CPA

Article Dean Dorton

Get It Right, Get It Done: 4 Ways Outsourced Accounting Benefits Your Business

You know the advantages that financial management software brings to your business. Manual processes and outdated reports have gone the way of the dinosaur (unless you think Jurassic Park is real). Your accounting department has never run more smoothly.

However, your finance team may still be spending more time on routine tasks and less on your business’s core functions than you’d like. As your business grows and changes, your accounting functions need to grow and change, too. Outsourced accounting services take care of the day-to-day jobs and provide an adaptable, scalable platform to meet your company’s evolving finance needs.

Consider the following advantages of outsourced accounting services:

1. Enjoy the benefits of the latest financial management software. Your accounting services provider uses the most up-to-date financial management software, such as cloud-based Sage Intacct, so you can be sure your accounting processes are efficient and that you get real-time insights into your growing business. What’s more, the software is flexible and robust to handle your company’s changing needs, including revenue recognition, project accounting, subscription billing, and more.

2. Save on processing time. Why waste valuable human resources on mundane processes like reconciliations, closings, and cash management when you can assign your team to more value-added projects? For example, your finance department could analyze the feasibility of adding a new product line, location, or business model such as subscriptions. Plus you can save on operational costs and channel those funds toward more critical business functions.

3. Help ensure taxes are accurate. Incorrect numbers can create inaccurate tax filings. The result? Penalties and audits you’d rather avoid. Outsourcing accounting services to the pros help ensure accuracy at every level—from transactions to reports—so you can face tax season with confidence, not trepidation.

4. Take advantage of industry experts. Providers of outsourced accounting services use experienced professionals to handle your finances. You can learn the latest tips and get expert advice as your company grows and your accounting needs become more sophisticated. From accounts payable to monthly closing to board and investor financial reporting, you have professionals backing you every step of the way.

With a new year comes an opportunity to do your finance a new way, a better way. That’s why Massey Consulting is proud to announce its merger with Dean Dorton, a top accounting firm, effective January 1, 2019. Now our clients can take advantage of the latest financial management software and free up their accounting team to focus on what’s important—growing the business into 2019 and beyond.

Get the details of the merger and learn what it means for you here.

Article Dean Dorton

CPA Insight: How Cloud Technology Can Speed Your Year-end Closing in 2019

A conversation with Philip Massey, founder and President of Massey Consulting, on the challenges of the year-end close and how cloud technology can turn those challenges into opportunities and set the stage for future innovation.

Q: What are the biggest challenges that companies face as they close their books for the year?

A: If you have an older legacy system, the actual process of closing the books is the main challenge. You have to follow manual, step-by-step processes for the subledger, inventory module, general ledger— everything. And whatever you do, don’t double-click a button because you might reset and have to start over! It’s difficult, but essential, to ensure the numbers post in the right place. Otherwise, you can’t close out the current year and start the balance sheets for the new year. Reporting is often a big challenge come January or February.

Q: Which features of cloud financial management solutions would be most helpful for closing the books at year-end?

A: When you get a new cloud financial management solution, such as Sage Intacct, the old way of closing the books seems insane. To me, it’s akin to driving across the country when you could fly. That’s because, with Sage Intacct, you literally have to do nothing to close the books at year-end; it’s a self-close system. On January 1, 2019, all you do is log in and see the live numbers for the day. You simply fix any input errors, and the system will automatically adjust your numbers based on the changes you made. For smaller companies, closing the books takes hours; for larger companies, it takes days or weeks—but with Sage Intacct, closing the books takes no time at all.

Q: What do you see as the biggest challenges and opportunities for finance teams in 2019?

A:  Automation will play a significant role in 2019, with a trend toward artificial intelligence shortly after that. It will be difficult to take advantage of these new technologies if you have a legacy, on-premises system. They are not nor are they capable of advancing fast enough to leap into intelligent automation. A cloud-based solution such as Sage Intacct, on the other hand, is built to integrate with and provide finance with all the benefits that intelligent automation has to offer.

Q: What benefits will finance see from intelligent automation in 2019—especially related to the close?

A: To start, intelligent automation can greatly improve accuracy by creating a self-checking environment, so finance can focus on analytics. For example, the system could point out variations or potential areas for review, such as a less-than-profitable product line. Finance will know what the machine doesn’t—that this product line supports more-profitable lines of business and can override what the machine recommends. It’s the humans that need to review the data and the trends. As automation takes hold in 2020 and beyond, accounting will have more analysts and fewer data entry specialists on the team. Larger companies will realize the benefits of intelligent automation first. Thanks to cloud technology, however, smaller companies will also be able to leverage those advantages based on economies of scale.

Q: When evaluating financial management solutions in 2019, what should companies look for?

A: Remember that there is no single system—or even group of systems—out there that is right for everybody. That being said, I would encourage organizations of any size to:

  1. Examine where they are with their accounting software and what manual processes are they still doing.
  2. Analyze this status quo to determine if it’s actually helping your business.
  3. Look at alternative solutions that might be out there, such as a midmarket package that automates these processes.
  4. Turn to the professionals for help. Selecting and implementing a technology solution require a significant investment of time and resources. The most successful deployments result from a partnership between trusted business technology experts and the finance team.

Article Dean Dorton

By Erica Horn, CPA, JD

While it is possible you missed it, it’s doubtful. The first major reform of the federal tax code in 30 years was enacted into law at the end of December. Promising tax cuts for everyone, the bill is called the Tax Cuts and Jobs Act (TCJA). This article highlights some of the changes made to individual income taxation.

Individual tax rates

Under the new tax law, the individual income tax brackets are structured as follows:

Tax Rate Single Married Filing Jointly
10% $0 – $9,525 $0 – $19,050
12% $9,526 – $38,700 $19,051 – $77,400
22% $38,701 – $82,500 $77,401 – $165,000
25% $82,501 – $157,500 $165,001 – $315,000
32% $157,501 – $200,000 $315,001 – $400,000
35% $200,001 – $500,000 $400,001 – $600,000
37% $500,001+ $600,001+

These rates are lower than the previous rates; however, not significantly lower. The big savings for individuals is to come through the near doubling of the standard deduction.

Personal exemptions and the standard deduction

The TCJA eliminates personal exemptions but compensates by increasing the standard deduction to $12,000 single and $24,000 married filing jointly (MFJ), indexed for inflation for tax years beginning after 2018. According to the Tax Foundation, nearly 70% of all filers take the standard deduction, meaning only 30% of filers itemize deductions. Therefore, even after the elimination of the personal exemption, when the lower rates are coupled with the increase in the standard deduction, the result should be a tax decrease for many taxpayers.

So what about the 30% that itemize deductions?

Every deduction on Schedule A has been modified to some extent. Accordingly, the 30% of taxpayers that have historically itemize deductions will be impacted.

Some of the more significant changes are described below. Unless otherwise noted, these changes are in effect for tax years beginning after December 31, 2017 and before January 1, 2026.Changes to deduction for medical and dental expenses

Under pre-TCJA tax law, the deduction for qualified medical expenses was allowed for qualified medical expenses exceeding 10% of adjusted gross income (AGI). This floor was reduced to 7.5% of AGI for taxpayers 65 and older; however, that provision expired on December 31, 2016. Under the TCJA, the 7.5% floor is extended through 2018.

Changes to state and local tax deduction

Under pre-TCJA law, taxpayers were entitled to a deduction, without limitation, equal to the state and local taxes (SALT) paid during the year. The deduction primarily consisted of state, local, and/or foreign real property and income taxes paid.

Under the new tax law, SALT deductions are capped at $10,000. Since this has traditionally been one of the largest itemized deductions, it is anticipated that it will have one of the greatest impacts on taxable income.Changes to mortgage interest deduction

Under the TCJA, mortgage interest on loans used to acquire a principal residence and/or a second home remains deductible, but only on debt up to $750,000. The limitation was $1 million under prior tax law. Taxpayers with debt acquired on or before December 15, 2017 remain subject to the $1 million limitation, as the new law is not applied retroactively.

Changes to charitable contributions deductions

Under the TCJA, the limit for cash contributions has been extended from 50% to 60% of the contribution base, which is generally a taxpayer’s AGI. However, payments made to a college or university in exchange for the right to purchase tickets to an athletic event are no longer deductible.

Changes to miscellaneous itemized deductions

Under the new law, all miscellaneous itemized deductions that are subject to the 2% of AGI floor are no longer deductible. Common miscellaneous itemized deductions included unreimbursed employee expenses, investment expenses (i.e. brokerage fees), and tax preparation fees.

Is there more?

Yes, there is much more, but just three additional changes are discussed here.

Expanded use of Section 529 account funds: For distributions after December 31, 2017, “qualified higher education expenses” include tuition at an elementary or secondary public, private, or religious school, and various expenses associated with home schooling, up to a $100,000 limit per tax year.

Individual alternative minimum tax (AMT): The TCJA doesn’t repeal the AMT for individuals as was hoped for, but it does increase its exemption amounts. Before the TCJA, the individual AMT exemption for MFJ was $86,200 and that amount was reduced by 25% of the amount by which the couple’s alternative taxable income exceeded $164,100. The TCJA increases the AMT exemption amount to $109,400 MFJ and that amount is reduced by alternative taxable income above $1 million.

Child tax credit: Under pre-TCJA tax law, individuals could claim a maximum child tax credit (CTC) of $1,000 for each qualifying child under the age of 17. The CTC was phased out for taxpayers with AGI above certain threshold amounts.

The TCJA modifies the CTC by increasing the credit amount to $2,000 per qualifying child and increasing the threshold amounts for the phase-out to $400,000 MFJ and $200,000 for all other returns. Additionally, $1,400 of the CTC is refundable.

The talk has just begunMuch is yet to be determined about the changes enacted by the TCJA. There will be many more articles and discussions as issues and unintended consequences appear and regulations are issues. Be sure and stay tuned.

As originally published in Kentucky CPA Journal

Article Dean Dorton

New ethics interpretation on data-hosting services

By Jason Miller

Are you currently providing a service that will soon impair your independence?

Are you currently providing a service that will soon impair your independence?

The AICPA Professional Ethics Executive Committee (PEEC) recently adopted a new interpretation, Hosting Services, which appears in the AICPA Code of Professional Conduct’s “Independence Rule” (ET § 1.295.143) under “Nonattest Services” and applies to practioners who provide nonattest services to attest clients. Under the new rule, providing hosting services to attest clients will soon (effective September 1, 2018) impair independence when a CPA takes responsibility for maintaining internal control over an attest client’s electronic information.Where is the new line?

Your firm’s independence will be impaired if you:

  1. Assume responsibility for safeguarding or maintaining internal control of a client’s financial or even critical non-financial information;
  2. Control client data such that it becomes incomplete or only accessible through the CPA; or
  3. Provide disaster recovery or business continuity services for an attest client.

In these three service areas, the PEEC is concluding that by providing hosting services, a CPA is delivering services that cross the “management activity” restriction.What are some examples that impair independence?

Cloud-hosted accounting software: If the CPA firm is managing the hosted software on their internal hardware or leased cloud servers, then the client is dependent on the CPA firm for controlling their critical financial information, and independence is impaired.

Website hosting: If the CPA firm hosts a client’s website on their internal hardware or leased cloud servers, then independence is impaired.

Disaster recovery: If the CPA enters into an engagement with the attest client by which they are playing a role in holding the client’s data backups or contingent processing environment to be used for disaster recovery or business continuity, then independence is impaired.

Contract management system: If the CPA firm offers the attest client services for a hosted solution to manage the client’s business contracts, then independence is impaired.

Please note, the preceding list is not intended to be all-inclusive.

What are some examples that do not impair independence?

Cloud-hosted accounting software: If a third-party software provider is responsible for the hosting, management, and availability of the hosted accounting solution and the client is controlling the access to the system, an independence issue would not be created. The primary differences between this scenario and the one above is the CPA is not controlling access to the system, and the client can maintain access to the information independent of the CPA. The client should be responsible for managing user access to the information for both their employees and the CPA team members.

Storage of client information for performance of engagement: The CPA may maintain copies of a client’s information required to provide engagement services. Information should not be the only copy or originals.

Client portal: The CPA firm may provide a secure electronic service to share information back and forth with a client, again as long as the information is required for the CPA to perform approved services and the information is not the only copy or original.

Please note, the preceding list is not intended to be all-inclusive.

Public accounting firms should always consider all applicable rules as defined in ET § 1.295 when providing non-attest services to attest clients. As a reminder, the changes discussed in this article do not take effect until September 1, 2018. This allows for adjustments to existing engagements.

The PEEC is also evaluating revisions to ET § 1.295.145 (Information Systems Design, Implementation, or Integration). Watch for proposed changes, which are expected to be released later in 2018.

As originally published in Kentucky CPA Journal

Article Dean Dorton

Hughes Pittman & Gupton, LLP (HPG) Partner Spotlight

Hughes Pittman & Gupton, LLP (HPG), is committed to helping each client define and achieve success. HPG offers traditional CPA audit, tax, and business advisory services with a dedicated, partner-led team of professionals. HPG has a team of experienced professionals dedicated to improving your total financial well-being through Client Accounting Services (CAS).

Massey Consulting invited Hughes Pittman & Gupton, LLP to share with our readers more about their company and services. Here is a brief summary from Beth Traynham on what HPG has to offer:

From startups to public companies to individual families, accounting is the foundation of a successful business. Outsourcing your accounting services to our Client Accounting Services team will help improve cost efficiency, provide high-level expertise, and offer accounting oversight from an experienced and objective voice. When you partner with HPG, we will provide you with a comprehensive, tailored plan to meet your specific outsourced accounting needs, allowing you to focus on growing your business and experience:

• Improved Efficiency – One of the main advantages of outsourcing your accounting is increased efficiency for you. With our outsourced accounting services, your accounting work is completed by experienced personnel saving you time and money on wages, training and employee benefit costs. Our team is consistent, accurate and on-time.
• High Level of Expertise – HPG’s experience and knowledge from working with a variety of clients in various industries allows us to offer a high level of expertise to each of our unique clients.
• Real Time Accounting Information – With the advent of cloud-based accounting platforms, use of our Client Accounting Services leverages the speed and constant integration of cloud-based information so that you receive your accounting information Real Time and at your fingertips.
• “One Size DOES NOT Fit All” – Our CAS clients include startups to multi-subsidiary international companies to families so our solutions are menu-based and varied to fit the needs of the client.

Our tailored services and technology resources will allow you to focus on growing and improving your business performance and profits. HPG brings experience with a variety of client situations and provides professional solutions with our Client Accounting Services team.

HPG Partner, Beth Traynham, leads our Client Accounting Services team. For more information, please contact Beth S. Traynham at Hughes Pittman & Gupton, LLP btraynham@hpg.com 919.232.5907

 

Article Dean Dorton

With nonprofit Certified Public Accountants still facing challenges stemming from the 2008 financial crisis, the American Institute of Certified Public Accountants (“AICPA”) has pinpointed significant developments that reflect such obstacles. At its Not-for-Profit Industry Conference last Thursday, the AICPA noted the following current happenings:

  • The Financial Accounting Standards Board’s proposal that enhances financial reporting disclosures will be issued as an exposure draft later this year.
  • Consistent organization policies on gifts and ethics must be implemented.
  • Younger nonprofit donors need more details on where their contributions are being spent.
  • To offer performance information, several nonprofits are testing quarterly earnings calls.
  • The middle class continues to struggle in its recovery from the financial crisis.
  • The impact of public perception of overhead rations causing nonprofits to be unable to meet their missions, also referred to as a “starvation cycle.”

To read the developments in depth, click here.