Avoiding the IT Money Pit

Though many businesses still require an in-house IT manager, it might be more efficient and cost effective to outsource some of your IT functions, so that in-house IT staff can focus on critical projects.

But, choosing the right IT solution and service provider can be challenging, especially when you’re not sure what your business needs. Companies around the world pump $2 trillion into IT each year—billions of which is actually wasted on unnecessary or ineffective IT “solutions.” So, how do you know if you need state-of-the-art IT, or just the basics?

To help you keep your IT spending under control, here are some indicators that “good enough" IT might be right for your business:

 If you have a smaller budget.  Knowing how much to spend on IT can be difficult for many decision makers. So, just recognize that IT costs can get very expensive — especially if you’re paying for all the bells and whistles that many IT vendors offer. If you don’t need cutting-edge equipment or 24/7 monitoring and service, don’t pay for it.

 If IT isn’t a critical function of your business.  Could your business survive for an afternoon if your system crashed? If brief downtime won’t significantly hinder your business, you probably don’t need to pay for IT services that guarantee repairs within a few hours. Determine what your business absolutely needs in terms of reliability and responsiveness, and select an IT solution in line with your critical needs.

 If you have fewer than ten employees.  When you’re running a very small business, you have less equipment and hardware to worry about. With very few employees, you probably only need basic IT support and hardware controls to effectively and affordably manage your team. You will still need reactive on-call service to support your network if you have a problem, but proactive maintenance tracking programs might be overkill.

Let Modern Office Methods IT Service Group help you to focus on your end user’s business continuity by keeping your employees working and productive with our Managed IT Services. Check out all of our Managed Network Services and contact us for more information at info@momnet.com.

JHB – BUSINESS SOFTWARE THOUGHTS

Once again I turn the microphone over to Jeff Becker.  Take it away Jeff......

If you are reading this, then Frank may have run out of topics to apply his snarky humor too. That really sucks, because I enjoy his writing over mine. So here we go. Prepare to be bored!

Software, why do we still need so many different programs that ultimately hold our information hostage from other programs? There are many reasons, but there are three main reasons in my opinion. They are as follows:

1.       Any good piece of software started out small and had a great idea, only to be bought by a larger company and subsequently screwed up. You are left feeling like a hostage.

2.       No one was addressing a particular need until a big company showed up…..thought it was a growth area….over sold it….and then screwed it up. You are left feeling like a hostage.

3.       Who the hell can talk to a programmer, let alone want too!! I finally kicked the habit of communicating by grunts and clicks! There is no way I am stepping backwards and talking in 1’s and 0’s!

There are many other reasons, but it all boils down to what I believe is the mind set of all big software companies. They know…..once you have stuffed all that information in…..gone through the learning curve of how to effectively use it……they now have you hostage! The entire process of talking to the sales team and listening to how they were going to streamline my business….always left me frustrated. After I committed to the package…..went through the learning curve of using it….it ultimately didn’t work as advertised. Then I had to deal with product support or a consultant! Can you say extra cost? Now this happened over a period of 20 years, so I am definitely carrying some baggage.

I eventually came to understand that I was asking for something that the infrastructure of servers and available networking protocols, just really couldn’t handle it. Meanwhile I was sold that it could. If I had needed free health care at that time...I would have shot the reps and gone to prison. I didn’t think they would understand me there, so I set that idea aside until I got a bit older.

I say watch out software companies! Business owners are getting tired of being guinea pigs or hostages. I wish I had all the money back that I spent on computers and software, thinking that their solutions would simplify my life. They all did in some little way, but the fact that none of them talked to each other just made me feel like a hostage and created a new manual process. Just the act of having to import and export something is a process that takes time and attention.

One good thing came out of all those dollars wasted. It made me really think through and determine what my process needed to be, if such a piece of software existed. Let me tell you a bit about my learning curves and how I incrementally became paperless.

MANAGING CONTACTS

The first area I wanted to streamline were all the contacts I had. I owned a specialty construction company and I worked all over the world. I would subscribe to a bid service…..mine data and manually enter the contacts into a piece of software called Sharkware. It was one of those contact managers like Goldmine. Sharkware was later screwed up by a big corporation. Anyways, it was great. I could talk to a lot of contractors, keep current with all those conversations, make links to people that knew each other, and then I could pick up where we left off at any time. People were amazed with my memory, little did they know! This was in the 80’s.

Outlook eventually became the dominate contact manager, but by no means did they create the market. The problem with the solutions available on the market, to include Outlook is -- they don’t integrate easily into other programs. Outlook now provides some integration, however it still doesn’t play nice with other programs with ALL of its features. So, you are held hostage with some of your information if you leverage it for all its capabilities. Don’t even get me started on what it takes to share this information with other users. Outlook is now reducing the many great features it once had. It’s starting to look like a downward spiral into being broken up into more features that now have to be bought.

They do have some hooks for programmers to push and pull data, but ultimately you cannot leverage ALL of the information it has with other programs. You become a hostage and your systems are separate. We are still at a point where sharing the full power of Outlook or any other contact manager will still require this information to be manually placed into your other systems. Have you ever changed your address with a big company, only to still get your mail sent to the old address? This is why. They can’t just use one system either!! So I simply ask, “Why can’t we change contact information in one place and have it register in other systems?” It makes me start calculating the cost of ammo to accomplish my revenge on all the decision makers at Microsoft.

INVENTORY/PURCHASING/ESTIMATING

Every company has some form of inventory. If you buy something from a manufacturer…or a supplier….then go install it or sell it…you have inventory. All three of the above areas absolutely need to be pulling from the same database. This will tie together the purchasing component when it’s time to re-order.

The problem is that accounting packages don’t do it well and standalone inventory solutions hold some important part of your information hostage. Not to mention the inventory sitting on jobsites, riding in trucks, and the list goes on.

Estimating programs absolutely don’t like to work with other programs. Most employees that are out there creating estimates, are using spreadsheets full of information the way they want to use it. I think a bit differently on this subject. I think we should all go to our Vendors and ask for a spreadsheet of everything they sell. Then simply import this information into your software and have it all in one place for the company to draw from. Use each vendors naming and numbering conventions. This simple act makes talking to your vendor easier and purchasing a snap. The minute you call it something else, you have just made your process less efficient. Now all the estimator needs to do is break up the vendor’s items into the many different units they will need for bidding purposes. They will also need a more flexible calculator and the ability to bundle items up to address the many ways they have to bid cost and units. Easily programmed.  

The biggest mistake I have observed is that a common naming convention isn’t used. Therefore your supplier may sell you something called a “Widget”, everyone else in the company calls it a “Thing-a-ma-bob”, and you sell it to the customer as a “pet rock”. Inventory is the #1 contributor to most organizations digital nightmares. The office grind of disputing invoices, returning unused parts, and trying to get this tightened up into a “real time” report is virtually impossible with the solutions today, especially if you re-name what the vendor is selling you. This problem is as much approach as it is the program.

MOBILE COMPUTING

There has always been hope for putting a mobile device into the hands of your employees and having them record their day in “real time”. You can do it now, however anything available today simply doesn’t do everything you need it to….and/or….want to track. They all force you to use the data flow the way they think you need and getting the information to flow requires that you to sometimes enter the information in a format that just doesn’t allow recording the data the way you want. It usually requires you to create a new name for items in order for you to shove your information into how the program was designed.

Mobile platforms have a long way to go. If you consider what is available on a PC today…..after having been around for decades….it’s logical to expect the same from all of these mobile solutions. Why can’t we have some flexibility in creating fields that we need? It’s because all of these mobile solutions are simply an extension of the PC software that is already frustrating you! How many mobile apps did you buy when they first starting coming out? How many do you buy or even use today? I refuse to buy a single app now. They still don’t have what I need.

I once used a custom programmer and created a piece of software, back when Palm Pilots were the rage. It worked great! However we all know the story of Palm. I was not only a hostage, but I became an orphaned hostage. I wish I had that money back. Screwed again by a big corporation’s opinion of what I needed for a phone. I went back to locked down spread sheets in hopes for a better day. However, I did achieve real time reporting!!

I am really excited about the integration of mobile software into the operating systems and cloud computing finally being an option. It really makes the cost of custom programming enter back into the affordable range.

 

DIGITAL PAPER/IMAGE MANAGERS

A lot has happened here with PDF being the format winner. Making it feel like paper is where the image management software war is still going on. Many years later, they all still have problems. The big problem is….that it is still a piece of paper and still needs data to be entered by a person. I gave up all hope in OCR technology. It just doesn’t work.

I think a paperless office is the best hope for even the dis-organized of the world. However, there has to be a naming convention for it to succeed. At least link it to a transaction, so it even the disorganized can find it.

The other issue is marking up the document like you would a piece of paper. There are some good products for this, but it is critical to pick one that does it well. I have used two in particular. Paperport is the one I have used the longest, but it is getting screwed up by a large organization. I am almost exclusively using Bluebeam right now. But…..I just received news….they were bought by a large organization in Germany. Who knows what my fate will be. The important factor in picking your document manager is to make sure they don’t convert your PDF’s into some proprietary file format. Otherwise you will always need their program to mark it up and read the files. “Neat scanners” is one of those products you should definitely avoid.

I also required all of my vendors to send all paperwork, via email. This established a custody chain, and a secondary backup system just in case. Tell them that they won’t get paid until they do. It is your company requirement. I only received 2 or 3 vendors that griped about it. I allowed them to fax it to me because my faxes were automatically converted to PDF’s and emailed to me.

There is a solution available for PDF’s, however moving to a paperless office will require some changes in how you do things. It may also require you to change some personnel that are going to resist the change. This is the number one place you can reduce the workload your employees currently have or possibly reduce the number of employees. Remember….most employees won’t figure out how to make their job easier…they just chalk it up to what they hate about their job and slog through it each day. PDF’s paired with automated “real time data capture” is the key to a well-functioning paperless office. When done right, it will feel like paper. PDF’s should only be used as documentation…..software should be capturing the digital information ONE TIME…and then making it flow to the many places it needs to go, without entering it multiple times.

I would also like to add, that your office staff should have a second monitor. Since a PDF is still going to be a piece of paper, they will need to be able to view the PDF on one monitor, while reviewing, marking up, or entering the data on the other monitor. This is what makes a PDF feel like paper. Switching back and forth between a screens on a single monitor is what makes the process seem burdensome. I can go on forever about how I work with PDF’s, but this is the basics you have to have.

ACCOUNTING PACKAGES

This challenge was the subject of many nights of Jack Daniels fueled rants! However, it was one of my proudest moments when I finally discovered the solution and broke the code of accounting packages. When I was in a very large growth spurt, I invested in a $40,000 accounting package that was going to do it all. I learned once again, that throwing big money at something didn’t work either. The more expensive software options, still don’t get it right. They can be more confusing than the more basic solutions. They involve more screens and will most likely handle the data differently than you would. If you want to tweak the system, you have to pay a consultant to do it.

Anyways, it was my attempt to combine estimating, purchasing, asset management, and inventory. Then…..after I loaded the information…hired the local supporting consultant….I was still unhappy with it. I just wasn’t happy with how I had to enter the data and how limited it was on the flexibility to crunch the data many different ways. Yep, I had more spreadsheets to export to.

 I bought the program knowing that I had to make some changes so my business would fit into the program the way ithandled information and subsequently spit out its reports. BIG MISTAKE!! Never settle for a system that requires you to change the way you want to track your business…..or requires you to rely on a consultant to make customized changes. I eventually threw it out and went back to Peachtree!

So here is the hustle in my opinion. The software companies wrote their software and then made recommendations as to “what size” company needed “what solution”. This was all based on who could afford what price point of course. All a CPA had to do was parrot what the software companies advised about their product. This eliminated risk for the CPA. It then set the stage for the large companies to simply buy up any competing company that carved out too much market share from them. This is why we don’t have many options. CPA’s don’t want to buy a bunch of software in order to perform their tasks for clients. As long as any the big boys buy up the small guys who have a great idea, then they get the CPA as a free salesman. I can’t tell you how many business owners tell me that they use Quickbooks, because that is what their CPA said they needed. Ultimately I feel as though I fell prey to the big software company plan.

Now here is something you need to understand about software. In order for software to work its magic, they use a backend database. A simpler explanation would be to say that they create tables. It is the same as using an Excel spreadsheet. Think of your larger spreadsheets and think of each tab as a programmers table. As you create a new tab within the workbook, you have just created a table of information. When the different tabs need to be combined into a single sheet with totals information, then this is when programming along with backend database beats the flexibility of an Excel spread sheet.  They can do the same thing in less tabs and have greater flexibility in accessing the information.

So here is the secret…..wait for it….wait for it…..

Open up your accounting package and count the number of digits your chart of accounts will allow you to enter. I think Peachtree is 17 and QuickBooks is 25. That is a REALLY BIG number. Try typing that number into excel…excel will even choke on it. 2,500,000,000,000,000,000,000,000 ….. That’s a big number!

So what does that mean? It means that both processes need to know what you want to track and how…in order for them to work. It also means that programmers have over built their software and we are not leveraging the smaller programs to their full potential. I chalk this up to both sides miscommunicating. How information needs to be organized is a big deal. Programmers keep adding features, however it starts making the software very complicated as they do it. This is a problem for the mobile computing software integration. In most cases, a re-write is necessary for many solutions out there. Remember, you are a hostage and getting them to spend the money to do it will be a difficult. They will instead choose to slowly roll out new versions each year, that give you access to a few more areas you have been screaming for.

Back to that big number in your chart of accounts. If you count the number of customers, number of vendors, number of jobs, number of cost codes for each job, now add the number of items you might buy from each supplier…..add to it all the other GL#’s you put cost to……now come up with a safe number of new GL#’s you will need each year. You will quickly see, that after 4 years you still haven’t maxed out the chart of accounts. Remember that all business owners assign a number to everything we track. So if we have ONE table that can accommodate that many numbers….why not just use the one table and forget about the other modules and its features…..meaning you just eliminated a bunch of tables to inter-relate. Programming becomes easier when trying to integrate a mobile solution. Better yet….why not just write your own and get big business out of the hostage taking business!

The solution is putting all that you track into the 18 or 25 digit number. The software will spit out any report you want as long as you do this. You can actually use a smaller accounting package for a much larger company if you do this. The industry would like you to believe differently. Just roll up the items you want to hide for financial or other reporting purposes.

So another way to say it is you don’t need all of the modules these base accounting systems are selling you. Leverage the chart of accounts differently than an accountant would typically have you organized. Try it out once and you will see what I mean. You have to understand, the accountant is setting up your chart of accounts, so they get the information that theyneed! Why not design your own chart of accounts, so it is something you can make sense of.

Owners need to address this part of their business. They are paying too much for these larger systems and many are not getting as much out of the smaller ones. Accounting packages are a backend system. They only organize information for reporting. I say organize it yourself, but make sure your accountant has the accounts he will need.

THE SOLUTION TO BRINGING IT ALL TOGETHER

Real progress has been made in programming. It used to be, that a programmer had to write very large strings of code to accomplish a simple mouse click. Now those programming languages are large pre-written modules that are simply cut & pasted or dropped and dragged to where they belong. Since the operating system now incorporates all the basics, a simple programming tie is all that is needed. So what I am saying is this…..custom programming makes sense today!! I did just simplify the programmer’s job, however it has become a lot simpler than it was. If you leverage the potential of your chart of accounts, create a road map of how you want to track your business, then you just made the programmer’s job easier and less expensive.

The mobile infrastructure is now here as well. Operating systems now have all the features that were considered “custom” simply built into them. Things like GPS, Camera, touch screen, and Cloud computing are all part of the operating system. Moving data and networking is no longer an issue as well. This sets the stage for capturing “real time data” when the work happens or when sales are made. If paired with a backend accounting system that is simplified like I explained above…then the act of stuffing the data in automatically, really reduces the programming costs. You tie this in with PDF’s being able to be tied to a transaction and the storing and sharing of contact information…you have just simplified a large part of your business.

Now here is the catch. Programmers don’t understand your business needs any more than a CPA or lawyer. They don’t want to do your job, nor do they feel like it is their place to advise you on how to do it. They have a job, they do it well, and you probably won’t pay them to run your business.

Custom programming your perfect system is the way to go. You can do it in small steps…or you can take a few years and make the change all at once. You can even make the programs you have now, talk to each other. Then start designing your dream program.

You can even have the systems run in parallel until you are ready to make the switch. The bottom line…explore custom programming to solve the processes that make tasks require multiple people. You may eventually start to believe that your “get it done” employees…can really handle a digital world. The programmer’s job is to make it work before you ask them to use it.

IN CLOSING

If you read my previous post and are now reading this post, you can see the direction I am heading. Helping small business owners fix clunky processes is my future. I have partnered with a programmer that has been doing this for a few decades and we are like minded and know we can fix this issue. He has been listening to these complaints for years and has the bulk of these solutions already written. We just need to tailor them to a business owner’s needs. I am now confident that our business model can compete with the solutions that are out there with me interpreting the client’s needs. I think business owners are ready to really fix the problem.

This was not meant to be a sales pitch. I simply felt as though this was the biggest challenge as a business owner I ever had. I didn’t want an office full of paper pushers that didn’t earn revenue. Having wrestled everything from DOS to windows 8.0, figuring it out consumed too much time and a lot of money. The answer was always there, but I just didn’t know enough about the programmer’s side to see how to communicate my vision without it costing a bunch of money. This exposure to programming has given me the last piece of knowledge I needed to streamline the software problem we all face. I also love to talk business and Frank’s blog is a great place to pass on my experiences to those of you that have the same passion for efficiency.

I never did get to write my dream piece of software, but I did manage to organize my existing software to reduce the redundancy and automate the many processes that I had. It consumed a large part of my time, but I at least got close. I know exactly how my next company will be organized as it grows.

So I think it’s worth the time and money to write your own software. Eliminate or at least, better utilize the office staff you have. Quit paying for software that holds you hostage. At least take the first step and start making the software you already have start to talk to each other.

 

Good Luck in Business,

Jeff Becker

Jeff@jhbecker.com

Why Long term Unemployment Persists

With the economy improving, why does long term unemployment still afflict a large portion of the workforce?  The Who (classic rock old guy group, now known as "Who's Left?") sang a song with the lyrics, "I hope I die before I get old."  You may not die before you get old, but your career almost certainly will.

Some personal disclosure is in order.  I am fifty-five years old.  I'm not a young whippersnapper / buck / punk (pick your old guy euphemism) lecturing you on how you just won't change with the times.  I am eligible for the super cheap IHOP breakfast special.  The waiters know me at Bob Evans.  I take enough prescription drugs that I'm considering one of those plastic old people pill caddies while I still have the mental capacity to use it.  I've got street cred as an old guy.

To prove my point about unemployment, let's do a virtual experiment together.  Get our your checkbook - jeesh I am an old guy.  Login into your e-banking software and schedule a payment for $250K.  You are going to place a bet.  You are going to pretend to be a business owner hiring a new employee for a tech job.  You are betting $250K on the person you hire from two potential candidates.  Pick the better candidate and get your $250K back plus more.  Pick the wrong one and lose your $250K.  So you don't have $250K to bet? That makes you just like most business owners.  We don't have it to lose either.  Welcome to the gamble business owners take every day hiring new employees.

You have two candidates, who appear equally qualified.  Neither is a perfect fit for your job, but from their resumes, either seems able to grow into the position.  Now you interview them and learn that one candidate is thirty-five years old and the other is fifty-five.  On whom shall you bet that $250K that you don't have?  Which one seems most adaptable to new skills?  You will hire the younger person one hundred times out of one hundred.  The economy does the same.

This doesn't seem fair?  Fair won't matter to you when $250K of your personal savings is at risk.

I like to think of myself as tech savvy and willing to learn new technologies and methods.  Maybe I even really do possess those traits.  However, I am one data point in an economy of hundreds of millions of data points.  My individual traits matter little in a job search.  I carry the statistical baggage of all fifty-five year olds.  I am a walking compendium of old guy characteristics that would eliminate me from most jobs without even an interview.

Maybe, we need a federal program to eliminate discrimination against old guys to make the job search game fair.  Before chasing the "fair" concept off a cliff, consider the following example from my wife's career.

She works with a man in his fifties, who has tens of years of computer experience.  I believe he was a programmer earlier in his career and then went on to teaching computer science in high school.  Now he is back as a programmer on a government contract.

He regales his younger colleagues with opinions of how EDLIN is far better than the current crop of of text editors.  Remember EDLIN?  If you do, you probably carry an AARP card.  EDLIN was the original (I think) text editor in MS-DOS - back about 1984.  With EDLIN, you edited text files one line at a time.  Yes, I'm that old that I used it.  It sucks compared to anything you might use in the 21st century.  The EDLIN turd was flushed about 1986 in favor of the MS-DOS text editor, imaginatively named EDIT, with which you could edit whole text files at one time.  What a technology miracle!

The qualities of EDLIN versus anything else really don't matter.  What really matters is the message this guy is broadcasting to his younger colleagues, which is, "I'm old and I can't change."  Maybe they mentally insert the word "won't", for "can't."

This guy's contract will surely end as do all government contracts. As the employee of a government contractor, your employment is contract to contract.  When one ends, you look for another one.  If your company doesn't have a position for you, you move on to another company.

Most people find new jobs by networking with colleagues from prior contracts.  What will happen when he goes out job hunting?  All of his current colleagues think of him as old and not adaptable.  Do you think they'll recommend his hire for new positions?  He is one more lead bar, that I get to carry around in my old guy career baggage.  He's a datapoint equal to mine.  Another brick in the wall we old guys can no longer hurdle in the job market.

Do we really need a federal regulation to get this guy his next job?  He's likely not productive in his current job.  Shall we curse another employer with his employment?  The economy is giving us the answer in the form of the economic reality of long term unemployment.   The economy doesn't value and won't pay for experience not relevant to today.  A really great EDLIN professional isn't in much demand.  Thus, we have persistent long term unemployment for people over fifty.

Sure, this is crappy news for us old people, but you can't solve a problem before defining it.  The problem is that our experience from twenty-five years ago has little value and probably is even a negative factor today on a resume.  Employees get paid for what they bring to a business now, not what they brought twenty-five years ago.  Old people like me may find this hard to believe, but the tech knowledge from twenty-five years ago has next to no value today.  Yessiree sonny, we know that a hard drive has platters that spin beneath read / write heads.  That doesn't matter in a world moving to solid state storage.

Here are some old guy job search tips.  First, don't talk about the good ole mainframe days and how cloud computing is really just a return to the mainframe model.  That's largely true, but your resume will go to the shredder anyway.  You think you're exuding understanding and perspective.  Your younger potential boss pictures giving you CPR in the lobby.

Second, get everything that happened pre 21st century off your resume.  No one cares that you were the senior director of DOS application development.  What can you do now?  Do you have today's important certifications?

Third, talk little (very little) about what you've done and a lot about what you can do for an employer today.  The words "extensive experience" should never pass your lips.  Those words scream out "past" not "future."

Last, and this is a great interviewing tip for all ages, use my favorite NFL employment metaphor.  Tell a potential boss that you are a great left tackle.  A left tackle is the protector of the quarterback.   The boss sees himself as the quarterback.  You are telling a potential boss that you have his back.  You aren't looking to sack him.  OK, this might not work with female bosses.  I don't have a good female boss metaphor.  I don't think the term, BFF, works in an employment setting, but maybe my still normal testosterone is getting the best of me here.

Thanks for reading!  I promise to be back more often after this most recent and challenging tax season.  For real tax and accounting advice, please visit the main S&K web site at www.skcpas.com.  Also like the "How to Screw Up Your Small Business" page on Facebook.  I solve all the world's business problems there daily.

Until next time, let's do it to them before they do it to us.  Damn - another old guy cliche.  Time for my Geritol and a nap.

Let Your Accounting Software Run Your Business

In my last post I debunked the myth that women are paid only 80% of what men earn. In this post, I will convince you that, if you believe in equal work for equal pay, 80% is way too much. Recently Laura and I took a trip to California. That will be the subject of another post, once I calm down.

Here is how I packed for the trip or for any trip. I have a packing system. First, I get showered, dressed, and ready to go myself. Then I begin packing. I pack the way I get dressed in the morning. First I pack underwear, then pants and shirts, then socks and handkerchiefs. Next I pack my electronics. This is a very important step. I need to be certain I'm not missing any cords I will need to recharge my iPhone or laptop. Finally, I pack toiletries and prescriptions. I have another set of procedures for how I pack these, but I'll spare you that in the interest of time. I close my suitcase and laptop bag. I am done, total elapsed time, one hour from shower to the door.

On the other hand, Laura spent two hours the night before the trip packing and almost two more to get ready the next day. Just before we left, she discovered she hadn't packed her bras and panties. Four hours and she hadn't packed the first items she needs each morning.

Let's compare our results. I spent one hour packing and Laura spent four hours. For those of you, who are great at math, she spent four times as much time as I did. In other words to accomplish the same work, I needed 25% of the time she spent. Based on this scientific productivity study, women should earn only 25% of what men earn. I am in favor for equal pay for equal work. You should be too. These study results are accurate to within 2%.

Does your accounting software work for you, or do you work for your accounting software? Do you find yourself entering data, or hiring someone to enter data, that then has to be reentered somewhere else to be useful? When you're traveling, do you have to lug around ten pounds of laptop and find a high speed internet connection to stay connected to your accounting data? Do you worry that, with the next storm of the century, years of customer sales information will be flushed into the nearest ocean as your file server floats down the street? If you answered yes to any of these questions, you are working for your accounting software and not the other way around.

Fortunately for you, in the past year, accounting software technology has moved to the cloud. This change is bigger than any change to accounting technology since Y2K. Moving your accounting system to the cloud will make your bookkeeper more efficient, make your data easily accessible from anywhere in the world, and ensure your data will be available even if your office is bombed by a disgruntled employee.

Moving your accounting system to the cloud will make your bookkeeper more efficient by reducing or eliminating duplicative data entry. She will no longer have to enter data in multiple systems or places. In fact, in many cases, there will be no data to enter at all. The technical term for this is “zero data entry.” Zero data entry means using data for your accounting system that was produced by someone else. Cloud based accounting solutions accomplish zero data entry by accessing credit card and bank transactions directly from your bank. Very shortly, you will have access to data from your vendors and customers as well.

Wave Accounting Software (www.waveaccounting.com) is a fine example of zero data entry at work. Wave connects with thousands of banks to grab your banking transactions, such as credit card charges, electronic payments, and deposits, and enters them automatically in your accounting system. You can get a profit & loss statement with absolutely zero data entry on your part. Best of all Wave is free. I wouldn't recommend it if you need sophisticated internal control or process lots of receivables or payables. However, for sole proprietors using simple cash basis accounting, Wave is a great solution for getting your records ready for your CPA. In fact, you can give your CPA access directly to your data, no more exchanging thumb drives or CD's.

Moving your accounting data to the cloud will give you instant access to your data any place you can get an internet connection, and you don't even need broadband. Cellular access or Wi-Fi through tablet devices works fine. The reason you don't need a lightning fast broadband connection is that all of the processing occurs in the cloud. Your device, whether a desktop, laptop, or tablet computing device, just accesses the data. You can process customer orders and take credit card payments while in your customer's office or at the beach. I would add you can do this in a strip joint, but writing that just seems like cheap titillation. Trust me, I have not tried this. That's my attorney tells me to say.

QuickBooks online edition is a perfect example of having the full functionality of your accounting system on an iPad. QuickBooks has robust accounts receivable and payable capacity. You get access to all of that functionality anywhere or on any device where you can get a web connection. Previously, to use hand held devices to enter customer orders, you entered the orders on a crippled version of your accounting software that would reside on your device. Then you had to physically connect the device to your desktop computer and run a synchronization procedure. Now you can enter orders in real time directly into your system. Your shipping department can process your orders and give you a confirmation before you leave your customer's office.

Finally, moving your accounting data to the cloud makes your data more secure. That seems counter-intuitive. How can opening up your data to the world wide web make your data more secure? There are three main security risks to your accounting data stored on your server.

The first risk is physical security. The biggest risk to your data is theft. I don't mean theft by someone hacking into your server. I mean someone walking out the door with your file server – a break in. In the cloud, you don't have a server in your office. You only have workstations, and even your workstations have no data on them to steal.

The second security risk is the physical safety of your data in case your office floods or catches fire. Maybe you have an off-site backup. Maybe it will actually be restore-able. I can't tell you how many times clients have called me, because we had the last known good backup of their accounting data. They tried restoring their backups and found the backups either never happened or didn't complete properly.

The third security risk to your data is unauthorized access from outside your office - hacking. If you have any computer connected to the internet, you are vulnerable. There are plenty of free programs available to determine your vulnerability to hackers. I guarantee your vulnerability is orders of magnitude higher than you suppose.

Your accounting data in the cloud is safer than your office server for all three of the security risks. Your cloud data is safe from both physical theft and destruction. Your cloud provider does your backups for you. They know how. Their up time is measured is “nines.” Four nines is the gold standard for cloud providers. That means your data will be accessible 99.99% of the time, far better than with your office server.

Finally, your data in the cloud is more secure from hacking. The major accounting system cloud providers undergo rigorous testing and are graded on the effectiveness of their security systems. The gold standard for cloud security is “SOC2.” The testing to achieve this level of certification involves both the physical security of your data as well as vulnerability to hacking. There is no perfect guarantee of security in any situation. Cloud security isn't perfect, but it doesn't have to be. It only has to be better than what you have. It is.

Here's a message to the douche bag in the Obama campaign commercial who complains that after he and his cohorts were fired by Romney, the company was worth $100 million more. What does that say about you???? It says you're a turd to be flushed. Get a job and earn a living. Anytime a company is worth more AFTER you are fired, you weren't worth much, probably not even the water to flush you. Mitt Romney is nicer than I am. For $100 million, I would not only fire the dude, I'd beat him to death with a baseball bat. Hopefully, this guy didn't reproduce. We need to let evolution do its job.

As always, thanks for reading. If you want real tax and accounting advice, please visit our main S&K site at www.skcpas.com. We have made a whole bunch of improvements to our client center in the past week. Please take the tour.

Until next time, let's do it to them, before they do it to us.

How to Piss Off the IRS

Every night at bedtime I pray, “Dear God, thank you for RGIII, without whom the Redskins are a winless team, an embarrassment to the NFL, and a waste of pixels on my hi-def, big screen TV. Additionally, I humbly pray for some defensive backs, who actually belong in the NFL and can outrun a little old lady in a wheelchair. I'm not asking for world peace. I'll let President Obama work on that. I'd just like a shot at the playoffs once every decade or so. In your son Stephen Strasburg's (baseball Jesus I) name, I pray. Amen.” Baseball Jesus II is Bryce Harper.

The IRS recently decided that its agents in the Criminal Investigations Division (CID) need more and better firearms training. The reason is not to shoot you in the back fleeing the scene of an audit, although it will make that more convenient for them. The reason is that CID agents deal with modern day versions of Al Capone. Many of you may know that Al Capone was imprisoned for income tax evasion, not the many murders for which he was responsible. Al pissed off the IRS, and they got him. If you piss off the IRS, they might not shoot you, but they will get you.

The easiest way to piss off the IRS is to screw up your tax return. With the IRS adoption of somewhat modern database technology, screwing up your tax return is easier than ever. They now have the ability to match millions of tax return documents, such as W-2 forms and interest statements filed by employers, banks, and brokerages with individual income tax returns. That means if you forgot to claim the income from a stock sale, the IRS will match your brokerage's record of the stock sale against your tax return.

Since you didn't voluntarily report the stock sale on your return, the IRS doesn't just send you a nasty letter. They send you an assessment notice, called a CP-2000 in tax lingo. The CP-2000 notices are produced and sent by the IRS computer in charge of dirty letters, the Automated Collections Service. The letter goes as follows, and I quote.

“Dear taxpayer scum, You suck. You missed a $10K stock sale on your tax return. Please send us $1 million immediately, or we'll empty your bank account and kill your dog.”

OK, maybe that isn't verbatim, but the sentiment is the same. The IRS knows you received $10K for your stock sale, but they don't know what you purchased it for. So they assume you paid nothing for it. Of course, you did actually pay something for it. Maybe you even lost money and are entitled to a deduction. Unfortunately many people just pay the IRS bill without questioning it.

If you were the person in the example above, here is how you should respond. You should prepare an amended tax return, form 1040X, showing both the stock sale and the purchase amount for the stock. You'll have either a gain or a loss. If you have a gain, you owe some additional tax, but probably not nearly as much as the IRS assessment. If you had a loss, the IRS owes you money. Attach the CP-2000 letter to the front of your amended return and mail it off to the IRS. There is a block on the CP-2000, which you should check that states, “I totally disagree with the assessment. Go torture some other poor soul.”

The example of the stock sale missing from the tax return is a common situation. As a firm, we deal with probably twenty or thirty similar situations a year. There are a lot of other documents the IRS electronically matches against your tax return. Here are some other common problem areas:

1. Estimated tax payments. Yes, people really can't keep track of what they have paid the IRS. You would think paying the IRS $10K would be a memorable event you just might happen to remember to record in your check register. This is the most common problem we see.
2. W-2 forms. Once in awhile, someone will forget one of these. The great thing about W-2 forms is not only do they record income, they record tax withholding as well. If you miss a W-2 form on your return, you may not owe any taxes, because you missed the tax withholding as well.
3. Brokerage and bank forms with dividends, interest, and / or stock sales. Many of these are minor in amount. However, if you miss a big one, substantial taxes could result. I'm not certain why the IRS chose to match stock sales the last few years. From 2008 through 2011, the stock market didn't exactly kick ass. I have found that most missing stock sales result in refunds once we amend the tax returns.
4. K-1 forms. This is a new matching program implemented just a couple of years ago. A K-1 form is something you receive from a partnership, S corporation, or estate showing your share of income from one of these entities. The IRS took awhile to determine how to match these forms since the numbers on your tax return may not exactly correspond to the amounts on the K-1 forms. Also the K-1 form amounts appear across a number of different forms on your personal tax return. This matching program has not gone well for the IRS or the unfortunate taxpayers affected, since a lot of the notices turn out to be incorrect.
5. Mortgage interest statements. The common problem here isn't that you missed recording a mortgage interest statement. The problem is normally that the IRS doesn't have the statement in their records. In other words, you claimed interest that they can't verify by computer. This is another area where the IRS routinely sends out incorrect notices. They also have trouble matching the mortgage amounts across the various personal tax schedules on which mortgage interest can appear.
6. Dependents. If your douche bag ex-husband claims your precious little Susie on his tax return, and then you try to claim her, you will get a lovely little assessment from the IRS. They don't care that the divorce decree states that you get Susie as a dependent. The first to file a tax return wins, at least initially. If he filed first, you have to prove to the IRS, that under IRS rules not divorce rules, you are entitled to a deduction for Susie. You can win this, but it is a royal pain in the ass paper chase that will take six months or so to resolve. If you have a douche bag ex-husband, file your return early. Screw him, unless I'm that douche bag ex-husband.
7. Social Security payments. If you make any money at all in addition to your Social Security income, there is a good chance a portion of your Social Security is taxable. If you don't report the income from Social Security, you'll get an assessment.
8. 1099-MISC forms. This is another common problem area. 1099-MISC forms are issued by businesses to their independent contractors. The IRS not only scans your tax return to see that you reported the income for regular income tax purposes. They are also looking for you to pay self-employment taxes on the income after you deduct expenses. When you get a CP-2000 notice for an unreported 1099-MISC, you get an assessment for income taxes and self-employment tax on one notice.

They are other areas where the IRS matches documents against your tax return electronically, but the above are the most common ones in our practice. The CP-2000 notices are also normally issued for the prior tax year. In other words, in 2012, we received mostly notices for 2010 tax returns. The 2011 document matching process will happen in 2013. Sometimes I hear people espouse the virtues of filing for extensions to have a lower chance of audit. There is no advantage to filing after the original deadline in terms of audit scrutiny. The IRS pulls some stupid tricks, but they have long been all over the idea that filing extensions reduce the probability of an audit.

Here's how to eliminate the possibility of receiving a CP-2000 notice for 2012. It really isn't that difficult. Just keep the documents that say “important tax documents” on the envelope. You don't even have to open them if you are really allergic to anything associated with the word, tax. Put the documents in a manila folder as they come in. Many documents are now available electronically. Save these in a folder called “2012 tax information” on your computer. If you receive documents by e-mail, create a folder in your e-mail program called “2012 tax documents.” Outlook and gmail make this easy.

The final way to make certain you aren't missing documents is to compare the documents you have with what you had for the prior year. It is one of the steps we take in preparing a tax return to ensure we aren't missing documents for our clients. If you use a tax preparer, ask for an income tax organizer in early 2013. An organizer is a document that shows all of your tax information for the prior year. You can see, for instance, that you had three interest income statements in the prior year. You should have three for the current year unless you opened or closed accounts.

When we work with professional procrastinators, who file their returns late every year, we don't totally rely on them to get us all of their tax documents. For tax returns that are already late, we can request a transcript of everything the IRS has in their records for a particular year. However, this doesn't work for returns filed during the normal filing season. The IRS electronic records are not available until later in the year.

As you can see pissing off the IRS can be avoided with a little (very little) effort at record keeping. However, once the dirty letter writing IRS computer gets mad at you, you will spend months getting off its mailing list.

On Friday night, we said a wistful farewell to the Nationals 2012 baseball season. By blowing a six run lead in the deciding game against the St. Louis Cardinals, a season of unexpected promise ended with a ninth inning collapse. I felt like a jilted lover after the game, wondering if it was really my fault, or maybe it's just that none of the damn Nationals pitching staff can throw a first pitch strike.

Strike one is known as the best pitch in baseball. After a first pitch strike, a .300 hitter becomes a .200 hitter. After ball one, the .300 hitter becomes a .400 hitter. You would think that by the time a pitcher reaches the major leagues, he might be familiar with this concept. You might even think his pitching coach would be familiar as well. Apparently not. I want the pitching coach, Steve McCatty, fired over this. After five playoff games, where his pitchers avoided anything close to first pitch strikes, he still couldn't get the concept through their skulls. I demand satisfaction or maybe a job as the pitching coach next year. I could save the money I spend on tickets.

Thanks for reading. For real tax and accounting advice, please visit our main S&K web site www.skcpas.com. Until next time, let's do it to them before they do it to us.

Al Gore and The Cloud

The blessing for which I am most grateful this Christmas season is Al Gore's invention of the internet. Al freed us from dealing with the mall's frenzied Christmas crazies. Surely he deserves at lease one Nobel prize for science and technology. There are obvious Orwellian consequences to living on the internet. The large and small details of our lives are stored on servers throughout the world. I'm not going to rage against the world wide web machine. That ship didn't just sail. We freely boarded the good ships Facebook, Google and Amazon.com. Our willingness to cruise the internet sea may, however, be a torpedo aimed at squarely at the bow of battleship Microsoft.

As I write these words, the processor in my computer is being intermittently highjacked by a half dozen computer processes. I witness this highjacking by running the Windows task manager. Task manager shows me not only what programs I am running, but what programs are running me. I see my processor utilization percentage leap to ninety percent. The computer won't even allow me to type. All I can do is yell, “Give me back my damn cursor.”

Why does my computer begin taking orders from some higher power than me? Every time, we start our internet connected computers, many of the programs we have installed call home across the internet the way E.T. called home. They call home to check for updates. For the most part, these updates are bug fixes. Isn't that a good thing?

In moderation, instant bug fixes are a good idea. However, when you have twenty programs all checking for updates at the same time, your computer doesn't have the processing capability to work for you. It is entirely a slave to internet updates. Goodbye productive time.

We are living through the beginning of an historic transition in the computer industry. E.T.'s phoning home destroys the productivity of hundreds of millions of computer users around the world. A lot of smart people have noticed – even at Microsoft. We are witnessing the true acceptance of cloud computing. Ten years ago, we flirted with the cloud, but ultimately returned to our Windows desktops. The cloud models of the early 2000's suffered from poor design and not enough internet bandwidth. But, like Freddy Krueger, cloud computing came back and back and back. Now cloud computing is back to stay.

What is cloud computing? Cloud computing is letting someone else host your programs and data. Think of cloud computing at the far right end of a computing continuum. On the far left, the computer processor and hard drive file storage are on the computer or a network of computers in your office. At the far right end, you have true or complete cloud computing where both your processing and data storage are on someone else's computer or computer network. In between are a whole bunch of hybrid models.

One hybrid model is called the hosted application model. In fact, there are a number of different hosted applications models. For example, we no longer maintain an e-mail server on our premises. We use a program called Microsoft Exchange along with Microsoft Outlook. In early summer, we exchanged our Exchange server for an Exchange server hosted by a company specializing in hosted solutions. The computers in our office originate our e-mail, provide the program to read our e-mail, and initiate changes to our calendars. However, all of our e-mails and calendars reside on someone else's server.

Why did we outsource the data storage for our e-mail and calendars? We didn't have the resources to manage the storage effectively. I personally save thirty minutes each morning, because their spam blocker is ten times more effective than ours. I don't spend forty minutes each morning deleting penis enlargement ads. (How do the spammers know? By the way, they don't work either.) I spend ten minutes. We don't have to worry about backing up the data or applying the at least weekly updates to Microsoft Exchange. Their spam program alone is saving me one hundred hours annually. Imagine those savings multiplied across an entire company. This increase in productivity is the promise of cloud computing.

Our hosted Exchange model is a rudimentary version of a hosted application. We still have a lot of computing resources in our office devoted to e-mail and calendar processing. Our e-mail writer and reader, Outlook, is still uses the processors in our office computers and is stored on our hard drives.

A more advanced hosted application model stores both programs and data on a remote server and only uses local computers for actual processing. This is really server leasing. You take everything, programs and data, located on your in-house server and move it to a remote server. Application hosts are now specializing by industry. For instance, there are companies now specializing in CPA firms.

There are still downsides to the various hosted application flavors. First, you are still running the same desktop applications. They are just located on someone else's server. That someone else takes care of backups and program patches, but the program patches still exist. You are also still dependent on the processing power of your individual computer and the operating system running on it. You are still cruising on battleship Microsoft.

The second big disadvantage of the hosted application model is that large amounts of internet bandwidth are required for your office computer, which is still actually running the applications, to communicate with the servers storing your data. Large amounts of data pass through your internet provider. You still pay dearly for large amounts of bandwidth even if you don't pay nearly as much as you would have ten years ago.

The submarine, with torpedoes aimed at battleship Microsoft, is true cloud computing. With true cloud computing, both your processing and storage are moved to remote servers. The computers in your office are merely the screens that display program output and keyboards that provide input. They are just devices to interact with the servers in the cloud. You probably don't even know the actual geographic locations of your programs and data.

The programs you run in the cloud are called multi-tenant programs. That means you aren't leasing a dedicated server and processor as with hybrid cloud models. You are sharing remote servers and processors with perhaps thousands or even millions of other users. Google Apps is a perfect example of true cloud computing. You neither know nor care where your programs and data reside as long as you can interact with them from anywhere with an internet connection. Another good example is QuickBooks online. If you have an internet browser, you have access to your accounting data.

There are important computer hardware and operating system consequences from true cloud computing. First, you no longer need powerful desktop computers. If the programs aren't running on your computer, you don't need a powerful computer on your desk. You just need an appliance to access the internet. Even smart phones don't have to be very smart to operate cloud applications.

Second, you no longer need a powerful operating system running in the computer on your desk. The operating system, typically Windows, provides services your programs need to operate. If your programs aren't operating on your desktop computer, you don't need a powerful operating system. This is the torpedo aimed at battleship Microsoft. Microsoft has controlled you by controlling your computer's operating system. If a program doesn't run on Windows, and you aren't an Apple user, you can't use that program.

Microsoft was slow to recognize the consequences of the cloud, but they finally caught on and offer versions of their popular desktop products like Excel and Word in the cloud. Microsoft was also slow to recognize the importance of the internet in the nineties, but they caught up, and Internet Explorer took over the browser market despite playing catchup. Does anyone remember Netscape? Netscape was clearly superior to Explorer, but Microsoft manipulated the Windows operating system to favor Explorer. They dealt a death blow to Netscape when Explorer became part of Windows. Microsoft controlled your operating system. So eventually they controlled the program to ran to access the internet.

The cloud is different, however. With true cloud computing, the operating system you use to access your programs in the cloud is irrelevant. Any operating system will do. In fact the simpler and faster the better. If you are frustrated with waiting fifteen minutes for your computer to start in the morning, the cloud promises instant on computer hardware. Imagine that – you flip the switch and your computer is on. You flip it again and your computer turns off.

Since the operating system is irrelevant accessing the cloud, Microsoft must compete on a level playing field with cloud applications from other providers like Google and Yahoo. In fact Microsoft is way behind and has expensive cloud solutions. The torpedoes haven't sunk Microsoft yet. The company is full of smart people and has survived and prospered from change before. But the cloud is a real, credible threat.

How should small business owners approach cloud computing? First, understand that the computer file server in your office may be the last one you ever own. In the near future, you will spending substantially less on computer hardware but substantially more on software hosting and services. We are quickly moving away from a business model of purchasing software to a business model where we will rent software. I can't promise you lower total costs, but I am really certain our productivity will increase as we spend less time waiting for our computers to pay attention to what we want to accomplish. We'll get our damn cursors back.

Second, inventory your mission critical computer applications. Begin determining which ones are moving to the cloud. E-mail and calendar applications are already there. Depending on the features you need in an accounting software package, the cloud might meet your needs now. More likely, your accounting is a couple years away from the cloud.

Third, contact a few hosting companies. Find out what they offer and do a cost comparison to determine if switching to a hosted solution will save you money. Don't just look at hard costs. Consider productivity increases and decreases in the time required to maintain your internal systems. I am betting you will decide to move at least some of your applications to some sort of cloud solution. We moved our e-mail and calendaring. Our project management is a true cloud solution. I foresee our income tax preparation program moving to the cloud in two or three years. I am determined to never buy another five grand computer file server.

Please check out our main S&k web site at www.skcpas.com. Thanks for reading!

Frank

"Big money in small business"

Vancouver-based Backbone magazine has a great article on the challenges facing technology vendors selling to the SMB market.

Author Gail Balfour sets the tone by noting that 97% of all firms in Canada are small- and medium-sized businesses. Vendors such as IBM, Dell, HP and Cisco covet the market, but as Balfour notes, for a long time “even the vendor pitches targeting SMBs amounted to little more than a product tweak and a revamped marketing message.”

But this is slowly changing, says Carmi Levy, senior vp, strategic consulting, with Toronto-based AR Communications. “You cannot underestimate the importance of the small- and medium-sized enterprise. Vendors are starting to realize that there’s real money in providing proper support to SMBs.”

Why so much interest in small business? As Levy notes, Internet technologies are making it easier for smaller companies to compete with big competitors, creating a growing market for tech applications. However, big companies have to learn how to service smaller firms.

Among the challenges noted by Chris Ellsay of Ottawa-based Workshift.com:
* SMB customers demand 24/7 tech support, and on a much more intimate level than enterprise clients
* Often they don’t have a dedicated IT person or staff, and are sometimes not very tech savvy.
* SMBs are price sensitive.

Sellers can’t simply downsize a larger product offering and expect SMBs to buy it, says Levy. Vendors need to build packages of products and services from the ground up. Levy says typical SMB customers are driven by “consumer thinking” and emotional impact, not by the “harder-nosed” enterprise attitude.

One more point: Don't think your brand power is going to crack open the SMB vault and keep you there. Changing brands is much easier to do in small biz, says Jayanth Angl of Info-Tech Research Group in London, Ont. “If a [competing] company is going to give them a better solution, [SMBs] are in a much better position to make that shift, whereas in a very large enterprise that is just not as likely.”

That also means that one negative experience can push SMBs to change vendors. “They base the decision more on emotion,” writes Balfour, “and their smaller size allows them to migrate to a new product without much pain or downtime.”

For more on this subject, and how Dell and HP are responding to this market, see the original story at http://www.backbonemag.com/Magazine/SMB_09070702.asp