The U.S General Accountability Office (GAO) estimates that only one in 800 businesses claim tax credits for which they are eligible. For small-to-medium-size businesses (where revenues don’t exceed $50 million annually) that means $4.2 billion in state and federal tax credits going unused. There are more than 3,000 tax credit programs, so it’s understandable that some of them are being under-utilized or completely overlooked; but it is pertinent that companies do their research, or access the services of qualified professionals who know the logistics of these programs.

One of the most widely encompassing tax credit programs available for businesses is the Work Opportunity Tax Credit (WOTC). The WOTC is a hiring-based incentive that offers up to $9,000 in tax credits for businesses that hire individuals from any of the below-listed groups of people:

• A member of a family that is a qualified recipient of Food Stamps
• A member of a family that is a qualified recipient of Aid to Families with Dependent Children (AFDC)
• Qualified veterans
• Qualified ex-felons or persons that are pardoned, paroled or on work release
• Vocational rehabilitation referrals
• Qualified summer youth
• Qualified Supplemental Security
• SSI recipients
• Qualified persons living in an Empowerment Zone, Renewal Community, Enterprise Community or Rural Renewal Community
• Long-term TANF recipients – formerly known as Welfare to Work
• Qualified unemployed veterans
• Qualified disconnected youths

The WOTC program can be traced back to the Reagan administration, so it’s nothing new, in premise. Providing work opportunities for disadvantaged individuals is the basis of WOTC, with roughly one of five workers qualifying for these credits.

Throughout the country, Federal Empowerment Zones have been created by state and federal governments in order to boost the economies and job creation levels of those communities. Federal Empowerment Zones provide for up to $3,000 in credits and incentives per year for all workers who reside in and are employed in these areas.

In 1994 the Clinton administration established 9 original empowerment zones, and the New York Empowerment Zone (NYEZ) was one of these first regional recipients. New or existing businesses located in or moving to the South Bronx or Upper Manhattan areas qualify for many federal, state and city incentives. In addition to employment credits, businesses in this zone qualify for a 0% tax on capital gains and increased tax deductions on equipment.

State Enterprise Zones offer other incentives and tax credits as determined at state level. These enterprise zones across the country are tied to specific industries and a company’s hiring, purchasing of equipment or building materials, or other business-related expenses.

The Research and Development Tax Credit allows for tax incentives and expensing for costs for investments for qualified companies involved in research or development of new or improved products or processes. These credits don’t merely apply to companies involved in technological research, as may be a common misconception.

The issue of unclaimed tax credits has been resolved by the IRS, which allows for a business to amend prior years’ (up to 3 years) returns in order to benefit from specific federal credits. Credits may also be carried forward for up to 20 years.

Being paid by clients/customers in a reliable or timely fashion is significant; companies can’t run on the promise of being paid, they need invoices returned promptly. Even reputable agencies and businesses can suffer from slow-downs in invoice paying; perhaps they are, themselves, awaiting funds to come through from other sources, also. Regardless of the individual scenarios causing slow or delayed payment of invoices by customers, businesses can’t functionally operate without the funds necessary to cover payroll, rent or inventory costs. Accounts receivable factoring and financing offers businesses an opportunity to get well-needed cash during lean times.

Accounts receivable financing involves borrowing against or selling a company’s receivables to a third party company that will pay them the amount they are owed, minus a fee for the service. This fee for service is labeled a discount, and the amount of the discount varies depending on the size of the transaction. Also considered when determining the discount is the amount of risk that the financing company which is buying the receivable will incur. The circumstances surrounding the receivable are important. If a larger, reputable firm owes money in a relatively short amount of time, the company will receive a larger portion of the funds. If a payer is already months behind and of a less-reputable nature, the factor, or financier will charge a larger discount for services.

There are essentially three different kinds of accounts receivable financing to consider: factoring, accounts receivable line of credit and accounts receivable loan-contract financing.

• Factoring: This involves selling an invoice to an invoice factoring company. With this option a company gets immediate cash at a higher percentage of the face value, usually 80%. In this scenario the financing company (factor) manages the collection of the receivable, and when it is finally paid in full, the selling company is paid the remaining portion of the debt due, but minus the service fees or discounts of the factoring company.
• Accounts receivable line of credit: A line of credit against receivables due is facilitated in this option. Like factoring, a relatively quick transaction time occurs, and the selling company receives a large portion of cash (80% or higher). The amount that will be offered, however, is based on an assessment of exactly how much is due in receivables. With this form of credit the company which is borrowing against its unpaid invoices retains a larger portion of control and client contact than the factoring option.
• Accounts receivable loan-contract financing: With this choice the selling company has a set period of time (3-36 months) to pay back a loan against accounts receivable. In this case the selling company has the largest amount of control regarding contact with debtors and these processes. Here capital locked in contracts can be accessed, although this is a more difficult form of financing for which to qualify.

Accounts receivable financing companies often specialize in servicing specific industries or types of businesses. It is important to understand the logistics of this type of financing, and these shouldn’t be used as consistent or structurally established methods of keeping a company in the black. There may be reasons for perpetual late payment by customers, and this may need to be addressed by the invoicing
business itself.

The U.S General Accountability Office (GAO) estimates that only one in 800 businesses claim tax credits for which they are eligible. For small-to-medium-size businesses (where revenues don’t exceed $50 million annually) that means $4.2 billion in state and federal tax credits going unused. There are more than 3,000 tax credit programs, so it’s understandable that some of them are being under-utilized or completely overlooked; but it is pertinent that companies do their research, or access the services of qualified professionals who know the logistics of these programs.

One of the most widely encompassing tax credit programs available for businesses is the Work Opportunity Tax Credit (WOTC). The WOTC is a hiring-based incentive that offers up to $9,000 in tax credits for businesses that hire individuals from any of the below-listed groups of people:

• A member of a family that is a qualified recipient of Food Stamps
• A member of a family that is a qualified recipient of Aid to Families with Dependent Children (AFDC)
• Qualified veterans
• Qualified ex-felons or persons that are pardoned, paroled or on work release
• Vocational rehabilitation referrals
• Qualified summer youth
• Qualified Supplemental Security
• SSI recipients
• Qualified persons living in an Empowerment Zone, Renewal Community, Enterprise Community or Rural Renewal Community
• Long-term TANF recipients – formerly known as Welfare to Work
• Qualified unemployed veterans
• Qualified disconnected youths

The WOTC program can be traced back to the Reagan administration, so it’s nothing new, in premise. Providing work opportunities for disadvantaged individuals is the basis of WOTC, with roughly one of five workers qualifying for these credits.

Throughout the country, Federal Empowerment Zones have been created by state and federal governments in order to boost the economies and job creation levels of those communities. Federal Empowerment Zones provide for up to $3,000 in credits and incentives per year for all workers who reside in and are employed in these areas.

In 1994 the Clinton administration established 9 original empowerment zones, and the New York Empowerment Zone (NYEZ) was one of these first regional recipients. New or existing businesses located in or moving to the South Bronx or Upper Manhattan areas qualify for many federal, state and city incentives. In addition to employment credits, businesses in this zone qualify for a 0% tax on capital gains and increased tax deductions on equipment.

State Enterprise Zones offer other incentives and tax credits as determined at state level. These enterprise zones across the country are tied to specific industries and a company’s hiring, purchasing of equipment or building materials, or other business-related expenses.

The Research and Development Tax Credit allows for tax incentives and expensing for costs for investments for qualified companies involved in research or development of new or improved products or processes. These credits don’t merely apply to companies involved in technological research, as may be a common misconception.

The issue of unclaimed tax credits has been resolved by the IRS, which allows for a business to amend prior years’ (up to 3 years) returns in order to benefit from specific federal credits. Credits may also be carried forward for up to 20 years.

This isn’t the first time New York has charged business owners for these interest payments. Last year, New York owed $95 million interest, charging businesses a fee of $21.25 per employee. This year, the state owes more in interest penalties, $102 million, but due to reduced federal interest rates the fee is only $12.75 per employee.

New York wasn’t the only state to borrow money from the federal government to help pay its unemployment benefits; about half of the country did the same thing. However, New York owes the second-largest amount to the federal government, about $2.8 billion. California is the only state that owes the government more for these unemployment loans.

When the recession hit the country, claims for unemployment benefits surged. Most states may have had a surplus in their unemployment funds at or before the recession, but these dollars were quickly obliterated, and states had no choice but to ask the federal government for loans to cover their responsibilities to the out-of-work.

In 2009 and 2010 U.S. Congress waived interest payments from the states, making 2011 the first year that this issue needed to be addressed via state governments. Last year, New York Governor Andrew Cuomo said that he wasn’t going to cancel these bills to business owners, and he wasn’t going to take the money from other state funds, either. He sought state congressional help on the matter, but they did not take any action. Business owners shouldn’t expect this to be the last year for these types of bills, either. With close to $3 billion owed to the federal government, these bills will be issued for years to come.

Unemployment funding comes fully from the private sector in New York. There was a $43 million balance in the state’s unemployment fund in 2008, when the recession began. Not knowing how large the number of unemployment claimants would become, and watching the balance grow negatively, a federal government loan was the only way out of the situation for New York and a host of other states across the country. In 2009 the number of New Yorkers receiving unemployment benefits was 600,000, more than four times what it had been previously.

The unemployment situation in New York is massive, when you compare its current status to its pre-recession one. In May of 2007 the unemployment rate for the state was 3.7%. Just five years later, in May of 2012, the unemployment rate for New York was 7.6%, more than double the pre-recession rate.

This June, Mike Durant, state director for the National Federation of Independent Business (NFIB), expressed upset with the state’s decision to request payment without much notice. Last year, the state gave about 30 days’ time to businesses before the money was expected. This year, the state did the same thing, giving about a month of time between initial invoice and payment due date. Durant thinks that “this bolsters the anti-businesses reputation of the state,” and calls it “an unexpected bill that can create some problems” to the businesses that might owe several thousands of dollars in a short amount of time.

A bookkeeper’s primary function is to keep detailed records of financial transacting in an operation. On a daily basis, the bookkeeper enters these transactions into journals and prepares reports (for the accountant) which detail this information.

Larger businesses may have an entire accounts payable department, where bookkeepers track all of the payments that a business makes and review invoices they receive. In a smaller operation, this is merely another facet of the bookkeeper’s daily charting.

Yet another task of bookkeeping is the overseeing of accounts receivable, where payments owed to the business are tracked, and invoices for payment are issued.

Many bookkeepers and/or bookkeeping departments execute payroll for their businesses via maintenance of records regarding hours worked by employees and the specifics of workers’ wage rates and annual salaries. A bookkeeper may track employee benefits for hourly and salary workers, also, in addition to processing actual payroll payments each period.

In smaller businesses the bookkeeper is often the one who has knowledge of account balances and cash levels on hand. In larger operations this information may be overseen by an accounting department, however.

Accountants differ from bookkeepers in many ways, starting with a more formal education. Many accountants may have received not only a BA but an MBA, in addition to having CPA accreditation.
As a result of receiving more education, accountants are known to make more strategic financial decisions for an organization than a bookkeeper would. Where the bookkeeper prepares and records data, the accountant takes it to the next level, creating balance statements, profit and loss statements and cash-flow reports.

The reporting that accountants provide is used by executives to make better financial decisions for the business. Accountants can also streamline financial transactions and processes so that the bottom-line of an organization is best being met. Think of accounting services as the next step after accumulation of data, and analysis of record-keeping that bookkeepers provide.

Accountants may also oversee bookkeeping work as a checks and balances system, decreasing the likelihood of fraud and other financial disasters that can occur when many hands are involved in the operations of a business, small or large.

The work of accountants and accounting services in general is more expensive than bookkeeping services. A business should understand the intricacies of bookkeeping and accounting roles to avoid misappropriating company dollars to pay an accountant for what may be the actual job of bookkeeping, instead, such as record-keeping and accounts payable/receivable.

Notice that tax preparation has not been mentioned for these duties of either bookkeeper or accountant. If one had to choose, the accountant, rather than the bookkeeper, would provide tax preparation or tax expertise for an organization, but at other times an accountant, specifically, may not be involved in tax work. A tax preparer would be the most qualified person to oversee tax-related issues and filing for a business, if the accountant is not as skilled in this area as necessary. Because of the complexities of tax filing in general, tax preparers would be the best choice for an organization who needs tax-related services.

The set of accounting standards used by accountants in the business world is referred to as GAAP, or generally accepted accounting principals. GAAP includes the standards, conventions and rules accountants follow in the recording and summarizing of financial information, as well as in the preparation of financial statements. GAAP has long been seen as too tedious and unnecessary for many smaller businesses to have to follow. The AICPA is aware of this, and has concluded that a formal framework for SME reporting is something that should be created.

GAAP is often followed when businesses need to provide certain documentation for outside parties such as financial lenders. But OCBOA or “other comprehensive basis of accounting practices” are often followed by SMEs for many other facets of business operation, something of which the AICPA is fully aware. The goal has since become to create a framework for OCBOA, and on May 23 the AICPA announced that by the first half of 2013 it expects to have a fully-functional set of formal standards for OCBOA for privately-held SMEs.

Many SMEs are sure to appreciate the AICPA’s work to streamline OCBOA, as they feel that GAAP is too complicated, in theory. OCBOA has less steps than GAAP, is cheaper to execute, and doesn’t require a cash-flow statement. Kim Lamplough, partner in the assurance division at accounting advisory firm Marcum LLP says that GAAP was supposed to be something smaller, private companies could follow, but the logistics have become way too complex.

Lamplough describes a scenario that affects many SMEs wherein they invest in the buildings in which they are housed, creating GAAP record-keeping and filing issues. The small business owner now has to involve himself in variable-interest-entitity accounting, and, in order to be compliant with loan covenants, must provide GAAP statements. She adds: “they now have to consolidate the operations of the entity that owns the building into the [company's] financial statements.”

Structurally, the OCBOA is undergoing changes itself. Eventually it will be named the “Special Purpose Framework” and will usher in an additional, accepted basis of accounting to the four that already exist. OCBOA currently allows for statements to be prepared on a cash, or modified-cash basis, an accrual income-tax basis or a regulatory basis of accounting, and will be adding to this list a set of criteria that can be applied to all material items in the financial statements.

Many U.S. Companies have long been fans of the system used by their foreign counterparts. The International Accounting Standards Board’s international financial reporting standards (IFRS) for SMEs, sometimes referred to as “IFRS Light” is appealing to U.S.-based SMEs who wish to expand or look for investors from abroad.

While GAAP is necessary when private firms wish to go public, IFRS Light is actually becoming more widely accepted throughout the world. More than 70 companies have adopted or plan to adopt IFRS Light for SMEs.

A small business with a limited number of employees might modify the ways in which certain business functions are performed, but the concerns, especially financial, are no less important than those of a larger operation. Mistakes that wreak financial havoc on an organization can occur at any level of business; and sometimes one simple mistake can cost thousands and thousands of dollars. Developing a system of checks and balances is integral for businesses of any size, but especially so for the small business.

Checks and balances that are integrated into a company’s day-to-day operations require a large-enough staff to participate. While medium and larger businesses have enough employees to develop a system where multiple signatures and daily updates on financial or contractual procedures are carried out, very small organizations not only lack an extensive-enough number of individuals to operate these procedures, those staffmembers they do employ don’t have the luxury of extra time in their workdays in order to make sure these checks are being made.

Recently, a New York woman who embezzled $55,000 from the small, family-run operation she worked for was sentenced to 2 to 6 years in prison. Between 2006 and 2009 the woman, Donna Wiley, was writing business checks to herself, wiring money into non-business bank accounts and using a credit card she had opened in the name of a co-worker. The employer, Ernest F. Fullam, Inc., certainly wasn’t adhering to a system of checks and balances wherein Wiley’s operations were subject to monitoring, if even occasionally. This small business case exemplifies where outsourced bookkeeping services would have been beneficial.

With outsourced bookkeeping services small businesses that do not have extensive numbers of staff to double-check and/or monitor the transactions of others in the company find certifiable peace of mind. Notwithstanding the potential for criminal activity to take place in these types of smaller operations, simply managing the finances of daily business can be a challenge for staff-crunched companies.

Like other outsourced business management services, professional bookkeeping services can be fine-tuned and the actual tasks overseen specifically contracted by the business itself. Just like with outsourced payroll management, certain processes may be elected, while others are declined. One thing that is certain about these outsourced professional services is that they are often providing ultra-critical roles in an organization.

Many times small business owners are the ones handling the accounting and/or bookkeeping services for their companies; this is a recipe for not only work-overload-induced-headaches, but also places bookkeeping-related tasks on a back-burner status for a business. The mentality of “I’ll get to that task later” is often muttered by the owner, busy with other responsibilities throughout the day. If the company is lucky enough to be able to afford a salaried staffmember to perform bookkeeping duties, this person needs the aforementioned checks and balances, so outsourced services would again be integral for this type of business.

Accounting Principals, a leader in the recruitment and placement of accounting and finance professionals, and a division of New York-based Adecco USA, recently assessed the top entry-level positions in the finance world via its national network of professional recruiters in this general field. They found the following to be the top six entry-level financial jobs:

• Financial Analyst
• Accountant
• Accounts Payable/Receivable Clerk
• Auditor
• Credit Analyst
• Mortgage Underwriter

Financial analysts come at the top of Accounting Principals’ list for their importance within many different job sectors. Investment banks, insurance companies and asset management firms are three of the main areas where financial analysts are most-needed. Amongst other industries these professionals are equally-sought for their knowledge of growth-forecasting and the preparation of quarterly financial statements. Financial analysts, according to Accounting Principals’ 2012 salary guide, enjoy a median salary between $49,700 and $51,000 a year.

All companies require accounting and bookkeeping services at some point in time throughout the year, whether or not they employ full-time in-house accountants or merely utilize the assistance of managed service providers (MSPs) through out-sourced accounting and bookkeeping management. Federal and state-level accounting regulations have only gotten more complicated throughout the past years and someone keen to the logistics of such is extremely valuable for businesses. Accountants enjoy median salaries similar to financial analysts, between $45,000 and $55,000 annually.

Individuals still going to school or new to the finance field in general can start out as an accounts payable/receivable clerk. Again, these people are intrinsic to businesses in varying different industries, and the work done in these positions offers an interesting introduction to the world of financial employment. Accounts payable/receivable clerks are the liaison between a properly-functioning and efficient business and its administrative and managerial departments. Accounting Principals lists the median salary of these professionals as $34,600 to $35,200.

Recent data on unemployment and the finance sector showed a huge difference in the overall jobless rate and those in the finance world; in February of this year the rate of unemployment for finance jobs was 5.3%, a full three percentage-points lower than the national jobless rate for all industries for that month, and 1.6% less than the same month in 2011. Jennifer Dodge, managing director at Accounting Principals, said “there’s been a steady demand for technical accounting skills, and while unemployment overall is still high, unemployment for professional accountants is low”.

Dodge furthers that there are certain accounting positions that companies can’t afford not to fill, and that technical skills in this area are always needed. For individuals looking for work in the accounting and bookkeeping areas many staffing firms, especially those in the tri-state New York, New Jersey and Connecticut areas, are often recruiting the skills of professional financial managers and accountants to service the numerous vacancies within their communities.

Sage’s survey found that 39% of Canadian businesses don’t use an outside accounting service whatsoever. Seventy-three percent of those that don’t use one simply prefer to manage these functions on their own. Overwhelmingly, of the 61% who do use an outside accountant, 77% of them do so for simply accounting services, in general. Bookkeeping services were utilized by 53% and corporate tax services used by 36%. A mere 34% of those Canadian businesses surveyed hired an accounting service for payroll support. The numbers don’t necessarily speak to these Canadian business owners’ opinions on the matter, however; of those surveyed 90% acknowledged that an outside accountant is critical to the success of their business, even if they’re not using them to the extent necessary for greater benefit.

Contrastingly, of the U.S. business surveyed, differences in use of accountants were noted. Fifty-five percent of U.S. businesses used an accounting service for business tax compliance, compared to a mere 31% of Canadian businesses. Financial planning and consulting is used by 41% of the U.S. businesses, with just 25% of the Canadian businesses reporting the same. Interestingly, Canadian businesses utilize accountants for bookkeeping services to the tune of 26% verses a mere 5% for U.S. businesses.

Of the 42% of Canadian businesses who had been audited, 84% found that these outside accounting services offered invaluable assistance in the matter. And for the same Canadian companies questioned, the outside accounting use began, for 35% of the operations, within 6 months from business start-up.

For businesses in both countries, there are several points-to-consider when weighing the use of an outside accounting service:

• Accountants bring financial data to life and can make greater sense of a bigger financial picture
• Outside accounting services can be that third-party that many a company needs, bringing another perspective to financial issues
• Accountants have experience with other businesses both similar and distinct; they have a large professional repertoire from which to draw
• Accountants understand tax issues more than anyone else, quite frankly. They can help better manage finances throughout the year so that tax time stings a bit less!

SMBs have traditionally been the user of managed accounting services for issues of tax compliance and annual handling of tax filing, but not much more. Larger accounting firms have not typically considered the SMB to be their key client; quite frankly, the SMB simply lacks the funds of bigger organizations, and year-round accounting services have not been and can not be utilized to the extent of these other companies. It’s a sort-of two-way street wherein the large-scale accounting services weren’t catering to or trying to amass a relationship with the SMBs and the SMBs, in turn, weren’t considering the benefit that an accounting service could provide them for times of the year beyond tax season.

Enter the MSP into this accounting-SMB scenario. The MSP that addresses the opportunities that exist within the SMB community will assist with so much more than mere compliance and tax issues. There are vast opportunities for outsourced assistance with payroll, benefits and invoicing needs, for examples. In fact, the MSP that is utilized by the SMB can, in addition to the aforementioned payroll and HR concerns, manage:

• Accounts payable and receivable
• Request for proposal (RFP)
• Unemployment insurance
• Currency exchange
• Budgetary projections and planning
• More distinct, higher-level financial activities

Ease-of-access and around-the-clock connection to online portals are other benefits of the MSP for SMB accounting-type services. In fact, the very structure of an MSP is one that addresses the need for both outsourced management yet accessible information for the SMB. The SMB should be able to utilize its MSP services at any point of the day, which actually sets MSPs apart from more traditional accounting services.

Australian accounting services provider The Proactive Accountants Network is launching US-based operations, sensing the void that exists for SMBs to find quality access to specified accounting and business advisory services. Dan Berthiaume blogs that the Australian company is essentially a franchise operation that would train accountants to handle specific SMB concerns. MSPs, he suggests, have a grand opportunity at their fingertips to not necessarily compete with The Proactive Accountants Network but to identify that SMBs have differing needs: they are not a large-sized business, nor are they one-man operations, or individual clients. MSPs should poise themselves prepared to offer any of the myriad services (as listed above) that a SMB could outsource to them.