Monthly Archives: May 2017

Supply Chain and Concentration Risks

Concentration risks can hurt your supply chain

Broken chain link held together by paper clipIf a company relies on a customer or supplier for 10 percent or more of its revenue or materials, or if several customers or suppliers are located in the same geographic region, it creates a concentration risk for your business. Because if or when a key customer or supplier experiences turmoil, the repercussions travel up or down the supply chain and can quickly and negatively impact your business.

To protect yourself, it’s important to look for concentration risks as you monitor your financials and engage in strategic planning. Remember to evaluate not only your own success and stability, but also concentration risks that are a threat to your customers and suppliers.

Two types of concentration risks
Businesses tend to experience two main types of concentration risks:

  1. Product-related. If your company’s most profitable product line depends on a few key customers, you’re essentially at their mercy. Key customers that unexpectedly cut budgets or switch to a competitor could significantly lower revenues.Similarly, if a major supplier suddenly increases prices or becomes lax in quality control, it could cause your profits to plummet. This is especially problematic if your number of alternative suppliers is limited.
  2. Geographic. When gauging geographic risks, assess whether a large number of your customers or suppliers are located in one geographic region. Operating near supply chain partners offers advantages such as lower transportation costs and faster delivery. Conversely, overseas locales may enable you to cut labor and raw materials expenses.

But there are also potential risks associated with close geographic proximity of customers or suppliers. Local weather conditions, tax rate hikes and regulatory changes can have a significant impact. And these threats increase substantially when dealing with global partners, which may also present risks in the form of geopolitical uncertainty and exchange rate volatility.

Financially feasible
Your supply chain is much like your cash flow: When it’s strong, stable and uninterrupted, you’re probably in pretty good shape. We can help you assess your concentration risks and find financially feasible solutions to minimize them. We work with businesses of all sizes and in a wide range of industries. Contact Ciuni & Panichi, Inc. and Dan Hout-Reilly, CPA, CVA, at dhout-reilly@cp-advisors.com or 216-831-7171.

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Technology Tips

Smartphones:  The Next Fraud Frontier

 

IT Tips

It may be time for your company to create a strategic IT plan

Portrait of three technicians standing in a server roomIt is understandable why many companies have taken an ad hoc approach to technology. A usual scenario is that as business needs developed and technology provided the best solutions, automation was implemented without creating an overall, company-wide plan.

As a result, many companies find all their different hardware and software may not communicate together. What’s worse, lack of integration can leave you more vulnerable to security risks. For these reasons, some businesses reach a point where they decide to implement a strategic IT plan.

Setting objectives
The objective of a strategic IT plan is to — over a stated period — roll out consistent, integrated, and secure hardware and software. In doing so, you’ll likely eliminate many of the security dangers wrought by lack of integration, while streamlining data-processing efficiency.

To get started, define your IT objectives. Identify not only the weaknesses of your current infrastructure, but also opportunities to improve it. Employee feedback is key: Find out who’s using what and why it works for them.  Also, figure out what isn’t working and why it isn’t working.

From a financial perspective, estimate a reasonable return on investment that includes a payback timetable for technology expenditures. Be sure your projections factor in both:

  • Hard savings, such as eliminating redundant software or outdated processes, and
  • Soft benefits, such as being able to more quickly and accurately share data within the  office as well as externally (for example, from sales calls).

Also calculate the price of doing nothing. Describe the risks and potential costs of falling behind or failing to get ahead of competitors technologically.

Working in phases
When you’re ready to implement your strategic IT plan, devise a reasonable and patient time line. Ideally, there should be no need to rush. You can take a phased approach, perhaps laying the foundation with a new server and then installing consistent, integrated applications on top of it.

A phased implementation can also help you stay within budget. You’ll need to have a good idea of how much the total project will cost. But you can still allow flexibility for making measured progress without putting your cash flow at risk.

Bringing it all together
There’s nothing wrong or unusual about wandering the vast landscape of today’s business technology. But, at some point, every company should at least consider bringing all their bits and bytes under one roof.

Need help. Please contact Reggie Novak, CPA, CFE, Ciuni & Panichi, Inc. senior manager, at rnovak@cp-advisors.com or 216-831-7171 for help managing your IT spending in a measured, strategic way.

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Don’t Lose Revenue to Fraud

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Tax Refund

Turn next year’s tax refund into cash in your pocket now

2018A tax refund, to be sure, feels like getting an influx of cash, and the bigger the check, the better. But it also means you are essentially giving the government an interest-free loan for close to a year. Keeping those dollars throughout the year is much better option for your financial well-being.

Now is the time to make a change in your withholding or estimated tax payments to begin collecting your 2017 refund now.

Reasons to modify amounts
It’s particularly important to check your withholding and/or estimated tax payments if:

  • You received an especially large 2016 refund,
  • You’ve gotten married or divorced or added a dependent,
  • You’ve purchased a home,
  • You’ve started or lost a job, or
  • Your investment income has changed significantly.

Even if you haven’t encountered any major life changes during the past year, changes in the tax law may affect withholding levels, making it worthwhile to double-check your withholding or estimated tax payments.

Making a change
You can modify your withholding at any time during the year, or even several times within a year. To do so, you simply submit a new Form W-4 to your employer. Changes typically will go into effect several weeks after the new Form W-4 is submitted. For estimated tax payments, you can make adjustments each time quarterly payments are due.

While reducing withholdings or estimated tax payments will, indeed, put more money in your pocket now, you also need to be careful that you don’t reduce them too much. If you don’t pay enough tax during the year, you could end up owing interest and penalties when you file your return, even if you pay your outstanding tax liability by the April 2018 deadline.

The best advice we can offer is don’t go it alone. If you’d like help determining what your withholding or estimated tax payments should be for the rest of the year, please contact Tony Constantine, CPA, Ciuni & Panichi, Inc. Tax Partner at tconstantine@cp-advisors.com or 216-831-7171.

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Smartphones:  The Next Fraud Frontier

Smartphones: The Next Fraud Frontier

Fraud and Your Phone

Touchscreen smartphone with Earth globeSmartphones quickly have become a standard part of life for much of the population, even our kids. Not surprisingly, they’ve also now become a standard target for hackers and other individuals with fraud-related intent. Understanding the risks associated with smartphones is the first step in staying secure.

Smartphone risks
According to the U.S. Department of Homeland Security’s United States Computer Emergency Readiness Team (US-CERT), smartphone security hasn’t kept pace with traditional computer security. These devices rarely contain technical security measures, such as firewalls and antivirus protections, and mobile operating systems aren’t updated as frequently as those on personal computers (PCs).

Yet users routinely store a wide range of sensitive information — including calendars, contact information, emails, text messages, passwords and user identification numbers — on their smartphones. Geolocation software can track where smartphones are at any time. In addition, apps can record personally identifiable information.

Even users who have little sensitive information on their smartphones are at risk. A hacker can target a phone and use it to trick its owner, or the owner’s contacts, into revealing confidential information. They also use targeted smartphones to attack others. Using malicious software, an attacker can control a phone by adding its number to a network of devices (called a “botnet”). And smartphones can spread viruses to PCs, which can be a big problem for companies with bring your own device (BYOD) policies.

Access points
An attacker can gain access to a smartphone through a variety of avenues. Sometimes an attacker obtains physical access, as when a phone is lost or stolen. More frequently, a hacker achieves virtual access by, for example, sending a phishing email that coaxes the recipient into clicking a link that installs malicious software.

Another way an attacker can gain access to a smartphone is text message spam.  Studies show that people are three times more likely to respond to spam received by cellphone than when using a desktop or laptop computer. These texts often lead you to shady websites that install malware on your phone or otherwise seek to steal sensitive details utilized for identity theft.

Apps can be dangerous, too. A user might install an app that turns out to be malicious or a legitimate app with weaknesses an attacker can exploit. A user could unleash such an attack simply by running the app.

Protective measures
Experts suggest that individual smartphone users, as well as those charged with managing an organization’s smartphones or administering a company’s BYOD policy, take several steps to reduce the odds of damaging attacks. Encryption is probably the most highly recommended precaution. When data is encrypted, it’s “scrambled” and unreadable to anyone who can’t provide a unique “key” to open it.

Two-step authentication, such as that offered by Gmail, is advisable when available. This approach adds a layer of authentication by calling the phone or sending a password via text message before allowing the user to log in. Of course, if the fraud perpetrator has obtained the phone illicitly, these authentication services put him or her one step closer to accessing the owner’s accounts.

Many users fail to enable all of their phones’ security features. If available, an owner should always activate remote find-and-wipe capabilities, the ability to delete known malicious apps remotely, PINs or passwords, and other options such as touch ID and fingerprint sensors if available. Conversely, users should disable interfaces such as Bluetooth and Wi-Fi when not in use. They also should set Bluetooth-enabled devices to be nondiscoverable, which prevents devices from being listed during a Bluetooth device search process.

Can you hear me now?
Just as smartphone technologies are evolving rapidly, so are the threats to their security. Users and managers need to stay on top of the risks and take the necessary precautions to protect these valuable but vulnerable devices. If you have a “bring your own device” policy or are thinking about creating one, we can help make sure the right security is in place for your company. To learn more, contact Reggie Novak, CPA, CFE, at 216-831-7171 or rnovak@cp-advisors.com.

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The Trump Tax Plan

Tax Plan

AMTThe Trump Administration served its opening volley on tax reform.  Although short on details and sure to be extensively debated and modified by Congress, it does offer us some insights on where the debate may be headed.  Of special importance is the omission of some key campaign proposals.  These include the border tax, potential limitations of mortgage interest, and charitable donation.

The Ciuni & Panichi team continues to watch the developing details of tax reform, keeping our clients in mind.  We will keep you abreast of major changes in proposals that will affect you and your businesses.

Summary of Trump’s Tax Plan

  • The business tax rate is reduced to 15 percent.  This includes all businesses even partnerships, S Corporations, and sole proprietors.
  • The number of income tax brackets will be cut from seven to three, with a top rate of 35 percent and lower rates of 25 percent and 10 percent. It is not clear what income ranges will fall under those brackets.  It would double the standard deduction.
  • It would eliminate most tax deductions. The mortgage interest and charitable contribution deductions would be retained.
  • Estate tax, otherwise known as the “death tax” will be eliminated.
  • There will be a “one-time tax” on the trillions of dollars held by corporations overseas.
  • The U.S. would go to a “territorial” tax system. Such systems typically exclude most or all of the income that businesses earn overseas. Most developed countries use this model.
  • Repeal of the alternative minimum tax and 3.8 percent Obamacare taxes.

Contact Jim Komos at 216.831.7171 or jkomos@cp-advisors.com for more information.