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5 Tips to Prepare for a General Contractor’s License Audit

Tip 1: Know Which Type of License you are Seeking:

The dollar amount of the project you are bidding on will likely be the determining factor of which license type is right for your company.  See the chart at the bottom of the post for the license thresholds, financial requirements and whether an audit is required to be performed by an independent CPA.

Tip 2: Possess the Necessary Working Capital:

Even though you may want a certain license type (i.e. unlimited), you may not meet the eligibility criteria for one, so be sure to review all of the eligibility requirements before submitting your application.

Tip 3: Engage an Independent CPA:

Please know that not all CPAs can perform audits.  Make sure you are working with a firm who has prior experience performing audits of general contractors.

Tip 4: Assemble all Documents Necessary for an Independent Audit:

Typical documents requested as part of an audit or review engagement include: a) access to QuickBooks or other accounting system used by the contractor; b) bank statements; c) access to source documents (checks received or paid); d) organizational documents including articles of incorporation.

Tip 5: Submit Audited Balance Sheet along with Completed License Application to your State Board of General Contractors:

Ensure that all of the necessary documents are attached to the State application form and the proper reports prepared by the independent CPA are attached.  States will not process your application without an attached audited balance sheet (if necessary).  Failure to include the audited balance sheet will result in costly delays in processing of your application.

For a quick outline of the requirements and thresholds for a GC licensure audit, CLICK HERE.

So You Want to Franchise Your Business?

Business owners looking for creative ways to grow and expand sometimes turn to franchising in order to accomplish their goals. Franchising occurs when the original owner of a business sells territorial rights to run independently-owned versions of the existing business. The independent business owners are franchisees. While the concept is not for everybody, there are certainly advantages to this business model.

Best practices to consider prior to franchising your business include the following:
Answering the Following Questions

Is my business even franchise-able? This is very important as not every business is. Is there even a need for my business concept in other geographic locations? Is my business model easily teachable to potential franchisees? Am I comfortable in making the transition from owner-operator to franchisor?

Consult a Franchise Attorney

The sale of franchises can be a legally complex process at both the federal and state levels. The laws are often not uniform and can vary from state to state. Prior to selling any franchises, a franchisor must file a franchise disclosure document (FDD) with the Federal Trade Commission (FTC). The FDD is discloses extensive information about the franchisor and is intended to provide the potential franchisee with information needed to make an informed decision. A franchise attorney will be a valued resource in your franchising journey. They will assist in the preparation and filing of the FDD.

Consult a Certified Public Accountant

With limited exceptions, a business looking to franchise will need to include financial statements that have been audited by an independent CPA. Audited financial statements are required to be included within the FDD prior to filing, with the failure to do so leading to costly delays and fines. Like a franchise attorney, a CPA will be a great resource as you begin your franchising process. Along with performing the required audit necessary for filing of the FDD, a CPA can also discuss the various tax benefits of the franchising concept and can serve as a trusted advisor on a range of topics including tax planning, business valuation and M&A strategies.

Now that you know the resources available to you, it’s time to begin your journey of growing your business via franchising. Contact us to learn more and to speak to a certified public accountant at LBA Haynes Strand!

Tips To Proactively Avoid Fraud and Embezzlement in a HOA

Fraud and embezzlement are words that can really cause an Association a lot of wasted time, money and energy.  So how can the Board of Directors get out in front of any potential fraud or embezzlement?  This is really simple and easy, but is almost always overlooked.  The Board needs to understand their role in fraud prevention and the top two components to fraud: motivation and opportunity.  In almost all cases, it will take both of these factors for fraud to occur.  Motivation is a factor completely outside of the Board’s control, but that cannot be said about the opportunity factor.

To reduce or eliminate the opportunity factor, establishing simple monitoring tasks by the Board are critical, extremely simple and highly effective.  First, review and control those key individuals that have banking authority.  When there are transitions on the board or with a management company then the individuals with banking authority need to be reviewed immediately and updated. Ensure this is reviewed and monitored by the Board Treasurer and then approved by the entire board. Next, establish an approved vendor list.  Payments made to vendors that don’t exist or consultants with no credentials are very common with Associations.  The Board should periodically review the disbursements ledger (check register) and look for payments to vendors that are not on the approved vendor list.

In addition, there are a number of control measures the board should do on a regular basis to reduce the risk of fraud or embezzlement.  These can include the following:

  • Review and approve the bank statements and bank reconciliations. Establish a due date to ensure the bank reconciliations are completed timely and reviewed timely.  Typically 15 days from the close of the previous month is a best practice.
  • Review actual results versus budgeted amounts and inquire of all variances.  Avoid only focusing on variances where the actual amounts exceed the approved budgeted amounts.  Variances significantly below approved budgeted amounts can be a myriad of issues.  Remember, the devil is the details. 
  • Discuss with your management company the safeguards they have over cash receipts.  The board should have a very good understanding of how much cash is received and what activities are leading to the generation of members paying in cash. 
  • Make sure your management company is utilizing a lockbox system for assessment collections.  Encourage all of your members to pay directly to the lockbox.  This will cut down on cash receipts. 
  • Review, review, review and review the monthly financial package.  This information is key and the boards timely review is critical to the identification of any potential issues that could be caused by fraud or embezzlement.  Make sure the financial package is completed timely as well.  Establish a due date with your management company.  This should be a date that is reasonable and agreed upon.

These steps, or suggestions, tailored to fit your association can help reduce or even possibly eliminate the opportunity for fraud and/embezzlement.  Fraud will happen at the most unexpected time, make sure your Board is taking the necessary precautions to protect the financial health and stability of your Association.  To learn more click the button below to speak with a Certified Public Accountant at LBA Haynes Strand.

Condominium Association Audit Guide

We understand that condominium association board members are volunteers who often do not have time to devote to a lengthy audit engagement process. In addition, they do not want to be constantly concerned about the “meter-running” or the resulting financial surprise of billable hours beyond their initial quote. LBA Haynes Strand offers a streamlined process to reduce time and create efficiencies for board members and their respective management company.

Condo Association By-Laws often require an annual Audit, Review or Compilation by an independent Certified Public Accountant. When complying with these by-laws, Board members fulfill their fiduciary responsibility to the Association.

What is the difference between an Audit, a Review, and a Compilation?
Audit

A Condo Association audit provides the highest level of assurance from an independent certified public accountant. Selecting an independent CPA that specializes in Condo Associations allows the Board and management to work with a professional that is in tune with the intricacies of their Association. An audit is much more in-depth in terms of scope than a compilation or a review type of engagement. The independent CPA is going to opine on the financials, that are the responsibility of the Association, provided to the independent auditor by either the Board or the management company.

Review

A financial review is less in scope than an independent audit, but more involved than a compilation. It provides you with limited assurances from the independent CPA over the financial statements as a whole. Review procedures involve inquiry and analytical procedures to determine if there is a material modification.

Compilation

In comparison, a compilation is far less in scope than a review. It provides no assurance or opinion on the financial statements.

Which of the three levels of service is right for my Condo Association?

Some Condo Associations require an audit while others require a review or a compilation, and in most cases, this is spelled out in the by-laws.

How much do these services cost?

The fees of each engagement are dependent on the controls and the processes of each management company. To receive an accurate and fair quote from LBA Haynes Strand, contact us for a no-cost consultation. Our team is happy to discuss your condominium association audit needs.

Creating A Strategic Plan For 2016

As the year end approaches, now is the perfect time to think about your strategic plans and growth strategies for 2016.  Your growth strategies and strategic plan should be focused on the upcoming year as well as three to five years down the road.  You have to understand exactly where your business is and have a vision of where you want your company to be in the future.  If you don’t have a plan that looks toward the future, you risk not ever growing your business.

One of the most important places to start is to build a budget.  As you are building your budget for 2016, and for your long term (3-5 year) strategy – think about the following questions:

  • Where do you want to be?
  • What size do you want to be?
  • Do you want to sell your company?

All of these questions should be asked on a yearly basis as you look three to five years into the future.  The answers to these questions will determine the day to day operational decisions you make.  If you are going to sell your company in two years, then maximizing current profitability is key – in order to show potential of the business.  If you are going to sell in 5 years and you need to grow significantly, then you may consider doing an acquisition.

Another item to think about is if you have the resources who can help you effectively sell your business or help you complete an acquisition?  Do you know how to set your company up to maximize the value you receive through a sale?  Teaming with a certified public accountant can help you with this. CPAs are notorious for having a wealth of resources and contacts that can help you build a network of advisors.  Whether it be an attorney, a wealth management advisor, a capital advisor, a bank, or SBA lender – CPAs can put you in touch with the right people.

Creating a strategic plan is essential to your business.  It is something that can help you identify the best opportunities for growth, understand potential financial results, and provide you with a detailed and focused plan that you can communicate to your team.

If you would like to learn more about how LBA Haynes Strand can help you achieve your long term goals, click the button below for a no-cost consultation!

NC House Budget Bill 117: Proposed Changes to Sales Tax, Corporate Tax, and More!

On Thursday June 11th, the North Carolina Senate version of the NC House Budget Bill (HB 117) was filed and included a number of changes from the original bill proposed by the NC House or Representatives. Among the changes are: lower personal income tax rates, a change in corporate taxes, a new formula for distributing sales tax revenue among counties, and a retooled jobs incentive program.

Remember, as of right now, all the changes are only proposed. You should, however, be aware of these changes and how they could affect you and/or your business.

New Sales Tax On Services:

The bill would broaden the sales tax base in order to help pay for new income tax cuts. Among the purchases facing sales taxes are: advertising, veterinary and pet care services, and repairs an maintenance work on personal property such as cars. Also this would mean that large non-profit organizations, such as hospitals, would lose a sales tax exemption.

Personal Income Tax Cuts:

The personal income tax rate would be cut from 5.75% to 5.5% beginning in 2016. The standard deduction would increase gradually over a four year period, meaning a married couple filing jointly wouldn’t owe taxes on the first $18,500 of income by 2020. A single person on the other hand wouldn’t owe taxes on the first $9,250 in income.

Corporate Taxes:

The bill proposes that over the next three years, the state would begin using the “single sales factor” formula for calculating corporate taxes. This means calculating the companies’ tax liability based entirely on sales instead of factoring in their payroll and property value.

Sales Tax Redistribution:

Included in the bill is a new distribution formula for allocating sales tax revenue among counties. Basically the state would distribute 20% of revenue based on where sales occur, and 80% would be based on the population of the county. This new version would allow counties to decide how to allocate revenue between their city and town governments.

Job Incentives:

The Job Development Investment Grant incentives would be capped under the new bill. This has been the state’s main job incentive program which has been out of money for months. The state could then offer up to $15 million each year and up to $30 million during a year in which the state lends a “high-yield project” bringing thousands of jobs.

Because House Bill 117 has already cleared the House, changes can no longer be made in public meetings. Instead members of the House can only approve the version passed by the Senate OR vote it down. In the event that it is voted down, legislators from both chambers would work out a compromise.

If you have strong feelings about this bill, you are encouraged to contact your senators. The Senate is expected to begin voting on this bill this week! To find contact info for your local representatives, please click here!

If you have questions about how budget bill 117 will affect you – reach out to LBA Haynes Strand today. Our team will be happy to walk you through the proposed changes and how they will affect you!

How Well Do You Know Your CPA Firm?

How well do you know your CPA Firm? Can you honestly say that your CPA is a partner in your success and that of your business? These two questions should produce the same answer: “Well enough to be confident in our collaborative success.” If this is not your answer, you may want to think about rekindling the flame between you and your CPA firm.

The relationship you have with your accounting firm should exceed standard service. Strategic planning, a strong partnership, and prolonged efforts toward ensuring future financial success should be at the forefront of your relationship with your CPA. If a close relationship with your accountant has diminished, or was never established in the first place, perhaps it is time to start rethinking things. Mutual understanding and a shared work ethic between you and your CPA firm are necessary to achieving financial growth for your organization.

Below are the primary components of a healthy CPA-to-business relationship, as well as the level of familiarity required for each element to be effective.

Ongoing Strategic Planning

What type of employee benefits do you offer? How about retirement plans? Your responsibility is to maintain a healthy, positive work environment. Part of the responsibility of your CPA is to factor your employees into the strategic layout of your current and future business endeavors.

Value Service Agreement

A strong CPA firm demonstrates the desire to cultivate close client relationships. You want your conversations with your CPA to be just that – conversations. How much value are you getting out of a consultation if you’re constantly monitoring the clock, keeping a closer eye on your bill than on the pertinent financial data laid out in front of you? Ensure that the value service agreement offered by your CPA is agreeable to your budget and beneficial to your finances. Work closely with your accountant to determine the plan that works best for YOU.

Growth Conversations

Are you and your CPA overdue for a growth conversation? You and your accountant should work together to create a strategic growth plan based on the specific goals you’d like to achieve in the future. Would you like to expand your business, or are you trying to downsize? Are you going to leave your business for future generations? Perhaps you are looking to sell your company. Whatever your plans may be, it is vital to converse with your CPA to determine the best formula for reaching those goals and to ensure financial security. You need an accounting team that is just as dedicated to fulfilling those plans as you are.

Long-Term Vision

What are your longstanding goals in terms of business development? Is your CPA familiar with them? Whether you’ve omitted this important information, or your CPA has neglected to ask, these objectives are vital in creating a strong and stable plan for your financial future.

Constant Connection

Your financial consulting needs will fluctuate from month to month, year to year, and so on. Regardless, contact with your CPA should not slip through the cracks during periods of lesser urgency. Both you and your CPA firm need to maintain a close relationship throughout the year. Communication is key!

There are several factors that contribute to your long-term financial success, but none of them are effective unless a sturdy foundation is established between you and your CPA firm. If you don’t feel as though a real closeness exists, all subsequent interactions are going to be out of sync with your future financial plans. To set and satisfy all of your financial goals, contact a professional CPA firm or work on strengthening the relationship with your current one.

Ready to get more out of your accounting services? Contact us to begin to understand the value of working with an accounting firm that provides much more than surface-level, mechanical tax preparation.