analysis and benchmarking of financial data to provide a continuous connection between private companies and their financial advisors. For a copy of this article in its entirety, please email info@frazierdeeter.com . Accountants Eye SOX Rules for Small Companies By Lori Johnston Atlanta Business Chronicle featured an article written by Lori Johnston about the internal control requirements Section 404 of Sarbanes-Oxley for small companies. Instead of being exempt from this costly and tedious section, it is likely that the Securities and Exchange Commission will only briefly postpone the deadline for small public companies. Johnston states, “Any deferment would likely require all non-accelerated filers—a company that is not required to file its annual and quarterly reports on an accelerated basis—to comply with the requirements for fiscal years beginning on or after Dec. 16, 2006.” "Your accelerated filers are still going to have to do Sarbanes. These non-accelerated filers were just going to be gravy on that," said Jeff McMinn , Senior Manager in charge of the Enterprise Controls and Risk Practice at Frazier & Deeter LLC . "The number of clients won't decrease. For the most part, it's going to remain the same." "Some small companies are kind of sitting back and taking a wait-and-see approach and hoping they're not going to comply," McMinn said. "They probably should be more progressive in their thinking." For the full version of this article, please email info@frazierdeeter.com . Marketing in Focus By Jeff Stimpson Jeff Stimpson wrote an article featured in Practical Accountant that examines the role of the marketing director in today's accounting firm. Often times, for small firms in one market, the marketing function is divided among various partners. As a firm grows, a professional marketing director is essential to take the firm to the next level. The criteria used to evaluate marketing director candidates vary between firms. Atlanta-based Frazier & Deeter hired its first marketing director more than 15 years ago, according to David Deeter , managing partner. The current director of marketing, Erinn Keserica , joined the firm almost five years ago. "We were looking for a person who could really leverage the Frazier & Deeter name in the market," says Jim Frazier, Jr. , a founding member of the firm. "At the time, David Deeter was starting his role as managing partner, so this person needed to be able to communicate and understand his vision. With over 400 applicants we made a strategic decision to go with the person who had enthusiasm, a solid marketing foundation, and coincidentally, no professional service marketing background." Stimpson goes into further detail on setting expectations of the marketer, providing the necessary infrastructure for the marketing department, establishing a marketing budget, getting firm-wide buy-in and other recommendations to take into account when developing a marketing department at an accounting firm. For the full version of this article, please email info@frazierdeeter.com . Re-Engineering Partner Selection By Howard Wolosky Howard Wolosky wrote an article published in Practical Accountant that highlights the changing process of partner selection. Many partners are quoted stating that the basic criteria for partner selection haven't significantly changed over the years, but the weighting of the criteria has. Generally, the criteria used in partner selection is credibility with staff, managing client relationships, ability to generate new business, development of a market niche or special service, and the ability to positively affect staff recruitment and retention. David Deeter , managing partner of Frazier & Deeter in Atlanta , states, "Realistically, the partner selection process hasn't changed dramatically. However, firms like Frazier & Deeter are consciously thinking more strategically than ever. The holistic approach of promoting and bringing in balanced professionals is something we look at. Can you bring in business, can you manage large accounts, and are you working toward the common goals of the team?" Frazier & Deeter is indicative of a growing trend by firms of having more individuals come into the firm at a more senior level. Deeter explains that his firm is focused on "attracting and developing partners with specialized skill sets and a depth of service or niche line experience that will add significant value to the firm." Frazier & Deeter uses psychologists to profile the personalities and aptitudes of partners and potential partners. "We utilize these profiles so we know how to develop the professional through our various training programs, apply personal and skill coaching, and understand how the individual is going to fit into the overall team," explains Deeter . In the remainder of the article, Wolosky elaborates on several other topics that are altering partner selection such as s uccession, compensation, the staffing crunch, business development, non-CPAs, special expertise, and the need for client firm allegiance. To receive the full version of this article, please email info@frazierdeeter.com .
Comments on The Fair Tax by Roger W. Lusby, III, CPA and Partner of Frazier & Deeter Viewpoint: Advisor Registration The following Viewpoint is a letter that Roger Lusby III, CPA, sent to Congressman Linder and Neal Boortz on the fair tax. Dear John and Neal: Several months ago, the Atlanta Business Chronicle featured an in-depth article on the Fair Tax (May 13-19, 2005 issue) as a prelude to your upcoming book. As a CPA and tax partner in the accounting firm of Frazier & Deeter, LLC, the Atlanta Business Chronicle interviewed and quoted me on the various tax issues raised with the Fair Tax. I personally do not support the Fair Tax proposal; however, I do support a simpler, fairer tax system. After reading your book, I felt the intellectual need to expound upon these issues; however, I also wanted to offer you some possible solutions to the perceived problems as well. Even though the passage of the Fair Tax would negatively impact my career as a tax professional, it is obvious that Congress will never simplify anything dealing with the Internal Revenue Code, so a complete overhaul may be in order! Furthermore, my comments are not political; I voted for (and contributed to) John Linder when he represented my District. In my opinion, the problems with the Fair Tax are as follows: • The States must comply . Taxpayers would still need to prepare state income tax returns, most of which use the current federal income tax return as a starting point in determining state income taxes. In order to abolish the Internal Revenue Service (although it would obviously be replaced by a new consumption tax division), it is important that the states comply as well. If Georgia maintains its current tax system, then nothing is achieved for the taxpayer since the same compliance efforts are required to complete the state income tax return. Solution . Remit 1.25% (instead of .25% as described on page 77) of the 23% consumption tax to all states that comply with the Fair Tax. This would be in addition to any consumption tax imposed by the states. If a state does not comply with the Fair Tax, they only receive .25% for collecting and remitting the consumption tax to the federal government. The book was very interesting and it appears that it is well on its way to becoming a best seller! The Fair Tax will energize the economy, help solve the social security issues, and implement a simpler system that will make illegal aliens, foreigners and non-compliant taxpayers pay their “fair share” of taxes. And that is a good thing! If you have any questions or would like to discuss these issues in person or on radio, please call. My best, Roger W. Lusby III, CPA Setting and Hitting Growth Goals Strategic planning is becoming much more formalized. Here's how firms set goals, monitor progress, and ensure marks are hit. By Jeff Stimpson Firms put down blue-sky goals at the beginning of the year, but making those numbers reality takes planning and attention. David Morgan, managing partner for Brentwood, Tenn.-based Lattimore, Black, Morgan & Cain (which has risen from eight percent annual growth three years ago to 23 percent annual growth in 2005), says LBMC sets annual and five-year goals for the firm, as well as specific goals for the staff. "Our managing partners have regular quarterly meetings with all partners to make sure we're staying aligned with the goals of the organization," says Morgan. "These meetings focus on departmental needs, as well as on the personal and professional goals of the individuals and how they relate to the overall goals of the organization." "If you plan, systematize, communicate, measure, and establish accountability, things come together," says managing director Steven Levey of GHP Horwath, and the GHP Financial Group in Denver , which just completed its third year of double-digit growth. St. Louis-based Brown Smith Wallace starts the goal-setting process "by analyzing the prior-year billings, and segmenting that into one-time revenue and recurring revenue. Then we determined where we wanted to be by the same time the next year," says Bill Willbrand, marketing member. "With each year, our process has become more sophisticated," he says. "Factors we consider now include how we'll secure resources to do the work, strategies we'll implement to secure new business, how much growth can come from cross-selling, and whether the work is out there in our target market." Consultant Gale Crosley says, "One of the signs that this is needed in your firm is if your growth rate has dropped off relative to the percentage the rest of the profession is growing. Also, if your growth is good but you have inefficiencies in developing and landing business, it's probably time to look at this approach." She has also been surprised at how "relatively unsophisticated" the growth-goal process it is in many firms. "Most firms hit a brick wall, and growth is curtailed. Often this happens when they are somewhere between $5 million and $10 million in revenue, because this growth planning model can't sustain a firm after a certain size." The Process Other important questions: Does the firm have effective marketing, public relations, and recruiting programs? Does the firm employ marketing and human resource directors and work with outside consultants? Are the partners willing to make the time commitment necessary to make the program successful? Does the firm have a leader to manage the process and ensure implementation, and the proper marketing infrastructure to support a growth program? Levey says his firm had always set goals for directors, using a "profit plan." "In December, we'd work backwards and decide what revenues we wanted to attain for the subsequent year by department and as a whole, then identify net profit for directors before director salaries," Levey says. "Any chargeable position had an hour goal and revenue target set according to a specified multiplier. The plan would be discussed with the directors, and we'd try to solidify this process with an annual two-day strategic planning meeting in the summer, with directors and senior managers. But we never grew as much as we wanted, and we had trouble meeting the profit plan. We rarely revisited the strategic plan until the next year. Until three years ago, we did very little benchmarking with comparable firms in the area or other regions." Several MAP and similar conferences and meeting with other firms, however, soon revealed key factors for Horwath's growth, including that the more profitable firms attained $1 million per partner, delivered 40 percent to the bottom line before partner compensation, and held their partners accountable for delivery of results, says Levey. More profitable firms also had a strong marketing culture. The California-based firm Stonefield Josephson, uses the strategic planning process extensively for growth, resource allocation, recruiting, and communication, according to Lyne Noella, director of corporate strategy. "We have a master strategic plan for the firm, which we revise once or twice yearly along with the budget," she says. "Layered upon the master strategic plan is what we call our 'Platform for Growth,' which addresses our top priorities and strategies for supercharging the firm's high-growth goals. We also have strategic plans for each major initiative." The latter, she adds, may be the growth of a specific industry group, such as health care, or a service group, such as tax. Other examples of major initiatives meriting their own strategic plans include such new groups as the SJ Valuation, Litigation & Forensic Group; supercharging a specific office; or securing a specific type of client. Since forming the new valuation group, for instance, SJ has developed three plans: A vision for the group, its composition and its mission; a first-year plan complete with projections; and a marketing launch plan. "A three-to-five-year plan for the group is in the works," Noella says. SJ strategic plans are relatively simple PowerPoint documents of six to 50 pages, Noella adds. "Each plan gives us the opportunity to formulate our thoughts, big-picture, and to communicate them effectively to shareholders and executives," she says. David Deeter , managing partner of Atlanta-based Frazier & Deeter , says F&D launched its strategic vision in 2003 after three months of planning, aiming to outline growth goals for "tangible and intangible values" for three years. "The process included a discovery phase, which took into account perceptions and feedback from all levels of the staff and members, as well as from some key clients," he says. Interviews were conducted and the data compiled into a draft plan that was reviewed and revised by the core discovery committee members before being finalized. A planning workbook included the interview responses, and following a one-day meeting of the core team, results were presented to the partners and a partner-level strategy workbook was developed. A partner retreat was then held to refine the results of the team effort and define the action steps to implement the strategy. The final vision of the strategic plan was launched at a firm-wide meeting, and supplemented by posters and quick reference cards given to the staff, says Deeter . How to Meet the Goals "The goal-setting process and then the subsequent tactical plans behind getting those goals accomplished is essential," points out Wade Clark, director of sales and marketing at the Springfield , Mo. , office of BKD. "Without that, the tendency is just to have an attitude of going out and just doing as much work as you can." BKD uses annual Business Development Plans (BDPs), generated at the practice unit level. According to Clark , the BDP tool focuses on revenue planning (including growth goals by niche), identification of top strategic prospects, allocation of top prospects by practice unit, niche, and partner/manager, and annual planning for advertising, conventions, and other factors. "Revenue planning is of particular importance," he says, "because it requires an examination of both recurring and non-recurring work within the goal-setting process. If this isn't done, business development growth goals would be vastly underestimated." The Merger Route Firms should seek to merge with other firms that meet pre-determined criteria that will allow them to achieve their overall growth plans, they say. If a firm's growth plan includes a goal to grow to a regional firm, obviously the only way to achieve this goal is to merge or acquire other firms in their targeted regional area. If a firm's plans include increasing revenues by $30 million, however, or achieving 25 percent annual growth, or doubling in size in a certain number of years, then there is a temptation to merge for top-line growth only. When M&A is part of a firm's growth plan, factors to consider are whether the deal increase the profitability of the firm in the future, and whether the M&A process distract from the internal growth of the firm due to a drain on resources. Gary Shamis of Cleveland-based SS&G Financial Services says his firm's pattern of growth, which is a quarter external, has been consistent over 20 years. "Mergers are a key element, but a secondary means of growth," he says. "Merging with another firm can certainly speed up the process, especially if you merge with a practice with a strong niche," admits Donald Cowan of Cowan, Gunteski & Co. in Toms River, N.J. "Mergers are an important part of the calculation, but only one piece of it. If you don't have strong internal systems in place, you won't achieve your growth goals even with a merger." "We always work specifically with non-merger growth goals," says Lisa Rhatigan, of The Whetstone Group. "Mergers are unpredictable right up until the deal is done. And even then, integration issues can prevent the revenue from hitting when you expect it, or that revenue can be very unprofitable in the first year. That's why we think it's so important to plan for non-merger growth and work to reach those goals. Merger growth can be gravy." Though most of the firm's growth hasn't been the result of M&A, Brentwood, Tenn.-based Lattimore, Black, Morgan & Cain does "view this route as an opportunity to enter or grow a service area or industry," says David Morgan, managing partner. "We are cautious regarding growth by merger or acquisition, and the reason is culture. Each organization's culture is unique, and there can be unforeseen issues in a merger that you might not have experienced with other growth options." A firm can meet its goals, says Groszkiewicz, by increasing actual billable hours over the prior year, cash collections over the prior year, and the number of professional staff hired and retained over the prior year. "The increase in billable hours is directly linked to the increase and retention of professional staff," she adds. Donald Cowan, managing director of Cowan, Gunteski & Co. in Toms River, N.J., sets annual and five-year growth goals in many areas, including firm growth, niche and service development, development for partners, principals and managers, billable hours, and realization. "We set a goal a couple of years ago that we wanted to double our size by 2008," Cowan says. "So we took a look at our geographic, niche and service markets to determine potential growth areas, established business development teams in each area, identified prospective clients, and formulated a marketing plan. We then established annual new business development, billable hour and realization goals. We identified how much each area needed to contribute to the bottom line in order to achieve our main growth goal, recognizing that it takes more than an increase in new business to truly grow the firm." Jennifer Lee Wilson of ConvergenceCoaching recommends focusing on three to five issues for a coming year, followed by shaping strategic initiative goals. "The first way for a firm to meet its goals is to not set too many, a surefire way to over-commit, under-deliver, and erode trust," she says. "Add other key achievements as the year progresses if you're well on the way with the first goals. This requires discipline, and a willingness to put some initiatives on the back burner, and requires partners and owners to have tough conversations to pick among their favorite goals." "We learned that as we got busier we paid less attention to our strategic plan," Levey notes. "Sarbanes-Oxley has helped our firm tremendously, but it's been hard to focus on strategic goals while trying to service existing and new business." The role of managing director was re-emphasized to be the firm's strategic plan sustainer, he adds, and this included holding mini-retreats every two months with each directors of department, and discussing such items as ways departments can handle the workload, and revisiting the strategic plan to make sure the firm stayed on target. Also discussed was developing metrics, including FTE, utilization, revenue per director, and other statistics to help department heads see if they were on target. "We look at the statistics at least once a month," Levey says. His firm also tried to create an atmosphere where department heads worked together, instead of competed with each other, identified new leads and arranged meetings with appropriate firm members and prospective clients, and discussed marketing and involvement at all levels. Outside Factors Cross-selling services to existing clients should be a major aspect of a firm's growth goals, say Damato and Tarasco, and many firms have successfully developed cross-selling plans that include wealth management and financial services, valuation services, litigation support, cost-segregation services, and other services. Lisa Rhatigan, VP of The Whetstone Group, says her company has worked with several firms to set specific growth goals for internal, non-merger growth, and that key questions include: How much net new business does the firm want to achieve in the next year? Based on that, how much gross new business does it need to generate? How many clients will or could the firm lose next year, and what's the average useful life of the client base? And how much of last year's revenue was from one-time projects that will need to be replaced? The calendar can play tricks on growth-goal plans. Clark notes that an annual growth goal of, say, $1.2 million may mislead a firm into thinking it needs to hit just $200,000 every month. "Not true," he says, "because what's sold in the last three months of the fiscal year will not be collected by the next New Year." Monitoring Partners' personal marketing plans should be also included as one of the criteria of their annual compensation, and monitoring partners' marketing should be done monthly, with a marketing director, managing partner, marketing consultant, or such executive facilitating the monitoring, with full support of the managing partner. LBMC tracks progress in several areas, including proposals (wins/losses, fees, involvement by LBMC personnel, and types of engagements, and "in situations where we may not be awarded the work, we take time to find out why," says Morgan, and new business (involvement by LBMC personnel, and types of engagements). Adds Cowan, "Our partners, principals and managers are all given a monetary goal tied into their annual bonus. We have a four-part bonus system, and marketing and business development is one of the four parts. If they reach their business development goal, they earn 25 percent of their bonus." Cowan's firm tracks "everything from billable hours to realization rates, to new client estimated fees and referral fees. Our team is provided with a Vital Signs report each week, which breaks down their billable hours. Everyone has an annual billable-hour goal, and can track their progress with this report. Partners, principals, and managers are given a new business report monthly to track their business development efforts." Willbrand's firm monitors progress weekly during sales meetings, as well as at quarterly recap meetings. "Monitoring progress toward the goal is not an exact science," he warns. "In some cases, we're not always sure when we'll begin working on a new project. We may win the business in October, but not start working on the project until January or February. This happens all the time, which makes monitoring a challenge." McGimsey says his firm tracks revenues from three perspectives: who manages the relationship, who originated the relationship, and who provides the service leadership. This tool (Relationship, Origination, and Service or "ROS" Reports) also provides information such as profitability based on service area, and industry groupings. "In addition, we periodically conduct client satisfaction interviews in which several high-level professionals meet with clients to ask for feedback on our performance," he says. "The interviewers don't work on the client engagement and are usually unknown by the client prior to the interview. Information gathered by these interviews may either positively reinforce the way in which we have been providing service, or provide valuable information relative to changes that we should make." Levey says his firm records staff time daily, closing out on the 10th and 25th of each month. "We prepare a 'flash report' that shows chargeable time per person for those periods, and compares them with the profit-plan. Tax and audit department work may be seasonalized based on prior years, whereas the litigation department is reported pro-rata. We also developed key metrics for each department to provide real-time statistics," Levey says. "Like most firms, we track our growth goals through weekly key performance indicators," Groszkiewicz says. "In the case of billable hours, we track it daily because we've adopted a daily time entry policy. That means everyone, including partners, must have their time entered and posted by noon of the following business day. It works well for our firm, because all our partners have buy-in of this key performance indicator. "We can also measure work load and excess capacity simultaneously. While we monitor this daily, we send a firm-wide report to all professional staff every Tuesday morning that gives a status of where each person is on a basis of billable hours budget compared to actual results. As a result, there's a lot of attention on meeting the billable hours goals firm-wide," Groszkiewicz says. "For additional monitoring purposes, we also send around a weekly key performance report that tracks each biller's collection target against actual cash collections. Daily, we distribute online the cash collections for the day by biller and client, and provide an update of actual collections benchmarked against the firm's monthly goal. We post the top collector as well on that report." The Niche Difference "We have regular industry group meetings with team members throughout the organization," says Morgan, adding that subjects cover business development, marketing, and client-service goals. LBMC tracks year-over-year growth of "focus industries. Much goes into the annual development of our focused industry groups, including involvement in the industry, speaking opportunities, educational seminars and presentations, sponsorships, tradeshows, advertising, and communications, as well as business development," he adds. "The process of setting the growth goal and breaking it down to its components should be the same no matter the niche," adds Rhatigan, "but the output from the process can vary widely. The percentage of work that comes from one-time project work is much higher in some industries, and clients stay longer with their CPA in some industries." Shamis believes monitoring and goal-setting can "absolutely" be impacted by niche work. "We've identified niches that have been experiencing exponential growth and allocate more resources to them." "Developing niches is important to a firm's growth," Cowan says. "Profitability per industry is more important to us than the volume of clients that we had in a particular industry. If we were not making money in that industry, we decided that we would not develop a formal niche, even if we had a large number of clients in this sector." Eye-Openers "The more specific the plan is, the more likely it is to be implemented successfully," says Rhatigan. "Quantify each activity, set timing, and identify who's responsible." "It takes time and involves hiring the right people who share the same goals," Morgan notes. "To make sure that employees understand the annual goals we have a firm-wide meeting to review the past year, and what's to come. Every employee is present, and our employees believe this is a clear differentiator in LBMC and other firms." Another critical factor to successful planning is self-honesty among the owner group and the ability to talk about the "ugly stuff" in the practice or business, says Wilson . "When we plan pretending that certain sticky problems don't exist, we create plans destined to fail. A first step is to break down long-term communication barriers among owners and get the real issues out on the table." And think long-term, adds Deeter. "A plan that only encompasses one year is not going to be as effective as one that thinks longer-term," he says. Be realistic and reasonable, and start small, Willbrand advises. "Don't try to achieve 30 percent growth in your first year of goal setting. Do something that will challenge you, but that isn't so hard that people will give up or get too frustrated in trying to achieve. Be fluid and flexible. The key to a growth plan is to nail down the factors that drive growth for your company. Significant growth is almost always derived from creating a significant advantage over the competition." Tap into Personal Passions with Team-building By Lori Johnston Atlanta Business Chronicle published an article about team-building in the workplace. Author, Lori Johnston, states that “team-building is no longer relegated to hotel conference rooms or outdoor ropes courses.” Companies are now seeing the value in activities that “build relationships and result in lessons that tie into the workplace,” says Johnston. Instead of official team-building programs, accounting firm Frazier & Deeter LLC sees the same benefits when employees volunteer for organizations such as the Ronald McDonald House and Hands On Atlanta as well as participate in sports leagues. Shared experiences create personal relationships, said Managing Partner David Deeter . “You build those relationships outside work and it seems to bleed over to performance," he said. Deeter said the younger generation seems particularly interested in those opportunities. For the full version of this article, please email info@frazierdeeter.com. Easing Sarbanes-Oxley Burden for Busy CFOs By Martin Sinderman Atlanta Business Chronicle featured an article written by Martin Sinderman on reducing Sarbanes-Oxley burden for chief financial officers of small to mid-cap companies. Tax departments of companies that are expanding internationally are confronted with several legal and tax complexities, said Partner Roger Lusby of Frazier & Deeter LLC , the city's 10th-largest accounting firm. These departments also typically ensure compliance with the provisions of the Sarbanes-Oxley Act. "This even affects many private companies [not otherwise covered by the requirements of the act]," Lusby said, "because implementing SOX is the easiest way for them to demonstrate to their customers/clients, many of whom are public companies, that they have instituted the financial controls and systems that these public companies are concerned about." CFOs have customarily turned to aggressive or innovative strategies to minimize taxes for their companies when dealing with the increasing costs of compliance with regulations. Due to Enron and other corporate scandals, this method is no longer effective. Sinderman lists some productive strategies available to help CFOs of small to midsized businesses deal with these challenges. Some of those tips are listed below:
For the full version of this article, please email info@frazierdeeter.com. The Community Foundation for Greater Atlanta By Jill Lerner Jill Lerner wrote the Community Kudos component of the Nonprofit Business section in the Atlanta Business Chronicle concerning the Community Foundation for Greater Atlanta giving thanks to Atlanta 's financial adviser community. The foundation, closing 2005 with $560 million in assets, credits a great deal of its success to local financial planning firms, which refer their clients to the Community Foundation for their charity. The top three referring firms were Hicks & Hicks P.C., Frazier & Deeter LLC and Kilpatrick Stockton LLP. Over 90 percent of the foundation's new contributions come from referrals from local professional advisers. The foundation receives more than 120 client referrals from professional advisers each year. Recruit and Retain by Jeff Stimpson Practical Accountant's Practice Innovation Awards annually recognize accounting firms that are taking the lead in developing new or improved services, and promoting efficiency in the practice of public accounting. Advertisement This is the sixth year of the award, and it's interesting to note that many of this year's winners won in previous years. Three of the firms (J.H. Cohn, Barnes Dennig, and PKF) won in five of the six years. A remarkable achievement, and it shows that innovative firms are never satisfied with the status quo and always look for new opportunities and ways to improve themselves. We, the editorial staff of Practical Accountant, proudly recognize this year's winning firms, and we'd like to thank the many firms that submitted entries. Here are the accomplishments of this year's winners. Fazier & Deeter knows as well as the next major regional firm the challenge of recruiting and retaining top talent, and has adopted programs and added numerous benefits to attract and retain talent. The campaign is driven by understanding "generational motivations" and the complexity of marketplace competition. Various teams have been established to champion programs within the firm, the result being one collective set of benefits that aligns with the firm's strategic values. Advertisement The firm has introduced a number of commonsense tactics to retain staff, including 100 percent healthcare paid by the firm, a third of the female staff in partner positions, and the ability to roll over unused vacation/sick days to the next year. Among F&D's other initiatives: an in-house counselor is available to work outside of health insurance, without cost to employees; an annual after-busy-season bonus for staff not eligible for overtime; child-care agreement with local facilities; a firm match for outside individual coaching; a Frazier & Deeter Foundation that "puts stewardship into employee hands"; an internal employee recognition program; paid paternity leave for full-time employees; reduced life insurance and mortgage service fees for employees; up to $2,000 in paid training for employees. The firm also has a vacation policy allotment that's the same for first-day employees as long-time staffers. The firm has experienced little turnover firm-wide, has acquired entry- through equity-level members at levels commensurate with the firm's growth, and has more than doubled in size and revenue over the past years. In a survey conducted by an independent source to gauge how the team is doing, 98 percent of F&D staffers believe their team is "committed to producing top-quality work, and consistently goes the extra mile to achieve great results." FRAZIER & DEETER, LLC [to view this article as a PDF, click here.] FairTax has mixed support among Ga. Businesses By Justin Rubner Atlanta Business Chronicle featured an article concerning the FairTax, a movement advocated by Georgia congressmen John Linder and Saxby Chambliss to replace the national income tax with federal sales tax. The article reports the FairTax has mixed support in Georgia 's business community. A representative from the Georgia Restaurant Association believes FairTax will have a favorable impact on the restaurant industry. Likewise, Richard Rainwater, the CEO of the Georgia Independent Automobile Dealers Association says that the FairTax will “bring down costs of a new car, I believe. When you have taxes embedded in manufacturing, it's already passed on to the consumer. The FairTax would replace that." Impact on accountantsRoger Lusby of Atlanta-based Frazier & Deeter LLC , said he is strongly against the FairTax but not only because accountants would conceivably have less work. He said the FairTax would be regressive, meaning the proportion of a poor person's salary versus a rich person's salary spent on goods would be disproportional. He also pointed out that if states don't eliminate income taxes, then little would be accomplished. "Taxpayers would still need to prepare state income tax returns, most of which use the current federal income tax return as a starting point in determining state income taxes," Lusby said. "Unless this is also changed, the FairTax does not reduce the compliance effort for most taxpayers." S Corporations Are a Better-Than-Ever Tax Shelter By Roger W. Lusby III, CPA, CMA, AEP For years, S Corporation status has been an effective tax structure. If you run your company as an S corporation, you avoid the “double taxation”—first to the corporation and then as dividends—that applies to regular (C) corporations and their shareholders. As S corporation shareholders, you'll have any income or loss incurred by the company passed through and taxed or deducted on your personal tax return. Also, you do not have to worry about certain other problems faced by C corporations, namely, unreasonable compensation issues and the excess accumulated earnings tax. To enjoy such tax benefits, S corporations must comply with various rules. Fortunately, some of the restrictions were eased in the American Jobs Creation Act of 2004 . Result: The tax advantages of electing S corporation status have increased as of 2005. More Shareholders Example: You are the founder of an S corporation. You have three children, all married, and six grandchildren. You, your spouse, your children, their spouses, and your grandchildren (14 individuals in all) own shares of your S corporation. This group will count as one shareholder in determining the 100-shareholder limit. Generally, the election to combine family members may be made by any member of the group. This election is effective until terminated. Key: Increasing the shareholders limit and allowing family members to be combined will make S corporations more flexible. As a result, you could distribute shares to more employees to enhance their loyalty. Trust Tactics Example: You create an ESBT to hold some of your company's shares. Your three children and six grandchildren are named as beneficiaries. Under the new law, all nine of them may be grouped as one shareholder, along with you and your spouse. Exception: Each person entitled to receive distributions from an ESBT is treated as a shareholder during the period in which distributions are received. However, the new law clarifies that unexercised powers of appointment will be disregarded in determining potential current beneficiaries of an ESBT. Example: You create an ESBT, naming an unrelated trustee. The trustee has the right (but not the obligation) to distribute current income among your three children, who are trust beneficiaries. In this situation, your three children can be combined with other family members and be treated as one shareholder. However, if the trustee must distribute to your three children, each one of them will be treated as one of 100 permissible shareholders. Extra time: The new law also extends the time in which an ESBT can dispose of S corporation stock after an ineligible shareholder becomes a potential current beneficiary. The limit is now one year, up from 60 days. Example: A foreign taxpayer is named as a current beneficiary of an ESBT. Although the trust may continue to exist, it must dispose of its S corporation stock because foreigners cannot be S corporation shareholders. Under the new law, the ESBT can take a year to dispose of the stock. Key: The new rules increase the appeal of ESBTs, which provide much greater estate planning opportunities, compared with other types of trusts eligible to hold S corporation shares. However, all income in an ESBT is taxed at 35%. Loss Leaders Example: You are the 75% owner of an S corporation that reports a $100,000 loss this year. Therefore, up to $75,000 may be deducted on your personal tax return. However, you basis in the company (amount of cash contributed plus shareholder loans) is only $50,000. Thus, you can take a $50,000 current deduction and carry the $25,000 excess loss forward to future years. Old law: Such losses must be used by you, the shareholder who incurred the loss. New law: In the case of transfers to a spouse, or to a former spouse as a result of divorce, any suspended losses will automatically shift to the recipient of the shares. Key: This rule may make a suspended S corporation loss more valuable in divorce proceedings, strengthening your negotiating position. Another new rule regarding suspended losses involves QSSTs. (In a QSST, the income beneficiary is treated as the owner of the portion of the trust that consists of the S corporation stock.) A QSST owes tax on the disposition of its S corporation stock. New law: Now, any suspended losses may be deducted when a QSST disposes of S corporation stock. Key: This provision makes owning S corporation stock via a QSST more appealing because suspended losses can be deducted, providing more flexibility for S corporation owners. Passive Income New law: If a bank or another financial company requires an S corporation to hold certain assets, perhaps as a condition for a loan, income produced by those assets won't be subject to the S corporation passive investment rules. Inadvertent Expirations Loophole: In some cases, waivers have been granted, allowing S corporation status to remain in effect. Example: XYZ, an S corporation, transferred some shares to a shareholder's IRA, not realizing an IRA is an ineligible shareholder. As soon as XYZ realized the error, the shares were repurchased from the IRA. No tax avoidance was intended, so a waiver was granted, allowing XYZ's S corporation status to be maintained. New law: Rules regarding such waivers have been extended to “QSubs”—domestic corporations that are 100% owned by an S corporation parent, which elects to treat the subsidiary as a QSub to reduce the parent company's administrative burdens. Result: It has Plenty of Accountants in Bartlett's Family Tree? By Karen Dean Atlanta Business Chronicle featured Ruth Bartlet t in an article about how accounting isn't just a job, it's almost become a family tradition. A partner at Frazier & Deeter LLC, she has a family filled with skilled number crunchers. According to Atlanta Business Chronicle, Frazier & Deeter is the last stop in a career that included early years a two Big Four Accoutning Companies. With 15 years at Frazier & Deeter , she plans to work “until I drop.” As manager of the firm's assurance services section, Bartlett focuses on accounting and auditing. Her clients cover a wide range of industries, and she specializes in the hospitality and real estate industries. Bartlett shares that she has also been very active in the Georgia Society of CPAs, and in 1993 had the distinction of being elected the organization's first woman president. That same year, she was also named the first woman partner at Frazier & Deeter . With the increase of women in the profession, Bartlett has seen a definite shift in attitude toward female employees. “Women have been recognized as valuable assets, “ she said. “Firms finally realized the need to be more flexible on things like alternative work schedules, or part-time work. There's now more of a change toward accommodating a work/life balance. Trust restored? By Tom Barry Atlanta Business Chronicle reports in an article that after the accounting scandals of several years ago, a Big Four accounting firm created a chief ethics officer position, set up an ethics hotline and mandated ethics training for its 120,000 employees worldwide. Reacting to public outrage, Congress in 2002 passed the Sarbanes-Oxley Act, which set strict disclosure requirements for publicly traded companies, created a powerful oversight board to discourage irregularities, made key executives vouch for financial statements and established criminal penalties for wrongdoing. It also prohibited accounting firms from providing specified consulting services to companies they audit. Meanwhile, accounting firms made a considerable effort to regain public trust. "Certainly people are talking a different line, and actually I think things are changing, with the real driver being the oversight board," said the University of Georgia 's Michael Bamber, referring to the Public Company Accounting Oversight Board (PCAOB) birthed by Sarbanes-Oxley. Bamber, who holds the Heckman Chair of Public Accounting in UGA's Terry College of Business , noted in the article that legislation requiring publicly traded companies to have audited financial statements was passed by Congress in the 1930s. But over time, especially in the 1990s, auditors increasingly sold consulting services to the same firms they audited, creating major conflicts of interest. "The big firms sort of lost track of their central auditing function," Bamber said. "They called themselves professional service firms, and their Web sites didn't much mention auditing. But that's come back a lot now." The article points out one legacy of the scandals being that smaller auditing firms have landed business they didn't get before. "Our firm grew 26 percent this (past) year," said David Deeter , managing partner of Frazier & Deeter LLC , a 90-employee CPA firm in Atlanta . "The Big Four firms are so focused on doing a good job with public companies that they just don't have the time for privately held ones. It's ended up helping us a lot." Smaller firms soaking up bigger clients By Steven Sloan Atlanta Business Chronicle published an article about how the collapse of accounting giant Arthur Anderse |
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