Category: Home Business

Home Business refers to doing business from one’s home. Similar to “work at home”, home business entails doing a job in your home in a satisfactory manner. but unlike work at home, your home business may be registered with the local municipality.

Can Financial Window Dressing Help Your Business?


 

Financial managers can do certain things to increase or decrease net income that’s recorded in the year. This is called profit smoothing, income smoothing or just plain old window dressing. This isn’t the same as fraud, or cooking the books, though, just in case that thought had crossed your mind.

Most profit smoothing involves pushing some amount of revenue and/or expenses into other years than they would normally be recorded. A common technique for profit smoothing is to delay normal maintenance and repairs. This is referred to as deferred maintenance. Many routine and recurring maintenance costs required for autos, trucks, machines, equipment and buildings can be delayed, or deferred until later.

A business that spends a significant amount of money for employee training and development may delay these programs until the next year so the expense in the current year is lower. A company can also cut back on its current year’s outlays for market research and product development.

Some businesses might ease up on their rules regarding when slow-paying customers are written off to expense as bad debts or uncollectible accounts receivable. These businesses can put off recording some of their bad debts expense until the next reporting year.

A fixed asset that is not being actively used may have very little current or future value to a business. Instead of writing off the un-depreciated cost of the impaired asset as a loss in the current year, the business might delay the write-off until the next year.

You can see how manipulating the timing of certain expenses can make an impact on net income. This isn’t illegal although companies can go too far in massaging the numbers so that its financial statements are misleading. For the most part though, profit smoothing isn’t much more than robbing Peter to pay Paul.

Accountants refer to these as compensatory effects. The effects next year offset and cancel out the effects in the current year. Less expense this year is balanced by more expense the next year. The important thing is knowing how far to push the envelope in these kinds of maneuvers and keep yourself and your company out of trouble with the IRS, ’cause that kind of a problem you just don’t need.

 

Does Your Business Need a Forensic Accountant?


 

Forensic accounting financial investigative specialists work with financial information for the purpose of conveying complicated issues in a manner that others can easily understand. While some forensic accountants and forensic accounting specialists are engaged in the public practice of forensic examination, others work in private industry for such entities as banks and insurance companies or governmental entities such as sheriff and police departments, the Federal Bureau of Investigation (FBI), and the Internal Revenue Service (IRS).

The occupational fraud committed by employees usually involves the theft of assets. Embezzlement has been the most often committed fraud for the last 30 years. Employees may be involved in kickback schemes, identity theft, or conversion of corporate assets for personal use. The forensic accountant couples observation of the suspected employees with physical examination of assets, invigilation, inspection of documents, and interviews of those involved.

Experience on these types of engagements enables the forensic accountant to offer suggestions as to internal controls that owners could implement to reduce the likelihood of fraud. At times, the forensic accountant may be hired by attorneys to investigate the financial trail of persons suspected of engaging in criminal activity. Information provided by the forensic accountant may be the most effective way of obtaining convictions.

The forensic accountant may also be engaged by bankruptcy court when submitted financial information is suspect or if employees (including managers) are suspected of taking assets. Opportunities for qualified forensic accounting professionals abound in private companies. CEOs must now certify that their financial statements are faithful representations of the financial position and results of operations of their companies and rely more heavily on internal controls to detect any misstatement that would otherwise be contained in these financials.

In addition to these activities, forensic accountants may be asked to determine the amount of the loss sustained by victims, testify in court as an expert witness, assist in the preparation of visual aids and written summaries for use in court and any other appropriate assistance the forensic accountant could be reasonable expected to provide, depending on the particular set of circumstances.

Can't go wrong when the science is right