Ready or not… here it comes! The new lease accounting guidance will be effective before we know it. ASU 2016-02, Leases (Topic 842) will result in some pretty dramatic changes to the balance sheet for companies that lease assets. Public companies with calendar year ends have to adopt the new standard on January 1, 2019, while private companies get a bit of a reprieve—they need to be ready to adopt the new standard on January 1, 2020.
So what’s it all about? The new rule will have lessees moving right-of-use assets and associated obligations out of the footnotes and onto their balance sheets. Some companies will end up looking more leveraged than they did under historical GAAP. And, during the process of implementing the new rule, everyone will gain a better understanding of the many lease agreements throughout an organization.
It won’t happen overnight. Those deadlines seemed so far off when the Financial Accounting Standards Board (FASB) adopted the new standard two whole years ago, but we’re now at the point that companies need to look at their leasing agreements (you may be surprised at what you find!), figure out any changes they need to make to current practices and systems, and think about the potential impacts.
All this needs to happen while the FASB is still making tweaks to the guidance. This past January, the board released a proposal that could tack on two new practical expedients:
- Companies wouldn’t have to provide comparative financial statements: The original guidance would require lessees, beginning at the earliest period presented in financial statements, to recognize and measure leases using a modified retrospective approach. For example, if you are adopting the new standard on January 1, 2019, you would have to measure and recognize leases as of January 1, 2017. But the new proposed option would let companies apply the new guidance at the effective date without having to adjust for their prior periods that are presented comparatively. So, for our example, you wouldn’t have to measure and recognize leases that expired before January 1, 2019.
- Lessors would get a new break. The current guidance allows lessees (but not lessors) to separate the lease and nonlease components and account for the entire agreement as a lease. Lessors oftentimes provide services other than just the lease—for example, maintenance services in an equipment lease. The second practical expedient proposed by the FASB would allow lessors to also not separate lease and nonlease components.
Both of these proposed changes would provide some simplification and ease the transition a bit (every little bit helps!). The deadline for comments was February 5, so hopefully we hear something soon.
Getting ready for new way of lease accounting
For those of you still trying to wrap your head around where to begin with the new rule, I recommend checking out What CFOs Need to Know About the New Leasing Standard, an excellent blog post written by my colleague Diana Gilbert, who heads RoseRyan’s Technical Accounting Group.
For those of you who have already sifted through the almost-500 pages of the new standard and think you have your arms around what you need to do, here are a few challenges that you might not expect:
You may have a lot of data digging to do: Finding and aggregating all of your company’s executed and signed agreements can be a daunting task. Most companies don’t have a system in place for keeping track of them, and some of your departments may have been pretty casual about documenting the deals they’ve made.
Then, once you do go through the process of getting a list together, you need to figure out whether each agreement contains a lease. This determination could be very easy, but other times, the answer may not be straightforward—is it a lease or purely an agreement for buying or selling goods or services?
You’ll also need to build in time for any international agreements. You may need to translate them into English so that you can understand all the terms! Clearly, depending on your company, there’s a lot to tackle here, and it can’t wait until the last minute.
The finance team may understand the new standard but does anyone else? The new standard can be tricky, even for accountants who have read every sentence of the guidance. We may know the details and are considering how things need to change, but those around us might not be thinking about it without our input. Don’t underestimate the learning curve. For instance, it may fall to the finance team to educate the facilities or operations groups on how to structure future deals.
Don’t forget about your auditors. You may have all the best of intentions and be doing everything right to put the new standard in place, but you’ll still need to show your work. Be aware that your auditors will focus on the implementation of the standard and will scrutinize the details—much more than they focused on the prior footnote disclosures.
January 1, 2019 is coming—there’s no putting it off now! Now is the time to ask questions and make your way through all of the agreements. Accounting expertise from seasoned pros who are already knee-deep in this standard and on top of the latest changes can help get you over the finish line. You’re so close.
Clarissa Enany, a member of our Technical Accounting Group, has held a variety of finance roles, including External/SEC Reporting Manager, Accounting Manager, Controller, and Technical Accounting Manager at companies like Symantec, Affymax and NovaBay Pharmaceuticals. She also worked at DocuSign, where she managed the month-end close process, accounts payable and payroll.
Looking for more tips on technical accounting? Join Diana Gilbert for an upcoming webinar, “Lessons learned from revenue recognition implementations,” on March 22, from 10-11:30 a.m. PST. Diana will unlock the many mysteries of revenue recognition implementations so you can streamline yours. For more information and to register, go to: bitly.com/revreclessons.
25 Reasons to Celebrate 25 Great Years
As finance aces, we naturally love numbers. We’re turning 25 this week, so thought we’d share 25 things that make RoseRyan special. It’s been quite an incredible journey since CEO Kathy Ryan started our consulting firm in 1993 with colleague Sue Macias. And now, with more than 800 clients under our belt, and close to 100 consultants, we’re celebrating this amazing milestone.
25 reasons we love RoseRyan:
Check out our photo gallery for our 25 year celebration to see how we roll.
Sound like your kind of place? We’re always on the lookout for talent—full-time and part-time positions are available. So, if you like what we’re about—and you have the right stuff—contact Michelle Hickam or call her at 510.456.3056 x134.
Why Private Equity Firms Need an Ace Team to Carry Out a Complex Transition Services Agreement
Here’s a common issue facing private equity firms today: How do you keep a newly divested business running and ready to become a part of something bigger than itself or stand on its own? This is not something that can happen overnight if the business was deeply entrenched in its old home and lacking its own administrative capabilities. Private equity firms find they need an expert team to handle the transitional time, to take the divestiture over the goal line.
Typically, depending on the size of an M&A deal, companies negotiate such details in a Transition Services Agreement (TSA). The TSA outlines what services the seller will be responsible for as the buyer gets ready to make it a part of its business (it may be absorbed by a PE firm’s portfolio company, for example, or become a standalone entity). Areas addressed in the TSA may include such services as finance, human services, legal, tax, IT and facilities. Everything in the TSA can affect whether the transition will be a smooth one and whether the deal will be successful.
The problem is who can fulfill those services? Oftentimes, neither the buyer or seller has the capabilities or capacity to do what needs to get done in the interim.
How a Symantec divestiture was streamlined
PE firms often lack the bandwidth and resources to immediately provide centralized administrative services for each company they acquire or are in the process of selling. What’s needed is a deeply experienced, multifunctional team of operational experts who can help out in the meantime, by focusing solely on meeting the needs of the TSA and bringing it to a successful conclusion. They fill a critical gap until a divested business unit can stand on its own or be fully integrated.
This was the dilemma facing software giant Symantec when it was in the process of selling its VeriSign business to a private equity–backed company, DigiCert. VeriSign had disparate systems and had never been segregated. Its global revenue was 400% of the acquiring company’s revenue.
Neither side had the resources to segregate the accounting records and processes. RoseRyan was brought in to provide transitional leadership, accounting, finance and operational support, to address the needs of the divested company for up to 18 months. We quickly organized a high-performance, specialized team of 13 finance pros dedicated to this important endeavor, which included:
TSA support: A rising need and how to get it
We expect a pressing need for transitional leadership and support as divestitures are projected to rise. In a recent E&Y study, 87% of global companies surveyed said they plan to divest over the next two years. For the same study in 2017, just 43% of companies said they were looking at making a divestiture over a two-year horizon.
Companies going through such a major strategic shift put the value of their deals at risk if they don’t know all the capabilities and processes required to keep the businesses running. Sometimes a seller may decide to fulfill the TSA requirements with the help of their employees, but they often find this setup isn’t ideal. It leads to overworked employees doing duplicate work, and it can create confidentiality and control issues around the data they’re segregating.
The better approach is engaging a third-party team that’s committed to the TSA (and not distracted by other priorities presented by the buyer or seller). Here’s why:
It’s best to look for a multifunctional team that has both strong operational and financial experience, and broad technical skills. Seasoned finance pros who can jump in when challenges arise because they’ve seen it all and done it all before will help the companies involved transition successfully and realize value quickly.
David Roberson is a vice president at RoseRyan, leading our cannabis business, heading up large-scale client engagements, and expanding our consulting firm’s presence in the private equity space. Formerly the CEO at Hitachi Data Systems, Dave led the complex TSA project last year that helped get the Symantec/Digicert divestiture over the finish line. In addition to holding a variety of senior level roles at Hitachi, Dave previously served as a senior vice president for Hewlett-Packard. He has also served as a director of 12 companies.
For more information about RoseRyan’s Transition Solutions, reach out to Chris Vane at [email protected] or 510.456.3056 x169.
The Key Factors of Staying Power Revealed: What Makes for a “Top Workplace”
For four years straight, RoseRyan has been recognized as a Top Workplace by the Bay Area News Group. This is a wonderful honor as it’s based on an independently run survey of our employees’ views and opinions—and it’s especially gratifying during our 25th anniversary year.
This milestone got me thinking about what it takes for a business to have staying power to endure the many ups and downs over time—and especially here in the competitive and extraordinarily fast-paced world of Silicon Valley. What’s important for real staying power?
First, the drive to keep innovating and evolving as the business gets more complex and the market changes is a big factor. Second, you need to deeply focus on meeting, or exceeding, the needs of your clients. Underlying all of it is the team you form that propels your company forward. Our consultants get a chance to be stimulated by the variety of challenges, projects and situations that our clients face.
Having an engaged, strong and supportive workforce means everything. Our employees’ votes of confidence in our firm affirm we have strong organizational health, earning us a spot in the Top 100 Workplaces list. I believe our firm’s staying power has a lot to do with these qualities:
A positive culture: We’re aligned along a common set of purpose and values, whether we’re working together or out on our own helping a client. Employees gave us high marks for the positive vibe they get at RoseRyan and the teamwork that makes working together seamless.
We’re connected: The firm also scored highly when employees were asked if they feel well-informed about important decisions. They said they’re a part of something meaningful. We’re all working toward the same goal—to provide great finance to fast-moving companies. We always have each other backs even when we’re working independently (getting a second opinion on an accounting decision is easy when you can reach out to a team of experts at anytime).
We’re effective: Employees say the firm is doing things “efficiently and well” and that we’re going in the right direction. Plus, they feel empowered to speak up about where the company is going. Bring on the new ideas—they’re encouraged within our firm as well as when our consultants are helping clients improve their financial operations.
Twenty-five years ago, RoseRyan began with the concept of gathering talented finance and accounting experts who crave engaging, challenging work while still having a life. We’ve set ourselves up in such a way that we can offer consultants choices based on their preferences and lifestyle (we have remote, part-time and full-time positions).
Making all this possible are the Silicon Valley companies that need excellent finance to keep them on track. They keep coming to us with fascinating assignments and an array of job experiences. Every client and every situation is different, so our consultants are always expanding their skills and are keyed up to report to work every day.
Being surrounded by a talented, growing team makes our jobs even more fulfilling. We have a fabulous dream team of finance and accounting consultants who give it their all in everything they do. I’m incredibly thankful for their hard work and dedication.
The positive vibe we’ve created, with a highly collaborative workforce that helps and supports each other, adds to the gratification we feel at work. Our strong foundational backbone, built out of a clearly defined culture and a common set of values, has been a major factor in our staying power in Silicon Valley.
Does RoseRyan sound like your kind of place? Learn more about the our culture, see our job listings, and reach out to Michelle Hickam, our talent-hunting expert, if you think you’d be a good fit.
Kathy Ryan guides the ship of RoseRyan as CEO and CFO. Since founding the firm 25 years ago, she has worked with hundreds of Bay Area life sciences and technology companies in CFO and other advisory roles. Her leadership has been widely recognized, from the San Francisco Business Times naming her an influential woman in Bay Area business and the San Jose/Silicon Valley Business Journal naming her one of the most influential women in Silicon Valley. Kathy also made Accounting Today’s national listing of the sector’s top 10 leaders, known as the Managing Partner Elite.
Implementing the new revenue recognition standard—5 lessons learned from the front lines
“Overwhelming” is an understatement when talking about implementing the new revenue recognition standard. A huge amount of effort is needed, as the public companies that first adopted the new rules quickly discovered—many were caught off guard with the work involved.
Their experience is your gain: Privately held companies now preparing to implement the standard could set themselves up for a smoother experience. Take advantage of lessons learned from the initial implementations. What tripped up companies as they went along? What slowed them down from making progress?
Based on our experience helping companies get through it, we have five big takeaways to share:
Companies now preparing to comply with the new standard are at an advantage over those that adopted earlier. Checklists and models for recognition and allocation have been developed for their benefit, and finance and accounting aces who have worked closely with companies to implement the new rules can guide you forward, with best practices and insights into how the business will be impacted.
Learn more about putting the new standard into action by downloading our report “Getting Real on Revenue Recognition.”
Diana Gilbert, who heads up RoseRyan’s Technical Accounting Group, has deep corporate and operational finance experience focusing on technical accounting, revenue recognition, process improvement and financial systems, SEC reporting and SOX compliance. Prior to RoseRyan, she held controller roles at a number of companies and was a senior manager at KPMG.
Getting ready for your first audit: what every small business should know
We can see the sweat from here. Your small business is up for its first-ever audit, and you’re concerned about how long the process will take, keeping cost down, and—above all—getting a clean opinion.
It’s natural to be concerned. We have helped many companies—from small businesses to going-public and already public companies—set up for the scrutiny of auditors. And while the workload involved varies from company to company, the main takeaway for a smooth first audit is always the same: it helps to be prepared. Just as you wouldn’t want an auditor to come by uninvited and without warning, you wouldn’t want to jump into the audit process in haste.
You may be anxious to start the audit process because of a pressing timeline—such as your need for financing and a lender that wants to see what the auditors have to say—but the effort will be prolonged if you’re not fully ready for the scrutiny. If you get stuck along the way and the audit gets derailed with delays, you’ve lost that much more time.
We suggest that, when setting out your plan, rather than viewing the audit itself as one big, overwhelming event, break it down into three steps:
1. Look inward.
Here’s where the streamlining of the audit process really begins. Some internal examination in these areas is required:
Many fast-moving companies let their books fall into disarray while their priorities were on other matters—such as advancing the business, developing their products and landing sales. With some expert help, you can still focus on those areas while giving attention to this important part of the business. You’ll find out your trouble spots and pick up ways to get organized and operate more efficiently.
2. Get your act together.
A small business in the tech industry turned to us when they needed an audit to satisfy the terms of their bank loan and keep preferred shareholders happy. With business booming, they lacked the internal resources for cleaning up their documentation, finding missing pieces and going through several years worth(!) of reconciliation.
In such messy situations, a pre-audit review specialist can notice the missing gaps, which can minimize the questions raised by the auditors. They’ll do it with a top-to-bottom analysis of the company’s accounting methods and practices. And they’ll not just note problems but make recommendations for getting through them. The analysis will cover such things as revenue, cost of sales, expenses, liabilities, equity and more.
For the tech client with the books in a jumble, our specialists had to tackle complex inventory questions, address various technical accounting issues and prepare audit schedules. They needed audits that covered four business years all at once.
3. Invite the auditors in.
Give your auditors a preview. Let them know how your business works and clue them in on what to expect when they visit. Surprises are the enemy. Just as you’ve prepared everything to avoid sudden surprises until now, set the stage for what they can expect. At this point you’ll want to designate a point person for the auditors to communicate with and help the team track down any information that arises.
How long can all this take? First-time audits can take as long as eight weeks. It depends on whether you have unresolved accounting issues by the time the auditors arrive.
No matter whether it’s your first time before the auditors or your zillionth, preparation is key. To make sure you’ve done everything properly, that you have the right documentation and that you’re ready to roll, seek out accounting experts who understand the needs of small businesses.
Learn how to prep for your audit—and ace it—with Audit Time? Don’t Sweat It, a RoseRyan intelligence report of tips for conquering audit prep mountains.
As a RoseRyan consultant, Michelle Hall loves to help startups with getting their finances in order, meeting their compliance requirements, budgeting and forecasting, and more. Earlier in her career, she held roles at Netflix, Mercury Interactive, American Express and other firms.
The latest on leasing: Power through the new accounting standard’s implementation
Ready or not… here it comes! The new lease accounting guidance will be effective before we know it. ASU 2016-02, Leases (Topic 842) will result in some pretty dramatic changes to the balance sheet for companies that lease assets. Public companies with calendar year ends have to adopt the new standard on January 1, 2019, while private companies get a bit of a reprieve—they need to be ready to adopt the new standard on January 1, 2020.
So what’s it all about? The new rule will have lessees moving right-of-use assets and associated obligations out of the footnotes and onto their balance sheets. Some companies will end up looking more leveraged than they did under historical GAAP. And, during the process of implementing the new rule, everyone will gain a better understanding of the many lease agreements throughout an organization.
It won’t happen overnight. Those deadlines seemed so far off when the Financial Accounting Standards Board (FASB) adopted the new standard two whole years ago, but we’re now at the point that companies need to look at their leasing agreements (you may be surprised at what you find!), figure out any changes they need to make to current practices and systems, and think about the potential impacts.
All this needs to happen while the FASB is still making tweaks to the guidance. This past January, the board released a proposal that could tack on two new practical expedients:
Both of these proposed changes would provide some simplification and ease the transition a bit (every little bit helps!). The deadline for comments was February 5, so hopefully we hear something soon.
Getting ready for new way of lease accounting
For those of you still trying to wrap your head around where to begin with the new rule, I recommend checking out What CFOs Need to Know About the New Leasing Standard, an excellent blog post written by my colleague Diana Gilbert, who heads RoseRyan’s Technical Accounting Group.
For those of you who have already sifted through the almost-500 pages of the new standard and think you have your arms around what you need to do, here are a few challenges that you might not expect:
You may have a lot of data digging to do: Finding and aggregating all of your company’s executed and signed agreements can be a daunting task. Most companies don’t have a system in place for keeping track of them, and some of your departments may have been pretty casual about documenting the deals they’ve made.
Then, once you do go through the process of getting a list together, you need to figure out whether each agreement contains a lease. This determination could be very easy, but other times, the answer may not be straightforward—is it a lease or purely an agreement for buying or selling goods or services?
You’ll also need to build in time for any international agreements. You may need to translate them into English so that you can understand all the terms! Clearly, depending on your company, there’s a lot to tackle here, and it can’t wait until the last minute.
The finance team may understand the new standard but does anyone else? The new standard can be tricky, even for accountants who have read every sentence of the guidance. We may know the details and are considering how things need to change, but those around us might not be thinking about it without our input. Don’t underestimate the learning curve. For instance, it may fall to the finance team to educate the facilities or operations groups on how to structure future deals.
Don’t forget about your auditors. You may have all the best of intentions and be doing everything right to put the new standard in place, but you’ll still need to show your work. Be aware that your auditors will focus on the implementation of the standard and will scrutinize the details—much more than they focused on the prior footnote disclosures.
January 1, 2019 is coming—there’s no putting it off now! Now is the time to ask questions and make your way through all of the agreements. Accounting expertise from seasoned pros who are already knee-deep in this standard and on top of the latest changes can help get you over the finish line. You’re so close.
Clarissa Enany, a member of our Technical Accounting Group, has held a variety of finance roles, including External/SEC Reporting Manager, Accounting Manager, Controller, and Technical Accounting Manager at companies like Symantec, Affymax and NovaBay Pharmaceuticals. She also worked at DocuSign, where she managed the month-end close process, accounts payable and payroll.
Looking for more tips on technical accounting? Join Diana Gilbert for an upcoming webinar, “Lessons learned from revenue recognition implementations,” on March 22, from 10-11:30 a.m. PST. Diana will unlock the many mysteries of revenue recognition implementations so you can streamline yours. For more information and to register, go to: bitly.com/revreclessons.
Check out a few of our new finance and accounting pros who have joined our dream team
Great finance requires great talent. We’re delighted to introduce eight finance pros who are joining our dream team to keep the finance operations in order through small business launches, galloping growth, explosive IPO and M&A restructuring, corporate governance and more…
In this fast-paced world, you need just the right finance solution at just the right time. And these folks have that magical combination of both technical and soft skills to help San Francisco and Silicon Valley companies take it to the next stage.
Here’s a quick introduction to some new members of the RoseRyan dream team:
Diego Aragon
Diego returns to RoseRyan from Percolata, where he was the CFO. He’s worked at both private and public companies, digging into planning, modeling, budgeting, restructuring, M&A and operational accounting.
Mary Castellucci
Mary has held finance roles at Cisco Systems, HP, Akamai Technologies and AppDynamics. Her strengths include financial modeling, planning and forecasting, revenue recognition, general accounting and process improvement.
Sara Chamberlin
Sara is all about the needs of small business. Her areas of experience include business analytics, accounting and auditing services, financial planning and analysis, and budgeting.
Joe Kontur
Joe spent 15 years with Panasonic, where he held roles in finance, engineering, IT and operations. He’s also worked with semiconductor and software companies. And he’s got a great blend of project management, FP&A, business and finance operations experience.
Irene O’Keefe
Irene loves working with our small business clients, and she’s off and running with office management, business analytics, accounting services and payroll.
Beth Schwartzmiller
Beth is another small businesses maverick who will handle accounting, office management, payroll and business analytics for a variety of clients.
Su Hooi Thang
Su Hooi joins our Corporate Governance team and has previously worked for Intel, Altera and Motorola in her career. She’s great at financial audits, SOX compliance and operations.
Steven Vattuone
Most recently the CFO at Electric Cloud, Steven has held a variety of senior finance leader positions, and he was also an audit manager at PwC. He excels at budgeting and planning, financial modeling, public companies and accounting operations.
We love to propel companies on to the next stage of growth with the right finance solutions. Do you know a finance ace who should be part of our incredibly sharp finance dream team? Like what you see about our dynamic and super-friendly culture? Thanks for referring great candidates our way, by reaching out to our talent expert Michelle Hickam at [email protected].
Technical accounting pros who love the tough stuff join the dream team
Tough-to-find talent has found their way to RoseRyan. Three accounting whizzes join our Technical Accounting Group (TAG), deepening our bench strength to handle the tricky transactions and evolving accounting matters affecting fast-moving companies.
It’s an especially busy time as companies need specialized expertise to make sense of the new revenue recognition rules, the new lease accounting standard, plus thorny financing issues and evolving SEC reporting requirements.
“I’m so excited to add three people to our already robust brain trust of technical accounting experts,” says Diana Gilbert, who heads the Technical Accounting Group at RoseRyan. “Companies don’t often have the in-house skills to take on complex accounting challenges on their own. Or they need to check in with experts who are in the field and are in the know about the latest accounting interpretations and best practices. We’re adding to the resources they can tap with these new members of the TAG team.”
The expanded Technical Accounting Group includes two accounting aces who are new to RoseRyan as well as one alum who has boomeranged back. We’re thrilled to have their accounting expertise on board!
Kelley Wall
Returning to the TAG team, Kelley was most recently the Director of Corporate Finance at Trimble and has deep experience including as a senior manager with PwC’s National Office. Kelley’s specialty areas include technical accounting, M&A, and SEC reporting.
Joan Paik
This KPMG and Yahoo alum’s specialty areas include stock-based compensation, SEC reporting and technical accounting.
Min Xiao
A former partner at PwC, Min’s specialties include SEC filings and technical accounting, financings, organizational transactions and revenue.
Got a technical accounting challenge or a tough transaction on the horizon? RoseRyan’s Technical Accounting Group helps companies at all stages. Learn more about our technical accounting solutions.
Please consider joining Diana Gilbert for an upcoming webinar, “Lessons learned from revenue recognition implementations,” on March 22, from 10-11:30 a.m. PST. Diana will unlock the many mysteries of revenue recognition implementations so you can streamline yours. For more information and to register, go to: bitly.com/revreclessons.
Small businesses targeted by phishing scams are more likely to get bitten
But here’s the thing: Everyone seems to think they wouldn’t fall for a phishing email—a fraudulent message that seems reputable on the surface. We work with many small businesses that figure they’re an unlikely target, when hackers could go after bigger businesses with bigger bank accounts.
The fact is, though, small businesses are prime targets for phishing scams. Here’s why: They have smaller staffs and their processes tend to be less formal than that of larger companies. This increases the odds that an employee of a small business inadvertently responds to an email con in haste. And, in a sense, small businesses have more to lose—they cannot easily absorb mistakes that affect their bank accounts.
To minimize the risk, small businesses need to be vigilant and aware of what’s going on—and keep their employees educated about what to look out for and how to react. In particular, they need to implement internal controls to avoid falling prey to phishing schemes.
In the phishing crosshairs
Phishing through mass emails isn’t new, but incidents of “spear phishing”—carefully crafted messages sent to an individual or business—are rising. In 2016, spear-phishing scams went after more than 400 businesses every day, according to a recent report from Symantec (a RoseRyan client). And small businesses were a key target: 1 in 2,897 emails received by companies with fewer than 250 employees was a phishing attempt, the report said.
Effective phishing emails look like others you might receive in your inbox. They appear to come from someone you trust—your favorite ecommerce retailer, your accounting software provider, your bank or the head of the company.
Last February, for example, payroll and HR departments received emails asking for W-2 information. The emails read like internal requests from a senior executive but were actually sent by outside scammers. Unfortunately, some companies fell for it and unwittingly sent out sensitive information about their employees—and also wired out thousands of dollars. “This is one of the most dangerous email phishing scams we’ve seen in a long time.” IRS Commissioner John Koskinen said.
How to avoid taking the bait
Be sure phishing emails remain a nuisance rather than a nightmare by putting processes in place that prevent employees from falling for them. We recommend keeping in mind these 3Cs for curbing cybersecurity risks: cyber awareness, controls and culture.
Cyber awareness: Without a dedicated IT department, small companies have to take it upon themselves to keep informed about the latest threats. Reach out to trusted advisers who can keep you apprised of cybersecurity trends and scams. They can provide guidance on new tools, such as password managers and anti-phishing software, that can help minimize the risk. And such experts can provide best practices, alerts and updates for protecting the company.
Also regularly remind employees to use caution with emails, when visiting websites and interacting on social media. It’s better to pause and question a message—and verify its request through other means (like a phone call), than to hand over the keys to the castle (such as a password typed into a fake website).
Controls: Internal controls help protect companies and the employees who oversee the finances and sensitive information. Proper processes can guide employees when it’s time to share data—you can put restrictions over who exactly gets access to certain types of information and who needs to sign off on transfers of a certain amount, for example.
What protocols exist, if any, around how employees access company files on their mobile devices, and how are those devices protected if they get left behind? Do they have two-factor authentication enabled on all accounts they access at work? Should you limit the use of USBs? Should you set up rules around who and how certain information (like W-2 data) is shared? Would it make sense to limit what sites employees access while at work (social media can be privy to phishing scams)?
A focus on controls goes beyond the inside walls of the company. Reach out for assurance from any service providers you use that they have proper controls as well—and will keep your information, including those of your clients’ and employees’, safe. Always know how third parties will use and protect your data.
Culture: When a company is made up of employees who communicate often and freely, they also feel comfortable questioning each other if, say, an email—even from the CEO—doesn’t seem quite right.
Companies that think they’re too small to be a target of phishing scams are off the mark. Businesses of all sizes need to be cautious of the risks, across all areas of the organization. Outside experts who understand small business can help you stay on top of the risks and build a fortress for keeping the company as protected as possible.
Diana Sayre has a soft spot for small businesses in Silicon Valley. Her strengths include operational accounting, budgeting, financial statements, audits and back office support. Previous clients she’s worked for include Box.com, Ceterix and Hydronovation.
Year-end checklist for finance teams—10 ways to end the year right
The exciting month of December offers a paradox to finance teams. They’re in retrospective mode while also planning for the year ahead. And they’re super busy while hoping to use up any leftover vacation days before the year ends.
Our finance dream team powers through it with some smart planning, to-do lists and the occasional eggnog. Here are a few of the items that finance leaders need to check off this time of year:
Get going on analyzing what you have: Are you set up for impairment analysis? If you haven’t yet identified indicators that could affect your asset valuation, you’re entering the no-excuses zone.
Reflect on your company’s viability: This is also the time you should be ready to assess—and record—your company’s ability to continue as a going concern.
Check in on your vendors: By now you should have access to SOC 1 reports from your third-party providers. Be sure to review what they say about their financial-related controls to consider any adverse impact on your internal controls.
See where you are with recognizing revenue: With all the attention and focus going toward adopting ASC 606, a review of current-year revenue transactions may be overdue. Don’t forget to make sure you’ve kept up to date with documentation around large and unusual transactions over the past year.
Review your progress: As for the new revenue recognition standard, by now you should have well-documented implementation plans, robust testing of systems changes, and a process and information for dual-reporting disclosures. This information is not only required in 10-Ks, but auditors will be really interested to see what companies have to say here. In an alert in October, the Public Company Accounting Oversight Board specifically told auditors to look carefully at what management reports in disclosures and footnotes around their implementation efforts. (This will likely still be an area of focus for the PCAOB even as it transitions to a new board and chairman in 2018.)
Look carefully at stock-based comp: Take a microscope to your equity records. This is about the time when accounting teams tend to get wind of option modifications made without their input. You should also look out for data-entry mistakes (they’re more common than you think!) and any missing paperwork.
Remember your auditors: Any preparation you can do for the upcoming audit will save time and stress later. At this point, you could request the client assistance schedule and start thinking about how you will gather the necessary documents when the time comes. If it’s your company’s very first audit or your first time with a particular firm, you may need to set aside time for educating the auditors about your business.
Reconcile for real: Maybe you’ve been naughty all year by letting reconciliations lag and now’s the time to catch up. Or perhaps you’ve been nice and it’s time to tidy up by reviewing current reconciliations to resolve any issues by the 31st.
Check in on budgets: If you take a “use it or lose it” approach to budgets, some leaders in the company may be buzzing about how they’re going to use theirs up. Reach out with reminders that expense reports need to be submitted on time, and consider whether some teams could carry over their unused budget for more careful spending next year. You don’t want any rash purchases in the waning weeks of 2017.
Know when you need help: This busy time can reveal cracks in the system. Projects that stretch the abilities of staff—or burn them out—often result in errors and missed deadlines. Folding in specialized expertise to take on a one-time transaction (like preparing for the audit) or to help the team get through a busy time is a smart way of efficiently filling a gap and starting the new year off right.
Make your way through this list, and you’ll finish the year on the right foot!