Klein Hall was just named to Inc. Magazine’s Best Workplaces

Naperville-based financial leadership firm Klein Hall has been named to Inc. Magazine’s Best Workplaces, a prestigious list that ranks companies across the country based on their ability to prioritize employee culture while achieving bottom-line growth.

To qualify, companies must have been founded and generating revenue by March 31, 2014. They must be based in the U.S., privately held, and independent—not subsidiaries or divisions of other companies—as of December 31, 2017.

Over the last three years, Klein Hall has experienced 112% growth. During that period of rapid change, they have continued to maintain an exceptional workplace culture, encouraging every member of the team to grow, develop, bond, be happy, and achieve their goals in career as well as life.

The Best Places to Work program from Inc. Magazine measures a wide range of research-validated workplace factors that impact employee engagement and satisfaction. This year, Klein Hall scored a 98.52 out of 100, which indicates highly engaged employees. Results also identified “Caring” as the word that best describes the work environment and senior leadership that value people as their most important resource.

“The most successful companies have the happiest people,” says Christina Klein, Managing Partner of Klein Hall. “People ask if it’s difficult to balance sustained business growth with employee culture. It’s not. It’s essential. You can’t have one without the other.”

Klein Hall encourages healthy work-life balance with perks like unlimited PTO and flexible schedules. We help our employees continue their professional development with paid training workshops, continued education, opportunities for advancement, and access to state-of-the-art technology. We also do the little things that strengthen the Klein Hall culture: a pet-friendly office, a casual dress code, a fully stocked kitchen, and frequent team outings.

“This is about more than just their career experience. This is about their life experience,” says John Miller, CPA, a Partner at Klein Hall. “We are helping our people define their path, decide where they want to go, and get there. And we’re having fun along the way.”

Want to learn more about Careers at Klein Hall? Click here.

Interstate ecommerce sales tax just got (even more) complicated. Here’s how to own it.

THE GIST (A 1-MINUTE READ)

  • The nature of interstate ecommerce changed dramatically in the summer of 2018, when the Supreme Court closed a 50-year-old loophole that once allowed interstate retailers to avoid state sales taxes where the business didn’t have a “nexus,” a physical presence or other reason that qualified the business for a state’s sales tax.
  • With the new ruling, online retailers are required to collect sales taxes based on the buyer’s location. Sounds easy enough, right?
  • Not so much. Sales taxes differ depending on the state (and, sometimes, the county), as do the filing requirements, and the rules are frequently changing on a state-by-state basis. This makes proper collection and filing difficult for all businesses and a major burden for small to mid-sized ecommerce retailers.
  • To navigate this territory, ecommerce businesses need to partner with a financial expert who understands both interstate sales tax and online retail. Unfortunately, hiring a full-time, in-house accountant is prohibitively expensive, especially for small businesses. Instead, companies are partnering with Klein Hall’s team of accountants and business advisors. We have decades of experience in the retail industry and have worked with numerous ecommerce businesses to navigate the ever-changing, ever-complicated world of interstate sales tax. Learn more.

The Full Story (a 5-minute read)

It’s a tough day to be an online retailer. Since ecommerce began, businesses like yours have enjoyed a loophole, which allowed them to sell goods sales tax-free to customers in states where the business didn’t have a “nexus,” a physical presence/business connection meriting the collection of sales taxes.

For example: If you were an online tea store operating out of Connecticut before June of 2018, you could sell chamomile to a customer in Ohio without charging that customer any Ohio sales tax. (Remember: This is assuming your business didn’t have any Ohio-based warehouses, production facilities, etc. to merit collection of Ohio sales tax.) Your goods, made in Connecticut, would therefore be less expensive to customers in Ohio than customers in Connecticut, encouraging customers in Ohio to buy tea imported from other states.

The loophole was a kind of sales-tax paradox. It encouraged businesses that wished to target customers in one state to operate out of another, depriving states of tax revenue they rightly deserved (according to the Supreme Court, anyway). Naturally, as we mentioned, this also gave consumers an incentive to purchase goods out of state – why pay sales tax when you don’t have to? – putting local brick-and-mortar stores at a disadvantage. You can probably see why state governments wanted to sow the loophole shut. In the summer of 2018, they got their way.

The taxation of ecommerce changed drastically on June 1, 2018, when the Supreme Court shut a 50-year loophole that allowed interstate retailers to avoid sales taxes in states outside their nexus (see the definition above, in the “Gist.”) The new legislation requires ecommerce businesses to pay sales taxes in their buyers’ states, which makes proper tax-collection complicated for interstate retailers, particularly small to mid-sized businesses, who typically lack a robust internal accounting infrastructure.

Back to your hypothetical tea company. Before the summer of 2018, you didn’t have to collect sales tax from customers outside of Connecticut, your hypothetical home state. Since June 1, 2018, you have to collect sales tax from every customer, in accordance with their state legislation. If a customer from Ohio orders tea, you have to collect Ohio sales tax on that tea. If the customer is from Texas, you have to collect Texas sales tax, which differs from Ohio’s. (The rules you will follow when filing these taxes and the frequency with which you will file them, also differ.) If a customer from Washington orders a pack of peppermint tea, things get really complicated. Now, you will have to determine the sales tax rules of not only the state, but the county in which the buyer resides, since Washington’s counties have unique sales tax requirements, as of the writing of this post. With the new sales tax legislation, peppermint tea can get pretty complex.

Notice our word choice: “You,” the tea business, are accountable. It’s not the government’s or the buyer’s responsibility to determine, collect and file sales tax. That’s up to you, the business. You have to determine what sales tax is owed. You have to be familiar with the unique tax obligations of 45 states plus the District of Columbia. You have to make that calculation, a calculation that, as you’re beginning to see, is complicated by a number of factors, including:

  • Sales tax laws are different for just about every state. There is no federal standard, so you need to take local rules into account.
  • States have unique deadlines and requirements for the frequency of filing. Missing a deadline can be treacherous, with late fees and other penalties.
  • Sales tax laws are always changing, state-by-state. Since the 2018 Supreme Court ruling, many states have rewritten their sales tax legislation, and some are still in the process of reworking it. You need to keep abreast of the shifting legislation. Easier said than done, especially since…
  • You have other things to worry about! You’re an online tea company (or any small to mid-sized ecommerce business) not a tax expert. You don’t have the time to track shifting sales tax legislation. You need an expert. Unfortunately, hiring an in-house accountant is prohibitively expensive.

…So, what’s a business to do?

For small to mid-sized ecommerce businesses, interstate Sales Tax is a complex, high-stakes headache. Hiring an in-house accountant is too expensive. But you can’t afford not to be compliant.

Instead, partner with a financial expert who understands ecommerce and can handle your interstate accounting needs. They will:

  • Keep track of specific legislation based on state, county, etc.
  • Monitor legislation as it changes.
  • Keep meticulous records, including specific filing frequencies, sales information and due dates. This allows you to track your sales and invoices, so you know exactly where your sales come from and can collect accordingly, while ensuring you are following proper filing rules for each state.
  • Integrating the optimal accounting software into your Point-of-Sale (POS) system. The right software can account for unique state tax laws and automate the data input process, saving you time and money, while reducing the risk of error.
  • Ensure you report the correct numbers, the correct way. Some states require you to break down collections based on local jurisdictions, which makes filing your taxes even more complex.
  • File in every state where you do business, whether or not you collected tax in that state. This is a common compliance mistake for small businesses. Even if you didn’t collect tax in a state, you still need to file for that reporting period. Fail to file, and you could be hit with penalties.

At Klein Hall, our accountants, business advisors and financial experts provide comprehensive financial leadership for ecommerce businesses. Since 2002, we have navigated our clients through the shifting retail landscape. Now, as legislation has changed, we’re helping small to mid-sized businesses adapt to the environment and gain a competitive edge. Learn more about our services for ecommerce retail businesses here.

Your business can save money and reduce risk by automating your transactional data input. Here’s how.

Each time a customer makes a purchase from your business, a small package of information is produced. We call this “transactional data.” (If you’re a business owner, you’re probably familiar with this.) This data includes all sorts of information amount the transaction: the amount of money spent, the date of occurrence, the location of the buyer, etc. On the surface, it all looks fairly mundane. But, when strung together, these data strands form a log of purchases that is deceptively important: the financial DNA of your company.

(more…)

The Financial Survival Guide for Your Growing Construction Business

Cash flow woes, multi-state regulations, new tax obligations, more scrutiny from the IRS…

…and we’re just getting started.

Growing your construction business comes with a long list of financial growing pains. It can feel like you’re a start-up all over again: high risk, high reward, and so many things to learn. It can be exciting and overwhelming (and, sometimes, just overwhelming).

Here are a few tips that will help protect your business as you grow:

Stop playing “catch-up” and get proactive with your cash flow management.

As your revenue grows, so will your expenses. This makes your cash flow situation increasingly complicated and potentially risky. Without proper planning, you could be heading toward a cash flow crisis. (See: Cash Flow Crisis: The Wrecking Ball of the Construction Business)

The only real solution is to plan ahead. Sit down with a financial professional, someone with experience in the construction industry, and create a comprehensive cash flow forecast. It should incorporate all of your current and upcoming projects while accounting for the timing of payments and receipts, as well as unexpected expenses. Since your financial situation is dynamic, you and your advisor will continually update and analyze your plan, while comparing past projections with actual values to test accuracy.

Once you have a plan, you are ready to create a more intelligent budget that will protect your growing business from whatever comes its way.

Get to know your new tax bracket.

As you grow, you may shift into a new bracket of the federal tax code. This may change the method you use to report your earnings, and it could also entitle you to certain benefits. Speaking of which…

Stay tuned for new tax credits.

Your business is changing, and you may be entitled to credits that were not available before. Don’t leave any money on the table.

Keep track of your presence in multiple states.

Growing construction firms typically develop a “nexus” (a presence) in multiple states. When that occurs, you will have to manage tax obligations in each one. Each state has different rules, so filing can become even more complex as you expand your reach.

Be consistent with your accounting (because the IRS is watching).

Depending on your revenues – your construction business will report earnings one of two ways. The first is “cash accounting.” In this method, you report cash receipts as income (when you receive them) and expenses (when you pay them). The second is “accrual accounting,” when you report income and expenses in the year-earned and the year-occurred, respectively.

The accrual method is broken down into two sub-categories… and, well, it gets pretty complicated. The bottom line is: As a growing business, you need to get organized and be consistent with your finances, because the IRS expects “consistent treatment of income and expenses from year to year.” (And it’s best to keep the IRS happy.)

Partner with a professional who knows construction (or, better yet, a whole team of us).

At Klein Hall, we know the construction industry. Our team of financial professionals have decades of experience in your field – we even have a Certified Construction Industry Financial Professional (CCIFP®) on staff – and we know what it takes for growing businesses to succeed.

Partner with us, and we will help you navigate periods of growth with cash flow forecasts, budgeting, advisory, assurance and more.

Click here to learn more about Klein Hall’s financial services tailored for construction.

Cash Flow Crisis: The Wrecking Ball of the Construction Business

Your business runs like a well-oiled machine. You are winning bids. Projects are pouring in. Your clients are happy. Your team is happy. You are on a straight-shot to success…

…and then, out of nowhere, a cash flow crisis hits. Things grind to a halt. You miss payroll. You don’t have the funds to purchase the equipment you need. You are out of cash, out of options. Pretty soon, you are out of business.

In the construction business, a cash flow crisis hits like a wrecking ball: fast, mean and unforgiving.

…So, what can you do to stop it?

Hold on. What is cash flow? And what is a cash flow crisis?

Cash flow is the state of money flowing into and out of your business. When your cash flow is “negative,” it means the money leaving your business exceeds the money entering your business. “Positive” cash flow is the reverse; more money is coming in.

Positive and negative cash flow aren’t “good” or “bad,” per say. On their own, they don’t define the financial health of your business. A healthy business can and will have negative cash flow, at times. For example: as you gear up for a big project, your cash flow is probably negative, because you are purchasing equipment and making other investments in preparation. That is a natural part of the project life-cycle.

However, without the proper management, your cash flow may be negative for too long, to the point where it becomes unsustainable. (That’s when you’re heading toward a crisis.) Maybe you plan too many projects simultaneously, or you forget to account for the delay in receiving payment from a past project. At this point, you may find yourself without enough funds to cover the basic expenses you need to operate your business, and, well… here comes the wrecking ball.

Cash flow is different than profitability.

Profitability is simply the degree to which your business is earning profit. Cash flow, on the other hand, is a measure of survival. It reflects your capacity to cover the expenses necessary to stay in business. This means your business can be profitable for decades, but a short-term cash flow problem (a wrecking ball) can swiftly push you into bankruptcy. That fast, intense cash flow problem is what we call a “cash flow crisis.”

Just like in personal finance, the goal of managing cash flow is to achieve an equilibrium, a balance where you are holding enough money to afford the materials, people, etc. you need to continue operations. Stay organized, balance your flow, plan ahead, and you will maintain that balance.

Of course, that’s easier said than done. Especially in this business.

Cash flow is a bigger challenge in construction than just about any other industry. Why is that?

  • Construction companies invest more up-front. Between equipment, payroll and other materials, businesses in the construction industry have to front a large cost at the beginning of each project.
  • You may have to wait longer to get paid. Construction contracts can be lengthy. After fronting a large initial cost, you may have to wait a long period for reimbursement, which can make cash flow management difficult, especially when multiple projects are occurring simultaneously. Speaking of which…
  • Multiple projects are (probably) happening at the same time. In this business, you are often navigating an entire portfolio of projects, each one affecting your cash flow.
  • No two projects are alike. Depending on the project, you will have to purchase equipment, hire new staff and operate on unique timelines. It’s hard to establish a winning formula when the variables are always changing.
  • There are many categories of expenses and multiple ways to report earnings. This makes accurately reporting your earnings more complicated (and more critical, since the IRS is carefully watching the industry for compliance).

A cash flow crisis isn’t the only financial wrecking ball.

In addition to cash flow, businesses have to manage compliance, and the government has an entire set of tax laws and accounting rules unique to the construction industry. It becomes even more complicated when your business crosses into multiple states, which, for growing businesses in this industry, will probably happen.

Sound complicated? It is. But you can take action to protect your business. Plan ahead. Be proactive. And, most importantly…

Partner with the right financial professionals, and they will help you navigate the complexities of cash flow & compliance.

You don’t want just any accountant. You need someone who specializes in the construction industry, an expert who understands the laws, the culture and the reality of your work. Better yet: partner with a whole team of experts.

At Klein Hall, we know construction. Our team of business advisors, accountants and Certified Construction Industry Professionals (CCIFP®)understand the financial ins and outs of your industry. We work with you to create cash flow forecasts & projections, keep your filings organized & consistent, and prepare your business for whatever comes next (and yes, that includes a wrecking ball).

Click here to learn more about our comprehensive financial services for the construction industry.  

The Truth about Fraud’s Biggest Myths.

The truth is, most business leaders don’t know the truth about fraud.

Do you?

At Klein Hall, we work with businesses of every size – across just about every industry – to prevent and detect fraudulent activity. We know the challenges our clients face, and we also understand the scope and the reality of fraud’s grip on the business world.

Now, we’re debunking the biggest myths about fraud and revealing the surprising truths that every business leader should know.

Myth: Big businesses are hit hardest by fraud.
Fact: Small businesses lose nearly twice as much per scheme.

Big money is being lost to fraud. However, contrary to popular belief, it’s not just a “big-business problem.” In fact, small businesses are hit hardest.

In a 2018 ACFE study, big businesses lost an average of $104,000, while small businesses (with less than 100 employees) lost an average of $200,000. If you’re a small-business owner, it pays to protect your company.

Myth: Fraud is usually a negligible sum. It’s just a nuisance.
Fact: The average business loses nearly 5% of its revenue to fraud.

Businesses in every industry are losing serious money to fraud. And the more money a business loses, the less it’s likely to recover.

Myth: Most businesses have never experienced fraud and never will.
Fact: Nearly 95% of all businesses are victims of fraud.

Fraud? That could never happen to your business… right? The reality is, it probably has.

So, what can you do to stop it?

Myth: Fraud just happens. You can’t prevent it.
Fact: Businesses with anti-fraud controls experience less fraud and detect fraudulent activity in less time.

At Klein Hall, we work with clients to strengthen internal controls and prevent fraud from happening. When fraud does occur, our CFE’s (Certified Fraud Examiners) help clients identify it quickly and recover funds, when possible.

Click here to learn more about our prevention, investigation and recovery services.

As Klein Hall Grows, 5 of Our Best Receive Promotions

We are proud to announce that 5 of our outstanding team members have been promoted to leadership positions. As Klein Hall continues to grow our portfolio and expand our offering, these employees are essential to shaping the future of our firm.

Jessica joined Klein Hall in January 2013 – first, as a Staff Accountant, and later, as Accounting Services Manager. In her new role as Principal, Jessica focuses on firm operations and Klein Hall CFO services: monitoring Klein Hall’s Key Performance Indicators, managing workflow, and using analytics to position our firm for continued growth.

“We’re growing,” she says. “And as we continue to bring our services to more clients than ever, I want to help make Klein Hall as efficient and effective as possible.”

Amy joined Klein Hall as a Manager in 2017, bringing nearly 20 years of public and private-sector accounting experience to the firm. Now, as Principal, Amy is leveraging her decades of experience to help lead our firm and our clients into the future.

“We have a strong team with a shared vision,” she says. “We’re all working together to support each other and our clients as Klein Hall continues to expand.”

Asta, who joined Klein Hall in 2010, has been promoted from Manager to Principal. As Klein Hall continues to reach new markets and expand our advisory services, Asta will take a primary role in Klein Hall’s expansion.

“We’re looking to the future – the services we’re expanding, the direction we’re heading, how the financial world is changing,” she says. “As Principal, my responsibility is to ensure our clients continue to succeed.”

Sean joined Klein Hall in December 2017 as a Manager of Tax and Accounting Services. His new role as Principal comes with many of the same responsibilities as his managerial position, with an increased focus on client relationships.

“The firm has been going through incredible growth,” he says. “I’m both honored and excited to be part of that.”

Matt joined our growing team as a Supervisor last fall. Now, as Manager, Matt is responsible for managing assurance engagements and engagement staff, as well as reviewing work performed for audits and reviews. His new leadership role sees Matt working directly with clients as he helps expand Klein Hall’s commercial assurance practice.

“We’re a growing firm in a changing world,” he says. “But we’re always focused on delivering the best solutions for our clients. It’s exciting to be part of that creative process.”

Fraud, by the Numbers

Fraud: The Numbers that Will Blow Your Mind (& Break the Bank)

The numbers don’t lie. Unfortunately, if you’re like 95% of all business owners, your employees do.

This is fraud, by the numbers.

$7 Billion

In 2018, the Association of Certified Fraud Examiners (ACFE) analyzed 2,690 cases of fraud. They found more than $7 billion in total losses.

2x

Smaller organizations are nearly twice as a likely to suffer fraudulent losses.

83.5%

Most fraud cases fall into one of three categories: Asset Misappropriation, Corruption, or Financial Statement fraud. The vast majority of those cases (83.5%) qualify as Asset Misappropriation, a scheme in which an employee steals or misuses an organization’s funds.

5%

A typical organization loses 5% of all revenue to fraud. Chances are, that includes yours.

1/2

Internal control weaknesses are responsible for nearly half of all reported fraud cases. In other words, a large portion of fraudulent activity could be prevented with proactive measures.

4%

Only 4% of perpetrators have a prior fraud conviction. Moral of the story? Just because an employee has a clean record doesn’t mean they won’t commit fraud, when given the opportunity.

85%

…of perpetrators display at least one “Behavioral Red Flag” before/during their fraudulent activity. Red flags include: living beyond their means, being unusually close to a vendor or customer, and experiencing personal financial difficulties.

70%

of corruption cases are perpetrated by someone in a position of authority, most commonly managers.

$0

That’s not a typo. In most cases, defrauded businesses recover nothing.

100%

of businesses are at risk of fraud…

…and 100% have the power to do something about it.

At Klein Hall, our financial experts take a sophisticated, proactive approach to preventing and investing fraud. We partner with businesses like yours to assess vulnerabilities, strengthen your internal controls, and detect fraudulent activity as it occurs.

Learn more about Fraud Services.

5 Signs Your Business Seriously Needs a Controller

There is really no substitute for a Controller, a professional who manages the financial lifeblood of your business. Often, in the early stages, the leaders of start-ups and small companies will manage their finances themselves. However, as their business grows and the finances become increasingly complex, these leaders have neither the time nor the expertise to manage it on their own.

Here are 5 signs it’s time to work with a Controller.

#1 – You spend too much time thinking about your company’s finances (when you could be thinking about your company).

You are a business leader, and your time is valuable. Every minute you spend thinking about your company’s day-to-day finances is a minute you could have spent on a different aspect of your business.

A Controller takes on the complex, time-consuming management of your business’ finances, so you can get back to focusing on your business.

#2 – The mistakes and missed opportunities are adding up.

Mistakes happen… but, when those mistakes are financial – like missed deadlines, miscalculated payroll, forgotten bills, and neglected tax-credit opportunities – they can be costly.

Avoid the fines, penalties, and lower credit rating that come with financial errors by teaming-up with a Controller.

#3 – You are growing out of the “start-up phase.”

As your business expands, your finances become increasingly complex. Everything – from payroll to major investments – requires more time and expertise to manage, and the margin for error becomes smaller and smaller. As you continue to scale, new opportunities will emerge, like lucrative tax credits, and you need someone who will identity those opportunities and act on them.

As your business grows beyond the initial start-up phase, a Controller will handle your increasingly complex finances and help guide you through this growth.

#4 – You are making major purchases/investments. 

Small to mid-sized businesses frequently make new acquisitions and major purchases, like upgraded equipment. A Controller will help you navigate these milestone and incorporate them in your cash flow strategy.

#5 – You’re ready to streamline your operations for maximum profitability.

Your bottom line can always be better. For even the most well-organized businesses, there are always opportunities to streamline operations and maximize profitability. However, it often takes a financial professional to identify these opportunities and execute them.

A Controller will work with your CFO and other leaders to optimize your financial operations and work toward a better bottom line.

Interested in working with a Controller? (But not-so-interested in the high cost of hiring an in-house Controller?) At Klein Hall, we created a solution. Our expert Controllers work with your business to perform a full range of Controllership services backed by a trusted organization of financial leaders – without the prohibitive cost of hiring an in-house employee.

Click here to learn more about Klein Hall Controllership Services.

What is a Controller, and Does My Business Need One?

Your finances are the lifeblood of your business, and someone must manage them. As a leader of your business, you need to focus on aspects of your company beyond the day-to-day management of finances, which becomes increasingly complex as your business grows.

That’s where the Controller comes in.

What is a Financial Controller?

A Financial Controller (or Comptroller) is a senior-level executive. They act as the head of accounting, working closely with your CFO to prepare financial reports, streamline operations, audit internal controls and navigate major business milestones.

What exactly does a Controller do?

  • They help you navigate major purchases, investments and business milestones, as well as the day-to-day management of your company’s finances.
  • They streamline your business operations to reduce costs and maximize profitability.
  • They regularly perform Compliance Audits, reviewing your business’ adherence to shifting regulatory guidelines.
  • They work with your CFO to coordinate your business’ finances and operations, preparing your company for the future. This is known as the BPF process – Budgeting, Planning and Forecasting.
  • They analyze your financial data and keep your business up-to-date with the latest financial-management technology.
  • They look for tax credits and other opportunities to reduce your tax burden.

What value do they bring?

  • Maximum profitability through streamlined operations and cost-saving opportunities.
  • Stronger internal controls for a more secure financial house.
  • More freedom. When you are not focused on day-to-day finance, you are free to concentrate on other aspects of your business.
  • Fewer roadblocks. They help you avoid the fines and penalties that come from missed deadlines, miscalculated payroll and neglected bills.
  • A plan for the future. They strategize with your CFO to align your operations and your finances with your plan for tomorrow.

At what point does my business need a Controller?

If your business is growing, if you are planning for the future, if you are preparing for a major investment or looking to maximize your profitability, it is time to work with a Controller. However, hiring an in-house Controller is expensive, and most small to mid-sized businesses just can’t afford the cost.

At Klein Hall, we created a solution for your business.

Klein Hall Controllership Services offer a comprehensive Controller solution without the cost and uncertainty of an in-house employee. Our expert Controllers work with your business to perform a full range of Controllership services, backed by a trusted organization of financial leaders.

Click here to learn more about Klein Hall Controllership Services.