Risk Management Bulletin

Since the tax filing deadline is April 15, you’ve probably already wrapped up your small business tax return for 2015. However, it’s not too soon to start preparing for next year. Consider several legitimate deductions you can take as an entrepreneur.

Accounting fees
Advertising and publicity
Amortization
Auto expenses for vehicles used for business purposes
Bad debts that you cannot collect
Banking fees
Board meetings
Building repairs and maintenance
Business association membership dues
Business travel
Charitable deductions made for a business purpose
Cleaning or janitorial services
Collection Expenses
Commissions to outside parties
Computers, electronics and tech supplies
Consulting fees
Continuing education to maintain your professional license and improve skills
Conventions and trade shows
Costs of goods sold
Credit card processing fees
Depreciation
Dining during business travel
Discounts to customers
Education and training for employees
Employee wages
Entertainment for customers and clients, up to 50 percent
Equipment and equipment repairs
Exhibits for publicity
Family members’ wages
Freight and shipping costs
Furniture and fixtures
Gifts for customers, up to $25 limit for each gift
Group insurance
Health insurance
Home office
Interest paid on business loans
Internet hosting and services
Investment advice and fees
Legal fees
License fees
Losses due to theft
Management fees
Materials
Maintenance
Medical expenses
Mileage
Mortgage interest on business property
Moving costs
Newspapers and magazines subscriptions
Office supplies and expenses
Payroll taxes for employees, including Social Security, Medicare taxes and unemployment taxes
Parking and tolls
Pension plans
Postage
Prizes for contests
Real estate-related expenses
Rebates on sales
Rent
Research and development
Retirement plans
Royalties
Safe-deposit box
Software and online services
Storage rental
Subcontractors
Taxes
Telephone
Utilities
Website design and related fees
Workers’ compensation insurance

The Internal Revenue Service doesn’t provide entrepreneurs with a comprehensive list of deductible expenses. Reference this list and talk to your CPA as you ensure you’re following all the IRS rules and taking only legitimate and qualified deductions.

Remember to keep good records, too. In case you’re audited, you’ll need to prove that the deductions on your tax return are legitimate. Save all receipts, and make sure they include the date of service, total and purpose of the expense. You may want to scan them into the computer or otherwise preserve them since paper can deteriorate over time and you’ll want to save all your records for up to seven years after you file your tax return.

Business deductions of legitimate expenses help you lower your tax bill. This list is a start as you find all the deductions you’re eligible to take as an entrepreneur.

Customer disputes are part of doing business. However, you can avoid disputes and retain your important customer base when you try these tips.

1. Prepare a written agreement before you sell anything. 

   This legal and binding document outlines the products you sell or the services you provide, and it includes pricing details. It also should include all terms and conditions. You don’t want to add terms to the invoice after your customer signs it.

2. Have professionals proofread the agreement. 

   Your attorney and tax professional will ensure that the document is legal and inclusive.

3. Be sure all authorized signers read and understand the agreement. 

   As the business owner, you need to understand the contract you’re asking your customers to sign. Any employees who are also authorized to sign the contract should understand it, too.

4. Identify your customer who is signing the contract. 

   Your client may by a corporation or company, but you need to be sure you’re meeting with an authorized representative of that company. The contact person must have permission to make the deal and sign contracts. Otherwise, the agreement could be void.

5. Have both parties sign the agreement. 

   Don’t provide goods or services without having both you and the customer sign the contract. This important step can protect you from expensive litigation.

6. Maintain detailed time sheets if you charge by the hour. 

   You’ll give the customer a reasonable expert before you start working, but keep detailed records of how you spend your time and what you accomplish as you reduce disputes about charges and results.

7. Remain professional at all times.

   It’s tempting to tell off a customer who complains about a lopsided display or the temperature of the office. Staying professional and keeping a smile on your face can go a long way toward diffusing tension, though. Teach your staff how to remain professional in all situations.

8. Prepare a procedure for processing complaints. 

   This step includes who deals with problems, how long you spend on resolving the conflict, how to handle an escalating situation and what to do with unresolved complaints. Everyone in the company should understand the chain of command and what to do when a customer is upset.

9. Admit mistakes. 

   Even though your written agreement includes all the details of the goods and services you offer, you and your staff are human and may make mistakes. Admitting when you mess up is good customer service.

When you avoid customer disputes, you provide a positive experience for your customers and improve employee morale. Try these tips today as you grow your small business.

Over 40 percent of the world’s population uses the Internet. Your potential to reach your existing and new customers expands when you get online, too. You’ll be able to sell your product anywhere you can ship it, meet virtually with clients from around the globe, connect personally with customers and share important information about your business, including the hours you’re open or your menu. Today, being online is almost essential for a small business, but there are risks. Before you run to set up a website, social media accounts and e-commerce site, learn about the risks of doing business online.

Internet Security

When you collect personal information, including addresses and credit card numbers, you have the responsibility to protect that data. Hackers who target your website could gain access to sensitive information and put you at risk for a lawsuit. Understand firewalls and other protections you need and have them in place before you open for business.

Legality

Depending on what goods and services you offer, you may be prohibited from selling or shipping to certain areas. You’ll also need to collect and pay taxes, which vary by country, state and even city. Be sure you understand the laws before you do business online.

Fraud

Accepting credit cards or bank information over the phone is risky. You don’t know if the person buying the item actually owns that financial information. You also could also receive false shipping information, which means you lose that merchandise and its income.

Time Commitment

Remember that you’ll need to update your online profile regularly so that your information is fresh and accurate. Be prepared for trolls, too, as your audience expands. These activities require time, so decide now if you have enough time to handle an online presence.

Searchability

Your website, blog and social media posts compete with thousands of other voices for attention. If you don’t use the right keywords, no one will find you, and you’ll be wasting your money. Be sure you have the right resources to maintain your company’s searchability before you commit to going online.

Ongoing Cost

In addition to paying for your website and web hosting, you’ll need to pay someone to update your online presence regularly. Consider whether or not you can afford this expense and if it will improve your bottom line.

Your small business can benefit from a website, e-commerce site and social media accounts. Know the risks and prepare accordingly to ensure you and your customers are protected.

Like a small leak can cause a major flood if it’s not caught soon enough, careless conversations can ruin your small business. It only takes one casual comment or discriminatory joke to set off lawsuit and ruin your company and reputation. Take note of three types of conversations and avoid them as you communicate with your employees, partners and clients and protect your livelihood.

1. Empty Threats

   It may be tempting to motivate employees by threatening to demote, suspend or terminate them if they don’t meet sales or performance goals. However, those threats are considered bullying if you don’t plan to follow through or are legally not allowed to follow through with the threat.

   Rather than make empty threats, be sure to spell out the expectations you have for employees and the consequences in your employee manual. Refer to that manual when you deal with your employees, and make sure your managers use it, too, as you prevent bullying and empty threats.

1. False Promises

   To boost morale or encourage team members to perform at their best, you may say things like “I see a future for you here” or “You’re going places.” These remarks could be considered contracts whether they’re made in writing or verbally and even if you said them but don’t intend to follow through.

   Making these false promises could result in a lawsuit if the employee is fired or does not receive the promotion. Rather than make a false promise, set up a tangible reward system with extra bonus pay, time off or branded products for your employees who achieve specific goals. This system boosts morale, employee retention and productivity without making false promises.

1. Inappropriate Comments

   A simple joke or comment about someone’s race, sexual orientation, disability, age, religion or gender might be funny in the moment. You won’t be laughing, though, when you’re sued.

   Be vigilant about avoiding any kind of conversation that could be considered offensive or insulting to your employees, customers and anyone. If you’re not sure about what’s considered inappropriate, refer to the Equal Employment Opportunity Commission’s website.

Water cooler conversation, private emails and even casual remarks made in passing could be the downfall of your small business. Set an example for everyone in your company by modeling the right conversation. Make sure your managers and supervisors are aware of these three conversational threats, too. You should also do regular trainings for your entire company as you encourage others to avoid careless conversations and protect your small business.

Preparing for tax season can be overwhelming for a small business owner. A good system that organizes receipts makes a big difference and helps you file an accurate tax return and protect yourself in case of an audit. Try these tips this year.

Keep Every Receipt

The Cohen Rule allows taxpayers to provide reasonable estimates for expenses when they can’t produce actual records of their expenses. IRS Publication 463 also states that taxpayers don’t need to save receipts for expenses under $75. However, saving every receipt allows you to prepare an accurate tax return and helps you win an audit.

Take Notes on Your Receipts

To prevent you from mixing business and personal expenses, record the details of each purchase on your receipts. Note what you purchased, and include why you bought the item. This step is especially important for entertainment and meals where you need to prove that you took clients to lunch and talked about business.

Use a Business Journal

Vending machine coffee and certain other business expenses will not have a receipt. Use a business journal to track those random expenses. Take a few minutes at the end of each day to write down all your daily expenditures on your Google or Outlook calendar. Print those pages at the end of your tax year to show all the miscellaneous expenses you purchased throughout the year.

Don’t Depend On Credit Card Statements or Canceled Checks

You do want to save your credit card statements and canceled checks, but they don’t always prove an expense. For example, your statement could show that you spent $400 at Staples, but you need to have solid proof for the IRS that you used that money to purchase office supplies for your business and not invitations for your daughter’s birthday party.

Avoid Using Cash

Cash is easy to spend and difficult to track. Use your debit or credit card instead as you ensure good record keeping. If you do have to use cash, be vigilant about recording details on the receipts or in your business journal.

Scan and Store Receipts for at Least Six Years

The IRS can perform an audit up to six years after you file your taxes. Be prepared when you scan your receipts before they fade and then store them electronically. Be sure to save them to Dropbox, OneDrive or another cloud-based storage option instead of relying on a hard drive that could crash and take your receipts with it.

Your small business may never be audited, but you want to be prepared. Keep good records and organize your receipts this year as you reduce your risk of a high tax bill after an audit.

Losing a key employee can cripple a small business. That person may hold responsibility for essential tasks, know your clients or be in charge of a large project. If you’re not prepared for the loss, your entire company will be affected by low morale, loss of productivity and an economic hit. Minimize the risks when you take several steps.

Identify Your Key Employees

Who in your organization can you not afford to lose? Which employees keep your company running or boost sales each month? These employees are the ones you need to be prepared to lose. Otherwise, your company is at risk of failing when that person decides to move on.

Develop a Knowledge Management Program

In many organizations, the key employees have important knowledge in their head but not on paper. Develop a knowledge management program that documents this vital information for the next person in the position.

Cross-Train

Instead of resting important responsibilities or projects solely on one person’s shoulders, cross-train at least one other employee in the job or position. That way, you’re not left hanging as you search for and train a replacement.

Hold Regular Update Meetings

Cross-training may not be possible for you. In this case, hold regular staff meetings where you update everyone on the project and prevent your staff from being blindsided if a key employee leaves.

Communicate the Good and the Bad

Improve employee retention and satisfaction when you keep communication lines open. Discussing the good and the bad can prevent small problems from growing and help key employees feel included and valued.

Stay in Touch With a Staffing or Recruiting Firm

If you don’t have a current employee who can step in and take over the key spot, have a staffing or recruiting firm on call. They have access to professionals who are experienced, trained and ready to step in with minimal effort from you.

Conduct an Exit Interview

When possible, interview the employees who leave your company. Discover the reasons for the departure and use that information to improve your salary, benefits package, company culture or other deficits as you prevent the loss of other key employees.

Focus on Current Employees

Even though a key employee left, you still have staff members who need you. Communicate clearly about the departure and discuss the impact it will make on the department or company as a whole. Restructure as needed, too, to keep business going.

Embrace Change

It’s easy to see a departure as a bad thing. However, a new employee brings fresh perspective, business connections and great skills that can improve your organization.

While losing a key employee is not easy, you can make the transition as smooth as possible when you’re prepared.

Advertise an open position in your company, and you probably receive multiple applications. These applications contain the applicant’s personal information, including social security numbers, addresses and past employment history. They need to be protected. Not only do you want to prevent identity theft that may result in an expensive lawsuit from the applicant, but you also may need the applications to fill future open positions. You also need to follow federal laws. Instead of tossing job applications after the position is filled, read about several laws that tell you how to handle these applications and the information they contain the right way.

Civil Rights Act of 1964

This federal act prohibits employment discrimination based on color, race, sex, religion or national origin. Part of the act also requires employers to keep job applications associated with permanent positions for at least one year after the application is received. If you’re charged with discrimination or unlawful employment practices, keep the job application and any other relevant personnel records until the issue is resolved.

Age Discrimination in Employment Act

Applicants over the age of 40 cannot be discriminated against according to the Age Discrimination in Employment Act. It also requires you to retain applications, resumes, applicant test results and referrals for permanent and temporary jobs for one year after you receive them. If the applicant is 40 or older, keep the records for two years.

Americans With Disabilities Act

The Americans With Disabilities Act protects employees from discrimination in the workplace and was specifically written for disabled people. It requires you to keep job applications and related documents for at least one year or until any discrimination charges are resolved.

How to Store Job Applications Properly

Typically, the Human Resources department is responsible for organizing and storing job applications and related documents. Only your company’s Human Resources staff and hiring managers should have access to the files. The paperwork should be kept in a locked filing cabinet or other secure location or in an offsite record storage facility. Once the federal requirements for keeping the applications ends, shred the documents or send them to a confidential recycler off-site.

Protect yourself and your small business when you store job applications properly. A little effort and organization can protect you from costly lawsuits that stem from stolen personal information. Proper storage also ensures you are compliant with federal employment laws and have access to information if you’re sued for discrimination.

An employee code of conduct contract tells employees what you expect from them. While it doesn’t have to be elaborate or long, it is important for large and small businesses.

What is a Code of Conduct?

In your company’s code of conduct, you’ll list the expectations you have for employees. This document is different than a code of ethics, but it might include some of the same details. Your employees will be required to sign the contract before they can begin working for you. The contract then becomes a legal document and remains in the employee’s file.

What is the Purpose of the Code of Conduct?

Every employee is unique with different values and ways of doing business. Your code of conduct ensures everyone in your organization is on the same page, and it helps to unify everyone in supporting your company’s brand and reputation.

The code of conduct can also reduce your liability. If an employee signs the document and then breaks one of the rules, you can pursue disciplinary action because he or she agreed to behave in a certain way and then did not.

What Information is Included in a Code of Conduct?

Your code of conduct will include a variety of information. For example, you may wish to prohibit your employees from engaging in certain behaviors, including illegal activities, discrimination, harassment, drinking, smoking or foul language. The contract could also include:

• Confidentiality expectations
• Proper procedures for emergencies
• Attendance policy
• Dress code
• Proper way to interact with coworkers, customers and vendors
• Grievance policy for handling disagreements among coworkers
• Non-disclosure and confidentiality requirements
• Conflict of interests

When writing your code of conduct, make sure it’s written in clear language to reduce confusion and ensure everyone can understand it. You may also include a blanket statement. It directs employees to see the employee handbook for additional rules. The handbook can then include further details about the information in the code of conduct.

Is the Code of Conduct a Legal Tool?

Signed employee codes of conduct are considered legal documents, so you can use them to justify disciplinary or legal actions against an employee who break the contract. However, be sure to hire an employment attorney or qualified human resources professional to review the code of conduct contract first. It cannot violate federal or state employment laws, and it must not contradict your code of ethics or employee handbook.

Your company’s code of conduct is an important document. If you don’t already have one, prepare one today.

Safety in the workplace starts with preparation. Your employees need to know what to do if a fire, chemical spill, natural disaster, civil disturbance or other emergency occurs. Federal guidelines from the Occupational Safety and Health Administration (OSHA) tell you which workplace safety drills to perform as you prepare everyone in your company for emergencies.

Create an Emergency Plan

OSHA guidelines require many companies to create an emergency plan. It’s also a good idea for companies that are exempt because it keeps employees safe and can prevent confusion and property damage. The plan includes escape routes and assigns employees to manage escape routes. It also includes procedures for shutting down equipment, counting employees after an emergency, providing medical care and reporting emergencies to the appropriate authorities.

Assign a Safety Coordinator

Someone in your company should serve as the safety coordinator. This person answers questions about the emergency plan, organizes required safety paperwork and overseas the drills.

Sounds the Alarms

Choose emergency alarms with a distinctive sound so that all your employees can recognize them. Hang them in locations throughout your building so that all employees can hear them. Hook up an auxiliary power source, too, to ensure the alarms sound even if the power goes out. When you perform safety drills, use the alarm to signal the drill’s start.

Mark the Evacuation Routes

Evacuation routes allow employees to exit the building when an emergency arises. Based on your building’s layout, choose several routes that allow quick and easy access to the outside. Emergency routes must also be wide enough for your employees to exit the building safely and kept clear and free from debris and clutter at all times. Post drawings of the routes in prominent locations around the building, and clearly mark the routes with bright, fluorescent paint or stickers.

Perform Regular Safety Drills

Creating a safety plan isn’t enough if your employees don’t know how to handle an emergency. At least twice a month, perform safety drills. The local fire and police departments should be present to share any tips on how you can improve the drills. Afterwards, meet to discuss improvements.

Also, if you change the emergency plan in any way, schedule a meeting. Ensure everyone knows and understands the new plan.

Safety comes first in any work environment. Begin today to prepare safety precautions and drills for all departments of your company. Then follow federal guidelines and practice until your employees evacuate the building properly and know exactly what to do. Your preparations could save lives, so don’t skimp on any of the details.

Doing business online is fairly common for most businesses. However, you do face Internet safety risks whether you email customers, take credit cards over the phone or use an online payroll company. Learn how your business can reduce your risks and use the Internet safely.

Wireless Internet

Anyone can access the information you send over an unsecured wireless Internet connection. Change your connection to secure or private immediately. When you do connect to a network, make sure it’s password-protected and encrypted especially when you send, receive or download sensitive, confidential or financial data. You can also use routers with Wireless-N security for better protection. In cases when you do need to use a public wireless network, don’t send or receive sensitive data. Set your laptop to ask permission before connecting to an open wireless network or save those transfers for when you’re back on your secure network in the office.

Passwords

Common passwords are easy to hack. Instead, use a mix of random capital and lowercase letters, numbers and characters, and be sure each account you use has a different password. Change your passwords at least once a month, too, and encourage coworkers to do the same when you put the task on the company calendar. Remember not to share passwords with anyone as you keep them safe.

Links and Attachments

When sending or receiving links and attachments via email, you also risk sending and receiving viruses. Check the sender’s email address and the file name before you open any attachment. Avoid opening anything that looks or seems fishy.

Website Security

Your business probably uses several websites to manage customer accounts or banking details. Be sure each website is secure before you use it. Look for the lock icon in the URL box whenever you use a website to manage business data.

Software Updates

Software developers and operating system manufacturers constantly make improvement to their products. Check regularly for updates on all the software you install. Security patches and other fixes keep your computer safer and ensure your software is operating properly. Choose automatic update or manually update your desktops and laptops at least once a week. Be sure to restart your computers to complete the changes, as well.