May 2012

By Guest blogger, Dominique Molina

As you know, the success of your tax business depends on taking readings and pulse points throughout the life cycle of your business. This can be much like a doctor takes your vital stats every time you go to a visit; “What’s your heart rate? What’s your blood pressure?” They do it every single time because they’re trying to get some basic statistics. Whether you’re in the growth phase or the reinvention phase of your business you need to create a tax business health checklist to routinely check the vital stats of your business.

One way to easily accomplish this is by creating a business dashboard. The benefits of implementing a dashboard in your business is that it gives you visibility. You can see where you are going. And if you can create this in a systematized, leveraged way, you can have this information at a moment’s notice, still meet your deadlines and tight client commitments; yet still take an active role in navigating your business. This is especially important during tax season when you just don’t have the time to spend on your own financial analysis.

Here are my recommendations for a few key financial indicators to keep track of on your business dashboard:

  • New Revenues from New Business – This is instrumental for tracking your own rate of growth. Are you on target within your business plan?
  • Client Retention Rate – Tracking the number of retained clients might be important enough to you to make your short list on your business dashboard. Your client attrition rate is a way to measure the effectiveness of your business plan. And once you know, you can adjust your strategies for improvement.
  • Profit Margin: Does your actual performance stack up to your business plan? Measuring this is the only way to know.

When this information is on your dashboard available at your fingertips you have what you need to make quick decisions to drive your business into the future.

Dominique Molina is President of the, a professional organization that helps tax professionals deliver thousands in tax savings to their clients. Dominique has compiled many resources for members including a tax-specific engagement letter, multiple accounting templates that help expedite routine tasks, and powerful accounting marketing guides.


About 80% of the 1.8 million accountants in the U.S. work in businesses other than public accounting firms. So if you’re an accounting professional working–or planning to work–in industry, you’re in the same boat with about 1.44 million other accountants, and need to differentiate yourself from your peers.

The Certified Management Accountant (CMA) designation is a great way to demonstrate competence in critical skills in demand today: planning and budgeting, financial analysis, and managerial decision making.

About 30,000 people have taken and passed the CMA exam since it was established in 1972 by the Institute of Management Accountants(IMA). The number of people taking the exam has been trending up in recent years as hiring managers are looking for people skilled in the key areas covered in the CMA exam – and are willing to pay them. On average, CMAs earn $22,000 more per year than their non-certified peers. If you have your sights set on moving up the corporate ladder, the CMA designation is a definite competitive advantage.

A few years ago, the IMA made some changes to the exam, reducing it from four parts to two parts. Don’t be fooled, though. The shorter exam is very challenging and hard to pass. For 2011, the IMA reported a Part I pass rate of 53% in the Americas, 51% in Europe, and 42% in Asia-Pacific. Given the difficulty of the CMA exam, taking an exam prep course has become an essential step for those making the attempt.

If you are ready to add CMA to your accomplishments, but feel finding the time to study on your may prove to be a challenge, then a guided online review course could be your solution. An instructor-led course can make the difference between passing and failing. Tom Coghlan, CMA, MBA, has been teaching CMA review courses for over 10 years, and these comments are typical of those he has received from participants.

“I’ve purchased self study CMA exam prep materials in the past and found that I just never got around to taking the exam. I enrolled in CPE University’s online CMA review course in the fall of 2011 and passed Part 1 the first time! The combination of live and rebroadcast webcasts made it easy for me to keep up, and between classes the “Problem of the Week” and the test prep software helped to reinforce what I had learned. Most of all, the instructors promptly responded to my e-mailed questions, right up to the day I took the exam.” (Theresa Lennon, Nevada).

“I just wanted to let you know that I PASSED Part 2!!!! I sincerely appreciate all of your help, flexibility & support in helping me achieve my goal of becoming a CMA. You provided great support,motivation, and acted as a mentor for me in passing the exam. I felt your class sessions were very informative and focused on the key areas needed to pass the exam.” (Carmine Tedesco, Massachusetts)

Given the difficulty of the CMA exam, the few people who attempt it, and the significant impact that the credential has on lifetime earnings, the CMA designation could be well worth your investment.

Good luck!

A business needs a set of well-designed procedures to ensure that its transactions are completed in a uniform manner. Otherwise, a company will experience inefficiencies and an increased incidence of fraud, and will spend an inordinate amount of time correcting transaction errors.

A procedure documents a business transaction. As such, it lists the specific steps required to complete a transaction, and is very useful for enforcing a high degree of uniformity in how those steps are completed. A procedure frequently incorporates one or more controls, which are designed to mitigate the risk of various types of losses. In some cases, an entire procedure is intended to be a control. Procedures may also be used to instruct new employees in how a company does business.

From the perspective of the management team, the first purpose (uniformity) is the most important, since it leads to greater efficiency. However, an auditor or risk manager may be more concerned with the second purpose (control), since they have a great interest in mitigating any number of risks to which a business is subjected. Further, the human resources staff has a great interest in the third purpose (training). Thus, there are multiple constituencies within a business that have a considerable interest in the construction and maintenance of a set of procedures.

Procedures are needed to ensure that a company is capable of completing its objectives. For example, the primary purpose of a consumer products company is to place reliable and well-constructed products in the hands of its customers. In order to sell goods to those customers, it must be able to complete the following tasks consistently, time after time:

  • Log in a customer order
  • Pick the goods from stock
  • Assemble them into a complete order that is ready for shipment by the promised date
  • Reliably issue an accurate invoice to the customer

A procedure is needed to give structure to these activities. For example, one procedure could instruct the order entry staff regarding how to record order information from a customer into a sales order (which is used to process an order within a company), which errors may arise and how to deal with them, and where to send copies of the sales order.

It is certainly possible for very experienced employees to handle these tasks without a formal procedure, because they have been with the company long enough to have learned how to deal with most situations through experience. However, such an approach relies upon the verbal transfer of information to more junior employees, which is an unreliable approach that gradually leads to the use of many variations on a single procedure.

Imagine a situation where there are no formal procedures in a company that operates multiple retail stores. Each store develops its own methods for handling business transactions. Each one will have different control problems, different forms, different levels of efficiency, and different types of errors. Someone trying to review the operations of all the stores would be overwhelmed by the cacophony of different methods.

You can see from this example that procedures are of great value in providing structure to a business – they define how a business does things.

Where do you stand on procedures?

Blog information from Steven Bragg’s Accounting Procedures course.

Do any of these complaints sound familiar?

1. I have too many requirements to keep track of.
2. It’s the 21st century for Pete’s sake—I shouldn’t have to keep paper files of certificates anymore.
3. Requirements keep changing. I’m afraid I’ll miss something.
4. I want to be more efficient. I wish it was easier to tell which courses will meet multiple requirements.
5. I have a career learning plan and I have CPE requirements. I wish they meshed better and reinforced each other
6. I’m a firm admin and have to manage the requirements of scores of professionals. A spreadsheet just doesn’t cut it.
7. I often end up scrambling for courses at the last minute. I wish I could check my status as I go.
8. I get so busy. Reminders about CPE deadlines would really help
9. Lucky me, I “won” the audit lottery. I wish I were more confident that I’ve done everything required.

These are some of the problems we hear about from professionals, like you, who take our courses. If any of above common laments sounds familiar, we invite you to check out CPE Link’s Compliance Manager. It just might be the solution you’re looking for.

What’s your biggest issue managing your CPE compliance?

An interview with Paul McCormack, fraud investigator and educator…

Paul McCormack, CFE, has 17 years of fraud investigation and detection experience gained in banking, real estate, manufacturing, transportation and insurance. He currently serves as Executive Vice President with Connectics Advisory Services, based in Atlanta, GA. He has also held positions with Innovar Partners, SunTrust Bank, Ernst & Young, Delta Air Lines, PricewaterhouseCoopers, and Putnam Hayes & Bartlett. Throughout his career, Paul has assisted local law enforcement agencies, FBI, DEA, and the Secret Service.

As a fraud investigator and educator, what’s the most common misconception you encounter about employee fraud?

“It won’t happen here. I trust my employees. They would never do that to me.” Ignoring fraud or thinking that it won’t happen in your company is wishful thinking. The business press is full of companies that thought exactly the same way. Many have been forced to close their doors as a direct result of employee fraud.

What is one of the worst cases of employee fraud that you’ve investigated?

I lead an investigation involving allegations of fraud regarding the actions of the CEO, CFO, General Counsel and SVP of sales at a mid-sized company. Almost all of the allegations turned out to be true. The investigation uncovered rampant fraud and abuse including expense fraud, accounts payable fraud, accounts receivable fraud, kickbacks, payroll fraud and financial statement fraud. Each of the executives had turned a blind eye to the fraud being committed by the others. The parent company was so disgusted with the results of the investigation that it closed the company and moved the operations to another state. Three executives were fired, the fourth resigned, and 50 employees lost their jobs. The company declined to notify law enforcement in order to avoid the adverse publicity.

How big is the problem of employee fraud?

The Association of Certified Fraud Examiners (ACFE) estimates that worldwide $2.9 trillion is lost to fraud each year. The median loss to a small business is $155,000. There is also incalculable damage to customer and investor trust.

What are the chances of getting the money back?

Fraud losses are rarely recovered. Fraud schemes last a median of 18 months. During that time, the fraudster is buying things, paying down debt, or sharing your money with their family and friends. They typically don’t deposit the money in the bank and watch it earn interest. Making matters worse, thinly stretched law enforcement is often unable or unwilling to help recover fraud losses. Financial crimes can be extremely complicated and time consuming to investigate. Detectives need to close cases quickly. At the federal level, the bar is even higher. A six-figure loss may be devastating for your organization, but it may barely raise the eyebrow of an FBI agent in a large city. With no connection to organized crime, drugs or terrorism, the case file may be shelved and forgotten. Civil lawsuits won’t get the money back either. Even if entirely successful, amounts recovered will be reduced by professional fees paid to attorneys, forensic accountants, etc.

What trends in fraud are you seeing?

I sometimes open my presentations with this quote from the economist John Kenneth Galbraith: “The man who is admired for the ingenuity of his larceny is almost always rediscovering some earlier form of fraud. The basic forms are all known, have all been practiced. The manners of capitalism improve. The morals may not.”

With that said, cloud computing and Internet banking have helped employees successfully steal proprietary data and funds at an alarming rate. Coupled with lack of employee oversight and you have the proverbial “recipe for disaster”.

So what can businesses do to prevent employee fraud?

First of all, they need to set the tone for honesty and integrity at the top. If executives are viewed by employees as unethical, it makes it far easier for them to justify committing fraud. Further, companies where the executives are morally bankrupt rarely view fraud prevention as a priority. As such the company normally has a very weak internal control framework in place to combat fraud.

Paul McCormack teaches the CPE Link course, The Threat Within: Combat Employee Embezzlement

As an instructor for CPE Link webcasts on family wealth succession planning, I can say without question this is a 2012 “hot topic”. The 2010 Tax Relief Act, including numerous income and estate tax provisions, is due to expire by its terms January 1, 2013. So the year 2012 is the year of Affirmative Planning Action by clients, with positive planning advice from their CPAs and other advisors.

In spite of there being many estate planners active in working with high wealth clients, it has been shown that many families hold back on succession planning. The usual statement is that the law is uncertain, so let’s wait! However, often the real reason for inaction involves the difficult family dynamics, potential for family conflicts, and absence of advisor initiatives. People and their concerns, fears and goals are the central issue in family succession planning.

The issues of Property (“you can’t take it with you”!) and what will happen on the death of the estate owner must be considered, whether or not there is any estate tax liability. Certainly, for many families, this year’s $5 million estate tax exemption will eliminate any tax liability. However, absent new legislation, the exemption drops way down to $1 million January 1, 2013! Title and property ownership issues should be considered in any succession plan. In addition, flexible provisions must be added into the plan documents to account for changed circumstances, changes in tax law and other uncertainties. Having a plan, and discussing it within the family, also is the best way to avoid expensive litigation among heirs.

The CPA often is in an excellent position as a trusted advisor to the client to provide a stimulus for succession planning. Basic issues, covered in my succession planning courses, include Estate Planning alternatives using trusts effectively, the proper uses of FLPs, LLCs and corporations for business and investment assets, Valuation and building “discount planning”, and Buy-Sell Agreements and related Deferred Compensation Agreement Planning.

With the April initial deadline for 2011 income tax returns past, now should be the time for actively proceeding to engage clients in succession planning within the family. This not only is the right thing to do for clients; but also it is an effective method of practice development for the CPA or other advisor. Go for it, and do your best for clients – they deserve it!

Guest Blogger, Owen Fiore, JD

The accounting department is the back office heart of a business. It takes in information from throughout the company and uses it to bring in cash from customers and pay out cash to suppliers and employees. Though it is an essential organ of a business, it tends to attract little notice from an operational perspective.

Nonetheless, there are massive differences been the efficiency and effectiveness of average accounting departments and those that operate at a world-class level. The key difference is having a lean focus on how the operation is constructed and operated.

The simplest definition of lean from the perspective of the accounting department is to maintain the function while spending as little as possible. However, the department must meet certain objectives that are time sensitive, such as preparing financial statements, paying employees, and issuing customer invoices. These tasks must be handled within certain time constraints, which introduce bottlenecks into a department that might be operating with minimal staffing.

Consequently, we need a looser definition of the lean concept when applying it to the accounting department. Thus, we propose the following mix of characteristics for lean accounting:

  • Minimal resource usage. There is certainly an overall goal of being cost-effective, but this goal is subject to the following limitations.
  • Maximize cash flow. The effective management of customer billings, cash receipts, credit, and collections can have a strongly positive impact on cash flows from customers, but doing so may require additional expenditures.
  • Enhanced financial analysis. The department can generate very specific financial analysis that, if acted upon, can increase company profits. Doing so calls for an investment in the cost accounting area.
  • Rapid reporting. A company needs feedback on its results, and this calls for a rapid-turnaround financial reporting system, which will only be effective if it is adequately supported.

In short, the controller needs to understand that the accounting department is primarily a cost center for which cost minimization is expected, but only within the goals of maximizing inbound cash flows, providing excellent financial analysis, and issuing financial reports as rapidly as possible.

This perspective on lean accounting, courtesy of Steven Bragg, CPA, a prolific writer on accounting best practices.