How to Determine the Best Accounting Software for Your Construction Company

How to Determine the Best Accounting Software for Your Construction Company

Changing your construction company accounting software may be stressful, time-consuming, and costly. However, making a switch to the right accounting software may help:

  • reduce manual work,
  • double tracking of jobs, and
  • help your construction company processes flow more smoothly.

Before committing to a new software package, a construction company should consider the following:

  • Determine what your construction company NEEDS in its accounting software.
    The first step, before changing an accounting software, is to discuss with all employees. From shop personnel, who will be receiving inventory, to the CFO, who will be running reports. Ask these individuals, what tasks should the software ideally perform?
  • Determine if your CURRENT accounting software meets the above needs.
    Changing accounting software is a commitment from every level of your construction company. Once you have accumulated your list of needs, take the time to determine if your current software has the ability to meet those. Consider the addition of modules, training and support offered by the vendor. Also consider your level of satisfaction with your current vendor. If you determine your current software cannot meet both your current and future needs, you can then consider making a change.

If, after the above assessment, changing accounting software is the best option, below are four items to consider:

  1. Fully Integrated vs. Basic Accounting Software
    A fully integrated construction accounting software helps to ensure your job costing and the accounting general ledger should reconcile to the penny between each other. A fully integrated system includes things such as, construction payroll, billings, purchasing and subcontract controls, general ledger reports by job, and job reports. Basic accounting software will not include modules specific to job costing. However, there may be a separate job costing system to meet your needs and may be used alongside your accounting software.
  2. Access & Portability
    Things to consider include multiple user access, security preferences, multiple business support, cloud based versus server based, and mobile access. Determining what your construction company needs, will help eliminate software options that do not meet the minimal requirements.
  3. Knowledge Required
    Take into account the knowledge and willingness of your employees. Some software requires high-level accounting knowledge to use, while others are geared towards individuals with limited accounting education or experience.
  4. Cost
    Be aware of all aspects of the cost of the software. This includes fees for upgrades, annual licensing, support fees, and hardware costs. Often, the premium features are not part of the basic software package and have additional add-on costs.

Questions?

Running your construction company goes smoother and profits stay higher with the right accounting and business management software. Let the technology experts at Smith Schafer help you choose the right financial management tools for your company and guide you through the implementation. We will make sure each solution works the way you need it to work.

Smith Schafer is a recognized leader in providing accounting, auditing and consulting services to the construction industry. Our Construction Group, comprised of numerous professionals, is committed to serving over 500 Minnesota construction and real estate entities. Click here to schedule a 30 minute free consultation. We look forward to speaking with you!

New Study Reveals Costs, Means and Ways to Stop Fraud

New Study Reveals Costs, Means and Ways to Stop Fraud

Would you leave the front door unlocked to your business? Of course not. That would give thieves easy access to your assets. Yet a surprising number of organizations do not have strong antifraud controls in place to protect against dishonest people inside their organizations. And theft from insiders — also referred to as “occupational fraud” — can be costly.

Fraud losses vary significantly, depending on the nature of the scam and how soon it is detected. Globally, the median loss is $130,000, according to the findings from the 2018 Report to the Nations on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners (ACFE). Here is a closer look at who was affected and how much was lost, as reported in the latest version of this biennial study.

VICTIM ORGANIZATIONS

Fraud can strike any organization regardless of the nature of its operations or its size. The latest ACFE study included 2,690 fraud cases occurring between January 2016 and July 2017.

While the news media focuses on high profile fraud incidents involving public companies, the median loss for those companies was only $117,000. Private companies suffered far greater losses — their median loss was a whopping $164,000. By comparison, the median losses for government and not-for-profit entities were approximately $118,000 and $75,000, respectively.

In addition, there are subtle distinctions between the types of fraud schemes that strike small and large organizations.

Top 5 Fraud Schemes by Size

Percent of Cases

Rank<100 Employees100+ Employees
1Corruption (32%)Corruption (43%)
2Billing (29%)Non-cash schemes (22%) 
3Check tampering (22%)Billing (18%)
4Expense reimbursement (21%)Cash on hand (14%)
5Skimming and cash on hand (20%)Expense reimbursment (11%)

To Catch a Thief

Small and large organizations also differ in how they catch fraudsters. Tips were the detection method in 29% of the cases involving small entities, compared to 44% of the cases involving large ones. This could result from the prevalence of reporting hotlines, which are more common among larger companies than small ones with limited resources.

Overall, tips are the most common way fraud is initially detected. But it is important to remember outside stakeholders may also provide tips on unethical behavior. In the 2018 study, 21% of tips came from customers and 9% came from vendors. So, it is important to educate your supply chain partners about any reporting mechanisms you set up.

Internal Controls

Beyond tips, a robust system of internal controls may help detect and prevent fraud. The latest study found that 15% of frauds were detected by internal audit procedures and 13% by management review.

What are the critical elements of an internal control system? In terms of lowering fraud losses, the most effective internal controls in the 2018 study were:

ControlPercent Reduction in Fraud Loss
Code of conduct50%
Proactive data monitoring and analysis52%
Surprise audits51%
External audits50%
Management review50%
Hotline50%

On the flip side, weak internal controls often provide dishonest people with the opportunity to steal assets or “cook the books.” In the 2018 study, a lack of internal controls and the ability to override internal controls were cited as the leading factors that contributed to fraud. Together, these factors were present in nearly half of the fraud cases in the latest study.

In addition, the 2018 ACFE study inquired about the types of antifraud controls fraud victims had implemented. The report revealed that 25% of frauds at larger organizations were caused by a lack of internal controls. In contrast, 42% of frauds at small organizations stemmed from weak controls. This finding helps explain why fraud seems to hit smaller organizations harder than larger ones.

Lessons Learned

Over the last two decades, the ACFE’s fraud report has taught important lessons including: No organization is immune to white collar crime. Driven by this report and recent high-profile public fraud cases, companies have increasingly implemented antifraud controls in recent years.

How do your internal controls measure up? Although strong internal controls do not guarantee fraud won’t occur at your organization, they can minimize your losses. Smith Schafer can help evaluate your internal controls and recommend areas of improvement. Click to contact us today!

Cybercrime: 4 Ways to Protect your Company

It is estimated, across the globe, cybercrimes cost businesses $450 billion in 2016. Yet companies of all sizes continue to ignore these threats. Many business owners feel they are too small for a cybercriminal to waste their time. However, the opposite is often true. Small companies are assumed to not have the proper safeguards in place to protect themselves or even recognize an attack.

THREE COMMON TYPES OF CYBERCRIMES

  1. Ransomware. A type of malware (a broad term for software, aiming to inflict damage or breach an IT system). Ransomware requires a company to pay a ransom to regain access to their files or server.
  2. Corporate Account Takeover. Another type of malware, which hijacks a user’s computer in order to trace anything from keystrokes to websites accessed. Malware is often invited into a network through an e-mail link or attachment. Unsuspecting employees click and download the program without knowing it.
  3. Identity Theft via Data Breach. Many companies have sensitive customer information that needs to be safeguarded. Companies known to have this sensitive data often are active targets of cybercrimes.

Three Things Companies can do to Protect Themselves from Cybercrime

  1. Conduct a Security Audit. Determine how easily a cybercriminal can assess a company’s server or files and find issues before they become larger problems.
  2. Test Employees. When it comes to cybersecurity, the number one threat is also the number one defender; company employees. Sending test phishing emails to employees to track how many click on the link or open an attachment.
  3. Have a Plan. An attack could happen, having a plan to resolve and react will save time and money.
  4. Assess Insurance Needs. Insurance can cover payments on ransomware or for downtime recovering from an attack. Determining the overall risk of these attacks will assist in determining the level of coverage, if any, needed.

How Smith Schafer can Help

  1. Review technology and security polices
  2. Technology planning and budgeting
  3. Technology coaching and executive education
  4. Work with IT vendors to implement a stronger security framework

CONTACT US

Keeping up with technology is a requirement for the success of a company. Click here to contact Smith Schafer’s Technology Services Group and learn how we can help. We look forward to speaking with you soon.

Ways to Combat Business Identity Theft

Ways to Combat Business Identity Theft

The IRS and state tax authorities have made significant strides in curbing individual identity theft over the last two years. But cyber attacks against businesses are on the upswing. Here are some simple ways business taxpayers can help protect their data from hackers.

Trends in ID Theft

The IRS recently announced the number of individualsreporting identity theft in the first half of 2017 has declined dramatically compared to 2015 and 2016. For the first five months of 2017, about 107,000 individual taxpayers reported stolen IDs. In comparison, 297,000 victims filed reports during the same time period in 2015 and 204,000 in 2016. Put simply, individual ID theft dropped 47% over the last year. The IRS attributes the decrease to safeguards put in place during the 2016 Security Summit. Unfortunately, the IRS has also noted an increase in ID theft involving business tax returns. While the number of businesses affected was relatively low, the potential dollar amounts were significant:

YearEstimated business ID theft cases through June 1Estimated losses
2015350 tax returns$122 million
20164,000 tax returns$268 million
201710,000 tax returns$137 million

The victims of business ID theft include corporations, estates and trusts, and partnerships. These days, hackers are bolder and increasingly tax savvy in their scams. For example, they may use stolen data to file bogus business tax returns and then collect refunds. Or they might post the stolen data for resale on the so-called “Dark Net” so other criminals can file fraudulent tax returns. Smith Schafer has been helping clients take appropriate security measures to prevent business ID theft, but problems persist. “We need help from the tax community to combat cybercriminals and raise security awareness,” IRS Commissioner John Koskinen noted.

Ways to Combat Business ID Theft

Because business ID theft can be so costly, prevention and early detection measures are critical. Here are some simple, but effective, security measures you should consider:

  • Make cybersecurity a top priority. Similar to an annual business plan, your company needs a formal cybersecurity plan that identifies a step-by-step approach for detecting ID theft. When breaches happen, your plan should trigger a prompt, thorough response.
  • Safeguard intellectual property. Companies should store all employee and customer data, along with other proprietary records, such as financial statements and prior years’ tax returns, in a safe location. Shred nonessential documents before throwing them out, and limit access to your employer ID number to parties with whom you initiated the contact. Share sensitive information via the Internet or email only if the recipient is trusted (such as your lender or tax preparer) and the site is secure.
  • Use the latest cybersecurity technologyThis includes firewalls, antivirus and antimalware software, and spam filters. Also exercise common sense: Don’t download files, click on links, or open pop-ups or attachments sent from unknown sources. Stored files should be encrypted for your protection and for the benefit of customers.
  • Educate employeesConduct periodic training sessions to remind employees about the latest scams, such as phishing emails where hackers pose as familiar businesses or colleagues to steal sensitive information. They should also be aware of your cybersecurity plan and each person’s role if a breach occurs.
  • Use prepaid credit cards for purchases. Prepaid employee credit cards limit your potential for losses when employees make purchases from suppliers and vendors. If a card is breached, the company can lose only what’s prepaid and you can immediately deactivate the card.
  • Monitor business credit reports. It does not take much effort to monitor your company’s profiles from the three major business credit bureaus: Equifax, Experian, and TransUnion. Subscribe to their monitoring services for round-the-clock access. What’s more, you can choose to receive real-time email notifications about suspicious activities affecting your company’s credit rating.
  • Guard your master list. Some companies track all their accounts and passwords in a master list, which can be convenient, but dangerous. A dishonest employee or hacker who manages to gain access to that list has the key to all your company’s information in one fell swoop, so you’ll need to be extra cautious with security measures.
  • Finally, contact your Smith Schafer professional promptly if you believe you have been victimized. We can help you get in touch with the appropriate law enforcement authorities, business credit bureaus and financial institutions.

No Guarantees

No preventive measure is 100% fail safe. The IRS and tax preparers are expanding their efforts to educate businesses and prevent breaches. You can also help lower your risk by crafting a formal cybersecurity plan, educating employees and implementing various other proactive security measures. If you have questions or concerns about your situation, ask your Smith Schafer professional for help.

Tax Return Identity Theft

The month of January is often the most corrupt period of the year when it comes to identity theft, as countless fraudulent tax returns are filed on unsuspecting taxpayers. The IRS has reported a whopping $21 billion in fraudulent activity, up from $6.5 billion two years ago. Part of the reason for the significant spike is an outdated detection system which has a slow process for implementing improvements. This, along with federal budgetary and legal constraints, has allowed thieves to thrive and obtain cash from filing fraudulent tax returns.

IRS data shows there were 787,000 confirmed number of fraudulent tax returns that made it into the agency’s processing systems in 2016; a decrease from the previous year, but significant nonetheless.

For the 2017 tax-filing season, the IRS is introducing new safeguards focusing on “trusted customer” features ensuring the authenticity of both the taxpayer and the tax return. These added features will include 37 new data elements transmitted by those involved in the tax preparation industry, as well as a plan to add verification codes on millions of additional W-2 tax return forms. In addition, the IRS is planning to launch an Information Sharing and Analysis Center to deliver earlier warnings of emerging identity theft issues and tax fraud schemes.

Signs you may be a victim of tax return identity theft include the following:

  • You attempt to electronically file your return and it is rejected. You may receive a message indicating a return has already been filed using your social security number. In this case, you will want to take immediate action. Complete an Identity Theft Affidavit (IRS Form 14039) and mail it to the IRS.
  • You received a letter from the IRS requesting information about a return bearing your name and identification number.
  • You receive income tax-related documents from an unknown employer. This may imply a fraudulent W-2 or 1099 statement was prepared using your personal information.
  • You receive a tax refund you did not request. The first thing you should do is compare it to your valid return. The IRS may have inadvertently refunded an overpayment that should have been applied to the following year. Or, if the amount does not match up correctly, a fraudulent return may have been filed using your name and identification number.
  • You receive other unanticipated materials from the IRS, such as prepaid debit cards or transcripts of tax returns you did not request. This could imply someone is attempting to gain access to your information.

Over the years, thieves have devised many schemes to obtain the personal information of taxpayers. One thing to keep in mind is the IRS will typically contact a taxpayer via a mailed letter. A telephone or email message should always raise suspicion, as it may likely will be a thief attempting to gather personal information.

If it has been determined identity theft has occurred, you should promptly contact the IRS as soon as possible. An additional procedure the IRS will undertake will be to issue an Identity Protection PIN. This is a unique personal identifier that must be included on your tax return when it is filed. This process will aid in the prevention of future fraudulent actions involving your information. As thieves continue to develop newer and sophisticated schemes, be sure to keep your personal tax information private. Personal identification numbers and income tax information should only be provided to others when absolutely necessary.

For more information on this topic or tax preparation questions you may have, contact your Smith Schafer professional today.