Today’s business technology is both powerful and restive. No matter how “feature rich” a software solution or hardware asset may be, there’s always another upgrade around the corner. In other words, it’s just a matter of time before your company’s next IT project.

When that day arrives, watch out for “scope creep.” This term refers to the tendency of a project’s objective (or “scope”) to gradually expand while the job is underway. As a result, the schedule may drag and dollars may go to waste.

Common Culprits

A variety of things can cause scope creep. In many cases, too few users give input during the planning stage. Or misunderstandings may occur between the project team and users, obscuring the purpose of the job.

Excessive implementation time undoes many projects as well. As weeks and months go by, business processes, policies, and priorities tend to change. For a new system to meet the needs of the business, the project’s scope needs to be executable within a reasonable time frame.

Ineffective project management is another common culprit. Scope creep often arises when a project manager underestimates the complexity of the tasks at hand or fails to adequately motivate his or her team.

Steps to Success

To stop or at least minimize scope creep, follow these five steps:

1. Distinguish “must-haves” from “nice-to-haves.”

Draw a red line between the functionalities your business absolutely must have and any added features that would be nice to have. Schedule the prioritized requirements in the form of phased deliverables during the project’s life cycle. Add “nice-to-haves” to the final phase or, better yet, defer them to future projects.

2. Put agreed-on deliverables in writing.

Use a Statement of Work document to clearly outline the stated project requirements. Be sure to cover both those that are included and those that aren’t. Have everyone involved sign off on this document.

3. Divide and conquer.

Segregate the project into small, manageable phases. As it proceeds, continue to review and sign off on each phase as it’s delivered, following an adequate testing period.

4. Introduce a formal change management process.

If someone demands a change, ask him or her to rationalize the request in writing on a change order form. Then analyze the potential impact, estimate the added cost and time, and obtain consensus before proceeding. Adhering to this step typically eliminates many low-priority demands.

5. Anticipate some scope creep.

It’s a rare project, if any, that proceeds exactly as planned. Allow for some scope creep in your budget and timeline.

 

Head-on Approach

Improving your company’s technology should be cause for excitement and, eventually, celebration. Unfortunately, it too often brings anxiety and conflict. Tackling scope creep head on can help ensure that your IT projects go more smoothly. Our firm can help you assess the financial impact of any technology solution you’re considering and, if you decide to proceed, set a budget for the job.

Ask many entrepreneurs and small business owners to show you their financial statements and they’ll likely open a laptop and show you their bookkeeping software. Although tracking financial transactions is critical, spreadsheets aren’t financial statements.

In short, financial statements are detailed and carefully organized reports about the financial activities and overall position of a business. As any company evolves, it will likely encounter an increasing need to properly generate these reports to build credibility with outside parties, such as investors and lenders, and to make well-informed strategic decisions.

These are the typical components of financial statements:

Income Statement.

Also known as a profit and loss statement, the income statement shows revenues and expenses for a specified period. To help show which parts of the business are profitable (or not), it should carefully match revenues and expenses.

Balance Sheet.

This provides a snapshot of a company’s assets and liabilities. Assets are items of value, such as cash, accounts receivable, equipment and intellectual property. Liabilities are debts, such as accounts payable, payroll and lines of credit. The balance sheet also states the company’s net worth, which is calculated by subtracting total liabilities from total assets.

Cash Flow Statement.

This shows how much cash a company generates for a particular period, which is a good indicator of how easily it can pay its bills. The statement details the net increase or decrease in cash as a result of operations, investment activities (such as property or equipment sales or purchases) and financing activities (such as taking out or repaying a loan).

Retained Earnings/Equity Statement.

Not always included, this statement shows how much a company’s net worth grew during a specified period. If the business is a corporation, the statement details what percentage of profits for that period the company distributed as dividends to its shareholders and what percentage it retained internally.

Notes to Financial Statements.

Many if not most financial statements contain a supplementary report to provide additional details about the other sections. Some of these notes may take the form of disclosures that are required under Generally Accepted Accounting Principles — the most widely used set of accounting rules and standards. Others might include supporting calculations or written clarifications.

Financial statements tell the ongoing narrative of your company’s finances and profitability. Without them, you really can’t tell anyone — including yourself — precisely how well you’re doing. We can help you generate these reports to the highest standards and then use them to your best advantage.

What is Form 1099-MISC?

Form 1099-MISC is ‘Miscellaneous Income’. Employers issue the Form 1099-MISC to contract workers, independent contractors or other non-employees, to report payments made during the year.

This form must be provided to any ‘non-employee’ to whom an employer paid $600 or more during the calendar year.

Important Note: Do not confuse Form W-2 to Form 1099-MISC. W-2 is for employees while Form 1099-MISC is for non-employees.

 

1. Complete the Form Accurately

The issued 1099-MISC must include the following information:

 (1) total amount of payments for this individual or business; and

(2) individual’s taxpayer ID and address.

Employers will need to get a W-9 Form from each payee. W-9 Form is titled the “Request for Taxpayer Identification Number and Certification.” It records the tax ID numbers for workers who are not employees and it records the certification of the person completing the form attesting that: the taxpayer identification number is correct, the taxpayer is not subject to backup withholding, the individual is a U.S. citizen, and any Foreign Account Tax Compliance Act codes on the form are correct.

 

2. Submit Completed 1099-MISC At the Correct Format

Employers can submit the completed Form 1099-MISC along with the Transmittal Form 1096, a summary tax report which shows the totals from 1099 Forms, to the IRS by mail or online.

 

3. Submit 1099-MISC by Due Date.

For the 2018 tax year, the deadline for giving these forms to payees and the deadline for filing the forms is: January 31, 2019.

 

 

Common Mistakes

• Filing Form 1099-MISC late or not filing

Employers who submit the Form 1099-MISC late or not filing at all to the IRS are subject to penalties.

 

• Missing TINs and Incorrect Name/TIN Combinations

TINs can be an SSN, an Employer Identification Number (EIN), an Individual Taxpayer Identification Number (ITIN), or an Adoption Taxpayer Identification Number (ATIN).

If a TIN is not provided or is obviously incorrect, it is considered missing. A Name/TIN combination is incorrect if it does not match or cannot be found on IRS or SSA files.

 

IRC 6721, ‘Failure to File Correct Information Returns’, imposes a penalty per return for each of the following infractions related to information returns that are defined under IRC 6724(d)(1):

• Failure to file,
• Filed with a missing/incorrect TIN (or other missing or incorrect information),
• Filed untimely,
• Filed on paper when electronic filing was required (incorrect media),
• Filed in an incorrect format, (unprocessable), or
• Any combination of the above.

For more detailed information, please refer to IRS Publication 1586.

 

If you need more information about the requirements and procedures of accomplishing the 1099-MISC and the re-introduced 1099-NEC reporting, contact us today at admin@fas-accountingsolutions.com or 713-855-8035.

The promise of the new year lies ahead. One way to help ensure it’s a profitable one is to re-evaluate your company’s pricing strategy. You need to devise an approach that considers more than just what it cost you to produce a product or deliver a service; it also must factor in what customers want and value — and how much money they’re willing to spend. Then you need to evaluate how competitors price and position their offerings.

 

Doing your Homework

Optimal pricing decisions don’t occur in a vacuum; they require market research. Examples of economical ways smaller businesses can research their customers and competitors include:

• Conducting informal focus groups with top customers,
• Sending online surveys to prospective, existing and defecting customers,
• Monitoring social media reviews, and
• Sending free trials in exchange for customer feedback.

It’s also smart to investigate your competitors’ pricing strategies using ethical means. For example, the owner of a restaurant might eat a meal at each of her local competitors to evaluate the menu, decor, and service. Or a manufacturer might visit competitors’ websites and purchase comparable products to evaluate quality, timeliness and customer service.

Charging a Premium

Remember, low-cost pricing isn’t the only way to compete — in fact, it can be disastrous for small players in an industry dominated by large conglomerates. Your business can charge higher prices than competitors do if customers think your products and services offer enhanced value.

Suppose you survey customers and discover that they associate your brand with high quality and superior features. If your target market is more image conscious than budget conscious, you can set a premium price to differentiate your offerings. You’ll probably sell fewer units than your low-cost competitors but earn a higher margin on each unit sold. Premium prices also work for novel or exclusive products that are currently available from few competitors — or, if customers are drawn to the reputation, unique skills or charisma that specific owners or employees possess.

 

Going in Low

Sometimes setting a low price, at least temporarily, does make sense. It can drive competitors out of the market and build your market share — or help you survive adverse market conditions. Being a low-cost leader enables your business to capture market share and possibly lower costs through economies of scale. But you’ll earn a lower margin on each unit sold.

Another approach is to discount some loss leader products to draw in buyers and establish brand loyalty in the hope that customers will subsequently buy complementary products and services at higher margins. You also may decide to offer discounts when seasonal demand is low or when you want to get rid of less popular models to lower inventory carrying costs.

 

Evolving Over Time

Do your prices really reflect customer demand and market conditions? Pricing shouldn’t be static — it should evolve with your business and its industry. Whether you’re pricing a new product or service for the first time or reviewing your existing pricing strategy, we can help you analyze the pertinent factors and make an optimal decision.