What are your options when you have outgrown Xero? Consider JCurve (Australia)

Margaret Varey for the Cloud Accounting Buzz writes:  What are the options for a small business wanting to use cloud accounting software when the business has outgrown current entry-level software such as Xero or QuickBooks Online (QBO)? There are a couple of reasons why the entry-level software may no longer be suitable: firstly its business model may have become more sophisticated and new requirements can only be addressed using add-on software, or the transaction volumes are too great (Xero also has a limit of approximately 1,000 and 1,000 banking transactions per month and around 5,000 contacts although QBO maintains that it can support any number of transactions with no adverse performance.)

One solution that has the potential to address both of these issues is the simplified version of NetSuite provided by Australian-partner JCurve. Although NetSuite has been around for some time, the JCurve solution is reasonably new and is promoted as the entry-level solution into an ERP solution, or more specifically entry level into the full blown Netsuite ERP software. The JCurve solution has the advantage that it is fully scaleable so businesses that subsequently outgrow JCurve can move seamlessly to the full NetSuite solution. NetSuite is an all-in-one ERP Cloud software solution since as well as standard accounting functionality it supports full CRM, E-Commerce, Advanced Inventory, POS etc – virtually eliminating the need for add-ons. So this solution has potential to support both business growth and the need for more comprehensive functionality.

I signed up for the 45-day free trial to road test the JCurve version of the software and to evaluate it as a solution for the small businesses that are pushing the boundaries of Xero or QBO. Unfortunately I dithered around a little over the Christmas period and wasted a good many of those 45 days and also encountered the 85 transaction limit in the trial version which impacted my testing but I got there with a bit of creativity. In the comments below I have also indicated where there is a comparison with Xero or QBO.

It did take me a while to become comfortable with finding my way around the software but probably no more so than any other product. The Dashboard was virtually infinitely customisable with just about every imaginable widget available which was good. I also liked the customisable task bar at the top where I could place shortcuts to frequently used functions for speedy access.

A comprehensive set up wizard steps you through the initial set up which is helpful as it can be a little complex but the initial set up is always the most complicated part of any new software implementation. After that it was reasonably plain sailing. The options in the initial set up enabled me to quickly realise that JCurve was seriously ERP which I think will be appreciated by many businesses. It also had some basic functionality such as Default Payment Terms and Credit Limits that I have sorely missed in Xero. (QBO has Default Payment Terms.)

JCurve does have the ability to import csv files for customers, suppliers, items and chart of accounts but the apparent lack of a sample file to structure the import meant I went through a few attempts before successfully importing. I did later discover the default templates in the Help section but they were only available for Customers, Suppliers and Items not the Chart of Accounts – DIY novices beware!

As I delved deeper, I found much to be pleased about as there was a lot of functionality that is frequently missing or limited in entry level software:

• There is a choice of FIFO or Average Cost at the Item level in Inventory – at this stage I don’t know what costing methodology Xero will use when its inventory module is released but QBO just has FIFO.
• There is a choice of Department, Class and Location categorisation on transactions with the option of one of each per transaction or one per line with the further option to make each Mandatory or Warning. (However I quickly found the mandatory option was realistically unworkable as it was an all or nothing and I would not normally want to classify transactions like Cash Receipts from Customer and Bank Transfers.)
• Comprehensive User Roles enabled very granular definition of user access – I find both Xero and QBO too limited.
• There is an incredibly comprehensive set of reports all of which could be customised and the format saved for future use (available in QBO)
• There is a transaction date and a posting date for each transaction – so good and sorely missed in other entry level software  (needed for example if I have completed my December accounts and receive a late supplier invoice for December, without a posting date, I need to record it as January.)
• I could click a link to see the GL postings on every transaction – this is probably something that only excites accountants but I do miss this in both Xero and QBO. I could also arrow backwards and forwards between transactions – love that. These features are both in the desktop version of Reckon Accounts (formerly QuickBooks)

Other features I also appreciated include:

• Account numbers were optional – (also in QBO)
• Sales and Purchase Orders (both in QBO), CRM, E-Commerce
• I could rename transaction types so for example a Bill can be named Supplier Invoice making the User Interface more friendly.
• On both supplier and Customer invoices – I could use either an Item or a GL account (available in Xero but not for customer invoices in QBO)
• There is a default general ledger account against a supplier – great for data entry consistency. This is partially present in QBO and Xero as they can remember previous transactions.

I did encounter some challenges and some dislikes along the way:

• Response times especially when saving transactions were poor
• Tax Codes – the naming convention was so user unfriendly it would daunt all but the most intrepid. (To think I complained about Saasu tax coding)
• Bank Feeds are only available via Yodlee, no partner banks appeared to be available
• Setting Tax Periods – mine kept being set to Calendar year not Fiscal year and I was unable to change.
• Customising the customer invoice wasn’t as flexible as I would have liked and I couldn’t resize the logo
• Make Deposits doesn’t allow for recording a tax code (same limitation in QBO) it is needed torecord the refund of workers compensation and similar events.
• Doing a look up on the chart of accounts when entering transactions such as supplier or customer invoice – firstly it didn’t display the account type and secondly it wasn’t context friendly, i.e. display income accounts for customer invoice and expense accounts for supplier invoice.
• I couldn’t set a default bank account so if I have a savings and transaction account, normally I would want to use the transaction account and set that as a default. I also couldn’t change customer receipts defaulting to Undeposited Funds.
• I couldn’t easily see how I could indicate on a supplier invoice that the amount included or excluded GST
• The layout of the customer invoice screen gave plenty of real estate to the header but very limited for the lines – compares very unfavourably to the clear layouts of both Xero and QBO.
• And the biggest disappointment – Multi Currency is only available in the Advanced (NetSuite) version. This is very much a limiting factor as most small businesses I work with need multi currency either in suppliers or customers and having to go to the full NetSuite product means there is no set up wizard etc.

I didn’t explore the Payroll module in detail, mainly because reviewing Payroll is always a very time consuming task. Suffice to say it looked as though it covered all major functionality for Australian payroll, it did have an Employee Portal which is now an industry standard.

I couldn’t find any evidence that JCurve was SBR-enabled so no automatic links into the ATO Portal. Xero has led the accounting software world in embedding links to the ATO although QBO can now do this using 3rd party software – GovReports.

The product pricing is per user based and starts at $49 per user per month (including 1 external accountant user and 5 restricted employee users). Given that this is a product you would probably only use if you had outgrown entry level cloud software, I would expect most businesses would require at least 3 standard users so it is definitely more expensive than Xero or QBO with their unlimited user plans. However given the comprehensive nature of the product, most businesses probably wouldn’t require add-on software which is where the cost of a Xero or QBO solution can multiply.

So would I recommend JCurve? I think this solution does have potential, there were quite a few things that I didn’t like and especially the response times and lack of multi currency is a concern but overall it looks to be a solid product that should support both business growth and more complex business models under the one umbrella. Hopefully future releases will address some of the usabiity issues noted bringing a dynamic all-in-one solution for growing businesses.

Bitcoin Added to Intuit’s Mint Alongside Traditional Accounts

Crayton Harrison for Bloomberg writes:  Users of personal-finance application Mint are now able to track transactions using online currency Bitcoin along with their traditional banking accounts.

Purchases using the digital-wallet service Coinbase can be imported into Mint’s ledgers, according to Intuit Inc. (INTU:US), which owns the money-management app. Mint has about 14 million users, Mountain View, California-based Intuit said in a statement.

Companies are adding Bitcoin services and accepting them as payment even as governments grapple with how to regulate the virtual currency, which was designed in 2008 to move money across the Internet. Overstock.com Inc. accepts Bitcoins for its household goods, and California’s Sacramento Kings plan to sell basketball tickets using the currency.

Bitcoin, created by a programmer or group of programmers under the name Satoshi Nakamoto, has no central issuing authority and uses a public ledger to verify encrypted transactions. Regulators and law-enforcement officials have expressed concern that virtual currencies could facilitate money laundering and sales of drugs and other illegal goods.

Ashlee Vance and Brad Stone for Bloomberg write: The Bitcoin-Mining Arms Race Heats Up:

Joel Flickinger’s two-bedroom home in the hills above Oakland, Calif., hums with custom-built computing gear. Just inside the front door, in a room anyone else might use as a den, he’s placed a desk next to a fireplace that supports a massive monitor, with cables snaking right and left toward two computers, each about the size of a case of beer. Flickinger has spent more than $20,000 on these rigs and on a slower model that runs from the basement. They operate continuously, cranking out enough heat to warm the house and racking up $400 a month in electric bills. There isn’t much by way of décor, other than handwritten inspirational Post-it notes:

“I make money easily,” one reads.

“Money flows to me.”

“I am a money magnet.”

Flickinger, 37, a software engineer and IT consultant by trade, doesn’t leave the house much these days. He’s a full-time Bitcoin miner.

Bitcoin is the digital currency that thrills nerds, inspires libertarians, and incites the passions of economists who debate the value of money made from nothing but ones and zeroes. Devotees watch the fluctuations of Bitcoin’s price with a fanaticism typically reserved for college football scores. Alternative currency startups are being lavishly funded by venture capitalists while visionaries gush about the world-changing possibilities of money free from government control. Silicon Valley is the natural center for Bitcoin mania. An advocacy group named Arisebitcoin recently put up 40 billboards around the Bay Area with messages such as: “The Revolution has started … where do you stand?”

As with an actual precious metal, Bitcoins are in limited supply—they must be “mined.” Unlike with precious metals, this mining is done purely by computer. Miners set their machines to run a series of complex calculations that tally up and certify all the transactions of other Bitcoin holders around the world. If the miner’s computers complete these calculations and solve a complex mathematical puzzle before anyone else, he earns about 25 Bitcoins as payment. It’s a nice haul: With the price of each Bitcoin nosing up near $1,000, that’s $25,000 for 10 minutes or so of work. For the moment at least, miners are the rare grunts who can also get rich.

Over the past six months the price of a Bitcoin has shot up, dived, shot up again—and kept on rising, making Bitcoin mining one of the most frenzied corners in technology. Engineers are racing to design and build unique chips that crunch Bitcoin algorithms at high speeds. Thousands of entrepreneurs like Flickinger are betting that their ability to harness these complex computer systems will make them rich—and maybe create a new world order along the way.

Flickinger is part of a group called Give Me Coins that pools together its computing power to have a better shot at verifying transactions and solving the cryptographic puzzles first. He spends much of his time chatting online and monitoring his account on Give-Me-Coins.com, which shows the group’s progress and his share in the work. His setup currently accounts for about 10 percent of its total computing muscle.

One of the first things he does in the morning is check the temperature of his mining rigs. Processing chips calculate faster when they’re hot, but not too hot—the optimal temperature is around 73.5C (164.3F). If it goes much higher, the machine can overheat and malfunction, but Flickinger likes to push the limit. Occasionally, he says, he stuffs the air holes of his machines with paper to bring up the temperature. “There is serious money in this,” he says, noting that he’s earned 100 Bitcoins over the past few months from mining and other transactions. He estimates his two fastest computers will earn him $150,000 each this year. “It takes up a lot of time, but I have no kids. I have no life. I have a cat.”

The Bitcoin system was introduced in 2008 by a shadowy figure who went by the name of Satoshi Nakamoto. To this day no one knows if Nakamoto is a man or a woman or some sort of cabal, though few deny the ingenuity of the creation. Digital currencies had been devised before—DigiCash and Bit Gold, for example—and never took off. Nakamoto started with the best ideas behind these earlier currencies, added a few of his own, and wove it all together with technical elegance. The biggest achievement was solving a long-standing problem of borderless digital money: With no government oversight or central database to track transactions, how do you prevent fraud?

How Xero, Intuit Quickbooks and MYOB Users Can Share Information, Work Smarter and Collaborate Better / Suntico: the social workplace for Sage users

Suntico is a social workplace for busy small and medium companies that sits on top of an organization’s accounting records, increasing company-wide collaboration and communication across teams and departments by allowing documents, links and general conversations to be shared and searchable on the content sharing timeline.

Studies show that knowledge workers spend up to 19% of their time looking for and sifting through information. Suntico allows colleagues to easily find and share records as a global search function searches accounts, contacts, transactions and conversations in one easy step.

In a move that will dramatically increase access to this unique collaboration tool for small and medium businesses, links to Sage 50 Accounts (UK and Ireland), Xero, Intuit Quickbooks, followed by MYOB have been announced. These will be rolled out over the coming months, starting with Sage 50 Accounts (UK and Ireland).

Currently, Suntico links to Sage 50 Accounting – US Edition (formerly Sage Peachtree), Sage 50 Accounting – Canadian Edition (formerly Simply Accounting) and Sage One (UK and Irish Edition).

Hugh Johnson, VP Business Development explains:  “We are already testing our connectors for Sage 50 Accounts (for UK and Ireland) and Xero. Extending this to Intuit Quickbooks and MYOB will enable us to serve over five million small to medium sized businesses in North America, the UK and Ireland, the Middle East and Australasia. ”

There is an attractive referral program for professionals that provide IT and accounting support to small and medium sized companies. Demo accounts and free trials are available with prices ranging from $185US per year for a 2 user subscription to $1,495US per year for a 40 user subscription.

Find out more at suntico.com/sage_50.

About Suntico: 

Suntico Holdings Ltd is an Irish privately owned business software development company and an authorized Sage developer that has invested very heavily in innovative research and development since 2009. The result is a social workplace for companies that use Sage accounting product.

Home is Where the Heart Is….Or Is It? Establishing Residency In A New State

Ellen O. Bonito and Chris Carreira for WTAS write: With the hassle of planning an out-of-state move, taxpayers often overlook an important aspect—changing residency for state tax purposes.

Incorrectly or incompletely transferring residency can result in an audit or filing requirement in the taxpayer's former resident state. Properly establishing residence in a new state helps a taxpayer avoid these issues after moving.

States may tax the worldwide income of their residents. Generally, states determine residency by:

1. statute (a permanent abode coupled with a minimum number of state days for any purpose); or
2. domicile, a legal concept.

Statutory residency is an objective standard, and its determination can be relatively mechanical. For purposes of this article, we focus on domiciliary residency.

Domicile focuses on the individual's intent to make a permanent home, a subjective standard. Confusion arises when a taxpayer is considered a legal domiciliary of multiple states. In situations where a taxpayer moves from a high- to a low- or no-income tax jurisdiction, a former resident state may attempt to claim the taxpayer as a resident. A taxpayer often discovers, to his/her tax detriment, that once domicile is established in a state, changing it is difficult.

To establish domicile in a new state, a taxpayer must show he/she physically moved out-of-state, maintains a place of abode in a new state, and intends to remain in the new state permanently or indefinitely. States use a facts and circumstances test composed of several factors to determine whether a taxpayer is a resident domiciliary. None of these factors are determinative in and of themselves; instead, the focus is on a comparison and a weighting of the level and types of activities engaged in by a taxpayer in the two jurisdictions in question.

States give primary importance to five factors when evaluating domicile: home, active business involvement, time, items "near and dear," and family connections. States will consider other factors if the primary factors do not resolve the issue.

Primary Factors

The location of a taxpayer's "home" is harder to determine when a taxpayer retains the old residence as a vacation home or hotel-substitute after moving to a new state. In these situations, states compare the original residence with the new residence to determine domicile. Whether the homes are owned or rented is not important. Aspects of the home that are important in this comparison are size, value, and nature of use. Size and value, especially, must be viewed in the context of the geographic area where the residences are located.

Domicile is more likely to remain with the original state if a taxpayer continues employment or active participation in a business located in the original state. A taxpayer may claim active participation in a business on his/her Federal income tax return in order to avoid passive activity loss limitations. However, if the active business is located in a taxpayer's former resident state, a state could argue the taxpayer never changed domicile. This can be mitigated if a taxpayer can show that most or all of the taxpayer's business efforts are performed in the new state. Passive investment in a business, though, located in a former resident state does not support an argument for or against domicile.

"Time" is a quantitative analysis of where a taxpayer spends time during the tax year. If the statutory threshold mentioned above is not met, "time" requires a subjective analysis. A comparison is made between where a taxpayer is required to spend time (i.e., work) and where a taxpayer chooses to spend time (i.e., vacation, leisure activities).

Items "near and dear" are those items with sentimental value, including book and art collections, family heirlooms, pets, and other personal items. Moving these items to the new state strengthens a taxpayer's claim of domicile in the new state. All the facts and circumstances must be considered. Thus, a taxpayer should account for "near and dear" items' sentimental and monetary values to the extent these items will be split amongst different abodes.

The final primary factor, family connections, focuses on the location of a taxpayer, a taxpayer's spouse or partner, and a taxpayer's minor children. In some cases, the definition of family expands to include adult children or elderly parents.

Cumulatively, a significant adjustment in a taxpayer's lifestyle clearly evidences domicile change. For example, spending an additional month in Florida every year is not as dispositive as moving to Florida with family heirlooms, buying a bigger home, and giving up active participation in a business in the former resident state.

Other Factors

Besides the primary factors discussed above, other factors that support domicile in a state include:

• Address where bank statements and bills are received;
• Location of safe deposit boxes;
• Location of vehicle registrations;
• Location of voter registration and participation in local elections;
• Public library cards;
• Social and athletic club memberships;
• Updating will to new state; and
• Use of professional services.

In their residency analyses, most states do not include charitable or political activities/contributions to organizations located in the taxpayer's former resident state.

Given the stagnation of the economy, and states' insatiable desire to grow their tax revenue bases, simply moving to another state may not change residency for state tax purposes. Without proper planning, a taxpayer may have two states claiming residency. However, with knowledge of the above factors, along with appropriate actions and detailed records, the residency transition can be painless.

Best Small Business Accounting Software – Top 4 Providers Compared QBO / Freshbooks / Sage 50 / Wave

We have no idea why David Waring did not include Xero in the field, nonetheless David Waring for FitSmallBusiness.com writes: With so many accounting software solutions on the market, it can be difficult to identify the best small business accounting software for your needs.  In today’s article we review the 4 most popular small business accounting software packages and reveal which is the best fit for your business.

Best Small Business Accounting Software for small businesses doing more than $250K in revenue: Quickbooks Online

Best Small Business Accounting Software for businesses doing less than $250K in revenues: Wave

	Quickbooks Online	Freshbooks	Sage 50	Wave
Cost for basic package	$12.95/Month	$19.95/Month	$379.99/One Time	Free
Cloud or self hosted?	Cloud	Cloud	Self	Cloud
Other Available Features (may require additional cost)	Invoicing Time Tracking Payroll Payments Point of Sale Inventory Management	Invoicing Time Tracking Payments	Invoicing Time Tracking Payroll Payments Inventory Management Point of Sale CRM	InvoicingPayrollPaymentsPoint of Sale
Other Integrations	DemandForce, Salesforce andmany others	Basecamp, Highrise and many others.	Document Management, Sales Management and many others.	none listed
Customer Service	Phone/Email	Phone/Email	Phone/Email/Live Chat	Email
	Learn More	Learn More	Learn More	Learn More

Best Small Business Accounting Software ($250K+ in revenues):Quickbooks Online

BEST FOR: Businesses doing more than $250K in revenue.

HOW IT STACKS UP: QuickBooks has been the most sophisticated accounting solution on the market for years. The online version has done an excellent job in keeping pace with the cloud revolution, boosting collaboration functionality, and integrating with mobile devices. Small businesses may be better served by a more simple, easy-to-use option, but we personally use QuickBooks Online and feel it will remain the go-to accounting solution for medium and large business.

PRICING: You pay a monthly subscription fee and can choose from three different packages. Simple Start is $12.95 per month and allows basic functions such as income and expense tracking, automatic banking integration, and sending invoices. If you want to manage and pay bills, set up recurring invoices and compare you’re profitability with industry trends, you’ll need to upgrade to the Essentials package for $26.95 per month. The Plus package will set you back $39.95 per month and offers added features such as inventory tracking, the creation of purchase orders, and budget projections.

WHY WE LIKE IT:

• Cloud hosting means you can access the program any time, from any computer and automatic data backup means you don’t have to worry about maintaining a server bank.
• Well-designed dashboards display the financial health of your company at a glance.
• Improved collaboration functionality allows you to seamlessly share data with clients, your accountant and employees from different business units.
• There’s a deeper focus on multi-tasking and you can now easily switch between accounts without logging out.
• You can easily synchronize your bank accounts for time-effective, stress-free bank reconciliation.
• Integrated QuickBooks Online smart phone apps keep you connected at all times and include new functions such as receipt capture for improved expenses management.
• As the industry standard in accounting software, you can expect your accountant and bookkeeping staff to be familiar with QuickBooks.

LIMITATIONS: Payroll functionality is not included in any of the three subscription packages. It’s held back as an additional add-on for an extra $31.20 per month. Even with the Plus subscription, only five users can access QuickBooks Online simultaneously, which may cause frustrations if you are running a larger business.

Quickbooks Online: Try Now FREE for 30 Days!

Best Small Business Accounting Software (Revenues Lower Than $250K): Wave

BEST FOR: Freelancers, contractors and sole proprietors who are on a tighter budget and need a basic accounting system.

HOW IT STACKS UP: Let’s not beat around the bush – this collection of simple accounting tools will not cut it for larger businesses. However, if you’re a sole proprietor with little accounting knowledge who feels overwhelmed by the complicated bells and whistles of other more advanced systems, then this could be the answer to your prayers.

PRICING: Wave is free to download and use, however the optional payroll add on will cost you $5 per month plus $4 per employee for the first 10 employees and $1 per employee after that. And if you want to take credit card payments, it will cost you 2.9 per cent of the transaction, plus 30 cents.

WHY WE LIKE IT:

• Wave connects to your bank account, PayPal account or other sources of data to automatically download your transactions into the system to eliminate manual entry.

• Invoices are customizable, you can set recurring invoices and you can include a ‘Pay Now’ button to accept credit card payments.
• Personal finance software lets you set budgets, assess your progress, and track your investments with real-time stock data.

• Snap a photo of your receipts with your smart phone and they will automatically upload into your records for easy bookkeeping.

LIMITATIONS: Wave runs internal advertising integrated into your dashboard to keep the service free, but this can be distracting. It would be worth offering an ad-free version for a small subscription fee, but for now it seems you’re stuck with ads. If you just need to send a few invoices, accept online payments, do your simple bookkeeping and track your personal finances, it’s great – but don’t expect much more than that.

Other Options:

FreshBooks

HOW IT STACKS UP: FreshBooks was purpose designed for small business and offers many of the basic functions available in QuickBooks without some of the more advanced functionality that is mostly reserved for medium and large business. FreshBooks offers automated billing and depreciation tracking and supports multiple currencies, however you don’t get the more advanced accounts payable, accounts receivable and general ledger functionality that comes as standard with QuickBooks. The result is a user-friendly interface that’s easier to use and doesn’t require the training time or expense required for the more complicated QuickBooks.

PRICING: FreshBooks starts from $19.95 per month to manage a maximum of 25 clients. Most businesses, however, will need to upgrade to the Evergreen package that allows you to manage an unlimited client base and gives five additional team members access to the program. If you need more than five additional FreshBooks users, you’ll need to upgrade again to the Mighty Oak package for $39.95.

Things to like:

• FreshBooks was designed for small business people, not professional accountants, which results in a user-friendly interface for accounting novices and takes less time to learn.
• The award-winning iPhone app and new Android app allow on-the-road connectivity for service-based professionals.
• As with QuickBooks, a customer support line provides advice and troubleshooting help during business hours. No need to waste time watching endless YouTube tutorials.
• Customizable online invoices support 14 payment gateways including credit cards and PayPal, and late payment reminders and recurring invoices save you time. FreshBooks will also notify you when your client has seen your invoice.
• Easily track your expenses with transactions automatically exported form you back account and snap photos of receipts with your smart phone.
• Track your time and pull your billable hours directly into your invoices, set different rates for each project and boost productivity with team timesheets.

LIMITATIONS: Our major problem with FreshBooks is the price. It’s expensive if you need access for multiple staff members, and QuickBooks offers a cheaper entry point, along with more advanced functionality for your money. If you’re a small business that finds yourself growing into a medium business, then it’s quite possible you’ll out-grow FreshBooks. Learning QuickBooks will take you more time in the short term, but if growth is on your mind, it may be a better investment than having to migrate to QuickBooks later.

Sage 50

HOW IT STACKS UP: Sage 50 is the only of the big four that’s not cloud hosted. That means a more complicated set-up procedure and limited remote access. However, it’s a very sophisticated system and covers everything from basic accounting to inventory and project management, and offers a strong payroll processing solution. Sage 50 will be especially valuable if you have accounting experience, however beginners may feel overwhelmed.

PRICING: While you only need to part with a one-off payment rather than an ongoing monthly subscription fee, it will cost you significantly more to get started – especially if you need multiple users. The software starts at $379.99 for a single user; $699.99 for three users; and $949.99 for five users. You may also need to factor the time IT staff will take to install it into the set up costs.

Things to like:

• It’s a complete accounting solution and is the only on this list that includes payroll processing as a standard inclusion.

• Sage 50 helps you grow. The Inventory and Services Management Center is great for planning purchases, customizing item and service data, and expanding service offerings.
• Project management tools help you ensure large projects don’t get out of hand. You can break large jobs into phases, then track costs to phases and compare estimates to actuals as the job progresses.
• Run ‘what if’ scenarios in the Cash Flow Manager to anticipate your cash needs into the future under a range of different conditions.
• The 2014 version has reduced the number of steps necessary for tracking outstanding invoices, which makes recording late payments quicker and easier.
• You get quick access to customer information – such as credit status messages – when creating invoices.

• The in-built Sage Advisor offers a QuickBooks Conversion Guide, which makes it easier to switch platforms.

LIMITATIONS: While new users receive one year of free customer support and automatic updates under the Sage Business Care Silver plan, you’ll need to pay your own way after that. The user interface also seems quite out dated and if you’re used to using more attractive cloud-hosted software in other areas of your business, using Sage 50 could feel clunky. We’re also concerned about its poor remote access capabilities. If you’re addicted to your smart phone or tablet, don’t expect Sage 50 to play nicely.

2013 Financial Reporting + Accounting Enforcement Annual Review

 Brian N. Hoffman for Morrison & Foerster LLP writes:  Introduction: If the public statements of the SEC Commissioners and staff are to be believed, brace yourself for the coming wave of financial reporting and accounting enforcement matters. The SEC has sent the message loud and clear in 2013: "The SEC is back and better than ever — and that certainly is the case when it comes to pursuing financial reporting and accounting fraud."¹

The SEC's emphasis on financial reporting is not unique, of course; pursuing such matters has long been one of the Commission's core focus areas. Yet in recent years — after the extensive activity in the early 2000s and the Sarbanes-Oxley Act, and a brief resurgence with stock option backdating — news about financial reporting and accounting matters took a back seat to cases concerning the Financial Crisis of 2008, insider trading, FCPA-related matters, and Ponzi schemes of all types. The numbers confirm this: The SEC filed 79 financial reporting cases in 2012, compared to 219 in 2007.² And the agency opened 124 such investigations in 2012, compared to 304 in 2006 and 228 in 2007.³ Last year, though, the SEC proclaimed that this trend was about to end.

Welcome to the inaugural edition of an annual review from Morrison & Foerster. Starting with calendar year 2013, we plan to track and analyze the SEC's renewed enforcement efforts focusing on public company financial reporting and accounting, as well as the efforts put forth by the PCAOB. Public companies, officers and directors, audit firms, auditors, and securities practitioners alike can turn here for an insightful discussion of the key cases and trends from the year.

In this edition, we first discuss developments within the SEC and its renewed vigor in the financial reporting and accounting arena. Next, we discuss areas on which the SEC has said that it will focus its financial reporting and accounting enforcement efforts. We then analyze the SEC's cases in 2013, which may best be viewed as a baseline against which future SEC priorities and efforts will be compared. Thereafter, we explore specific themes that emerged from last year's cases, as applicable to public companies and their officers and directors, as well as to audit firms and auditors. We then discuss the several cases last year that focused on Rule 102(e) bars. Finally, we close with a review of developments at the PCAOB.

We hope that you enjoy the report as much as we enjoyed putting it together. Please let us know your thoughts; we look forward to hearing from you.

Redesigning the SEC's Division of Enforcement, Again

Under the leadership of SEC Chair Mary Jo White and Division of Enforcement Co-Directors George Canellos and Andrew Ceresney, the SEC once again recast its enforcement program in 2013. In Chair White's words, the changes are designed to highlight the agency's "robust" enforcement program that is "aggressive and creative," and that "continue[s] to focus on financial statement and accounting fraud."⁴

Forming a New Task Force

Several years ago, in the wake of criticism concerning the SEC's enforcement efforts, the Division underwent a fundamental reorganization. In an effort to streamline its processes and conduct its investigations more efficiently, the Division flattened its management structure, obtained delegated authority to issue subpoenas, and formed five specialty units, staffed with attorneys and accountants from around the country, to focus on specific enforcement areas: market abuse, asset management, structured and new products, Foreign Corrupt Practices Act (FCPA), and municipal securities. Notably absent from the reshuffling, however, was a unit specifically focusing on financial reporting and accounting matters.

Fast-forward to 2013. Calling accurate financial reporting "the bedrock upon which our markets are based," Ceresney proclaimed that "the importance of pursuing financial fraud cannot be overstated."⁵ He expressed skepticism that a reduction in the number of public company restatements really meant that there was less financial fraud.⁶ The Division thus will "pivot away" from Financial Crisis cases and instead will dedicate resources to pursuing financial reporting and accounting fraud.⁷

As part of this pivot, the Division announced the creation of the Financial Reporting and Audit Task Force (here, the "Task Force").⁸ Building on prior efforts "to concentrate resources on high-risk areas of the market," the Task Force will be "dedicated to detecting fraudulent or improper financial reporting."⁹ It will identify areas susceptible to inappropriate financial reporting by, among other things, engaging in an ongoing review of financial statement restatements and revisions, analyzing performance trends by industry, and using technology-based tools.¹⁰ It will strive to serve "as an incubator to build accounting fraud cases."¹¹ David Woodcock, Director of the Fort Worth Regional Office, serves as Chair of the Task Force, with Margaret McGuire, Senior Counsel to the Directors, serving as Vice-Chair.¹² Attorneys and accountants from both the headquarters and regional offices staff the Task Force, working closely with the Commission's other Divisions and Offices.¹³ The success of the Task Force, according to Division leadership, "should be judged by the quality, and not the quantity, of our cases."¹⁴

Quants Rule!

In the past few years, the SEC has poured increasing resources into utilizing quantitative analysis to aid enforcement efforts. The Aberrational Performance Inquiry, for example, identifies outliers in reported fund performance, which flags matters for the enforcement staff to pursue. Likewise, analysis of mass trading data obtained from broker-dealers allows the staff to identify potential insider trading and market abuse matters.

It is not surprising, therefore, that the Division created the Center for Risk and Quantitative Analytics (here, the "Analytics Group") – headed by Lori Walsh, formerly Deputy Chief of the Office of Market Intelligence – to bolster the Division's financial reporting and accounting enforcement efforts. This new Analytics Group is designed to serve as "both an analytical hub and source of information about characteristics and patterns indicative of possible fraud or other illegality."¹⁵

The staff will also build on existing analytical tools such as the SEC's Accounting Quality Model, which allows the staff to identify outlier attributes in issuer filings as compared to industry peers. Those outliers can then be further investigated for possible improprieties.¹⁶

Whistleblowers Help

The Division will not solely rely on its internal sourcing of cases. Last year, the Division continued to reap the rewards of its whistleblower program, established under the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act"). For providing information that leads to a successful enforcement action involving sanctions of over $1 million, a whistleblower may receive an award of 10% to 30% of the amount collected by the SEC.

In fiscal year 2013, the SEC's Office of the Whistleblower received 3,238 tips concerning potential securities law violations, up from 3,001 in fiscal year 2012.¹⁷ In each of the past two fiscal years, tips about "Corporate Disclosures and Financials" were the most prevalent of those received by the SEC (aside from tips classified as "other"): 17.2% of the 2013 tips (557 tips) and 18.2% of the 2012 tips (547 tips).¹⁸ Driving the numbers home, Task Force chair Woodcock stated that whistleblowers are "hugely important" in the financial reporting and accounting fraud arena, and that the Division is currently investigating cases that it could not have uncovered through analytics alone.¹⁹

Indeed, 2013 was a banner year for the SEC whistleblower program. On September 30, the Commission announced an award of over $14 million to a whistleblower whose tip led to a successful SEC enforcement action.²⁰ This is the largest award granted under the program to date.²¹ Chair White, touted the whistleblower program as "a tremendously effective force-multiplier" that the Commission expects to use with increasing frequency going forward.²² Large awards like this one, she said, will persuade others to step forward, incentivize companies to treat internal reports "seriously and fairly," and encourage companies to self-report misconduct to the SEC before whistleblowers do so.²³

Settlements and Trials

Bucking years of precedent, the SEC also adjusted its settlement policy in 2013. Historically the SEC has allowed defendants to neither admit nor deny allegations of wrongdoing when settling enforcement actions. Last year, however, the SEC announced that it will seek admissions of liability under certain broadly-defined circumstances.²⁴ Cases appropriate for potential admissions include matters involving a large number of harmed investors, conduct imposing significant risks on investors, circumstances where admissions will aid investors in future proceedings, and instances when reciting unambiguous facts will send a clear message to the market.²⁵ The SEC already deployed this approach three times in 2013.²⁶ Although none of these cases involved financial reporting, it is not difficult to envision a significant financial reporting and accounting matter fitting into the criteria articulated by the SEC as being appropriate for an admission. Moreover, the SEC retains its full arsenal of other remedies: disgorgement, a civil penalty, a clawback of executive compensation, a bar on serving as an officer or director of a public company, and a bar on practicing before the Commission under Rule 102(e).

Additionally, this past year the SEC emphasized its trial acumen. Stressing the difficult and complex nature of its cases and the frequent lack of direct evidence of liability, the Commission lauded its trial group and its record.²⁷ Chair White stated that the SEC notched an 80% success rate at trial over the past three years.²⁸ While this statistic may be true, the outcomes have been mixed in recent high-profile cases. For example, the SEC won a verdict of liability against Fabrice Tourre, a former Goldman Sachs employee charged with Financial Crisis-related claims, but lost against Mark Cuban, a Texas businessman charged with insider trading.²⁹

Moreover, in financial reporting and accounting cases, the SEC suffered two publicized trial losses in December. First, a jury in Kansas issued a verdict in favor of the CFO of NIC, Inc. who the SEC accused of concealing over $1 million in perquisites paid to the company's former CEO.³⁰ Second, a court in California ruled for the former CFO and former CEO of Basin Water, Inc., finding that the SEC failed to prove that the executives entered into "sham transactions" to boost revenues.³¹

Nevertheless, the SEC continues to spotlight its litigation prowess and, anecdotally, indicates that its settlement posture is becoming much more aggressive. All of this signals that the Division will not shy away from taking appropriate cases to verdict.

Focus Areas: What's Next

Armed with its arsenal of enforcement tools, the Task Force and Division will focus their financial reporting and accounting efforts in several areas.³²

Revenue recognition will "remain a staple of [the] financial fraud caseload."³³ Other performance benchmarks used by companies likewise will be carefully scrutinized. And the staff has emphasized on multiple occasions that the effectiveness of internal corporate controls are of paramount concern.³⁴

Additional areas highlighted in recent public comments and cases include asset valuation; recorded expenses, particularly capitalized expenses; estimated reserves and allowances; accounting in connection with acquisitions; off-balance-sheet financings; alternative tax treatments; MD&A disclosures, particularly looking at possible omissions and the use of non- GAAP measures; related-party transactions; and matters arising from foreign operations, including possible FCPA issues, cash controls, and other accounting and disclosure concerns.

Furthermore, the Task Force may seek information from multiple companies within particular industries, but Woodcock has declined to provide specifics about these potential "sweeps."³⁵ Complex and unusual transactions, adjusting entries, and significant end of period activity are unlikely to pass unnoticed as well.

Nor will the Division solely investigate issuers. Through a companion initiative internally dubbed "Operation Broken Gate," the Division is keenly focused on identifying auditors who do not act in accordance with applicable professional standards.³⁶ As Ceresney stated, when the staff discovers issues, "you can expect that we will scrutinize not only the CEO, CFO and Controller, but also the engagement partner, engagement quality reviewer, and the auditing firm as a whole."³⁷

Specifically, the Division will seek to ensure appropriate audit planning, identification of risk areas, testing, follow-up on red flags, documentation, and independence. The Division also will probe the activities of other "critical gatekeepers," such as Audit Committees.³⁸

Finally, lest anyone think that the Division and Task Force will focus solely on mega-cases, Chair White emphasized another enforcement tack that she referred to as the "broken windows" approach.³⁹ That is, the Division will not overlook so-called smaller violations — "such as control failures, negligence-based offenses, and even violations of prophylactic rules with no intent requirement" — in order to show that the SEC cop is walking the beat and to prevent budding violators from blossoming into bigger fraudsters.⁴⁰

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Footnotes

1 See Speech 9/19/13 at http://www.sec.gov/News/Speech/Detail/Speech/1370539845772 (last visited 11/26/13).

2 See id.

3 See id.

4 See, e.g., Speech 9/26/13 at http://www.sec.gov/News/Speech/Detail/Speech/1370539841202 (last visited 11/26/13).

5 See Speech 9/19/13 at http://www.sec.gov/News/Speech/Detail/Speech/1370539845772 (last visited 11/26/13).

6 See Speech 9/19/13 at http://www.sec.gov/News/Speech/Detail/Speech/1370539845772 (last visited 11/26/13).

7 See Speech 9/19/13 at http://www.sec.gov/News/Speech/Detail/Speech/1370539845772 (last visited 11/26/13).

8 See Release No. 2013-121 (7/2/13) at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171624975 (last visited 11/26/13).

9 See Release No. 2013-121 (7/2/13) at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171624975 (last visited 11/26/13).

10 See Release No. 2013-121 (7/2/13) at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171624975 (last visited 11/26/13).

11 See 45 Securities Regulation & Law Report 2206 (11/21/13) at http://news.bna.com/srln/SRLNWB/split_display.adp?fedfid=38332092&vname=srlrnotallissues&fcn=40&wsn=488535000&fn=38332092&split=0 (last visited 11/26/13).

12 See Release No. 2013-121 (7/2/13) at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171624975 (last visited 11/26/13).

13 See Release No. 2013-121 (7/2/13) at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171624975 (last visited 11/26/13).

14 See Speech 9/19/13 at http://www.sec.gov/News/Speech/Detail/Speech/1370539845772 (last visited 11/26/13).

15 See Release No. 2013-121 (7/2/13) at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171624975 (last visited 11/26/13).

16 See Speech (12/13/12) at https://www.sec.gov/News/Speech/Detail/Speech/1365171491988 (last visited 11/26/13).

17 See 2013 Annual Report to Congress on the Dodd- Frank Whistleblower Program at https://www.sec.gov/about/offices/owb/annual-report-2013.pdf (last visited 11/26/13).

18 See 2013 Annual Report to Congress on the Dodd- Frank Whistleblower Program at https://www.sec.gov/about/offices/owb/annual-report-2013.pdf (last visited 11/26/13).

19 See Law360, "Expect Renewed SEC Emphasis on Accounting Fraud," 10/4/13 at http://www.law360.com/articles/478273/expect-renewed-sec-emphasis-on-accounting-fraud (subscription required, last visited 1/3/14).

20 See 2013 Annual Report to Congress on the Dodd- Frank Whistleblower Program at https://www.sec.gov/about/offices/owb/annual-report-2013.pdf (last visited 11/26/13).

21 See Release 2013-209 (10/1/13) at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539854258 (last visited 10/21/13).

22 See Speech (10/9/13) at http://www.sec.gov/News/Speech/Detail/Speech/1370539872100 (last visited 11/26/13).

23 See Speech (10/9/13) at http://www.sec.gov/News/Speech/Detail/Speech/1370539872100 (last visited 11/26/13).

24 See Speech 9/26/13 at http://www.sec.gov/News/Speech/Detail/Speech/1370539841202 (last visited 11/26/13).

25 See Speech 9/26/13 at http://www.sec.gov/News/Speech/Detail/Speech/1370539841202 (last visited 11/26/13).

26 See Release No. 2013-159 (8/19/13) at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539780222; Release No. 2013-187 (9/19/13) at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539819965; Release No. 2013-266 (12/18/13) athttp://www.sec.gov/News/PressRelease/Detail/PressRelease/1370540521484 (all last visited 12/20/13).

27 See, e.g., Speech 11/14/13 at http://www.sec.gov/News/Speech/Detail/Speech/1370540374908; Speech 10/25/13 athttp://www.sec.gov/News/Speech/Detail/Speech/1370540071677 (both last visited 11/26/13).

28 See Speech 11/14/13 at http://www.sec.gov/News/Speech/Detail/Speech/1370540374908 (last visited 12/5/13).

29 See Release 8/1/13 at http://www.sec.gov/News/PublicStmt/Detail/PublicStmt/1370539749266 and Release No. 22855 (10/23/13) athttp://www.sec.gov/litigation/litreleases/2013/lr22855.htm (both last visited 11/26/13).

30 See "SEC's Courtroom Cred Slips as Trial Losses Mount," Law360, 12/4/13 at http://www.law360.com/articles/493461/sec-s-courtroom-cred-slips-as-trial-losses-mount (subscription required, last visited 12/5/13).

31 See SEC v. Jensen and Tekulve, C.D. Cal., Case No. CV-11-5316-R, Dec. 10, 2013 athttp://articles.law360.s3.amazonaws.com/0495000/495240/SEC%20v%20Jensen.pdf and "SEC Loses Fraud Claims Against Water Purifier Co. Execs." Law360, 12/12/13 at http://www.law360.com/securities/articles/495240?nl_pk=48ae06b0-9c49-4021-aff1-c4acc84a7a33&utm_source=newsletter&utm_medium=email&utm_campaign=securities (subscription required, both last visited 12/13/13).

32 See Speech 9/19/13 at http://www.sec.gov/News/Speech/Detail/Speech/1370539845772 (last visited 11/26/13); 45 Securities Regulation & Law Report 1759, 9/18/13 at http://news.bna.com/srln/SRLNWB/split_display.adp?fedfid=36647326&vname=srlrnotallissues&wsn=489021000&searchid=21774354&doctypeid=1&type=date&mode=doc&split=0&scm=SRLNWB&pg=0(last visited 9/23/13).

33 See Speech 9/19/13 at http://www.sec.gov/News/Speech/Detail/Speech/1370539845772 (last visited 11/26/13).

34 See, e.g., 45 Securities Regulation & Law Report 1759, 9/18/13 at http://news.bna.com/srln/SRLNWB/split_display.adp?fedfid=36647326&vname=srlrnotallissues&wsn=489021000&searchid=21774354&doctypeid=1&type=date&mode=doc&split=0&scm=SRLNWB&pg=0(last visited 9/23/13).

35 See 45 Securities Regulation & Law Report 1758, 9/20/13 at http://news.bna.com/srln/SRLNWB/split_display.adp?fedfid=36647339&vname=srlrnotallissues&wsn=489020500&searchid=21774378&doctypeid=1&type=date&mode=doc&split=0&scm=SRLNWB&pg=0(last visited 9/23/13).

36 See Release No. 2013-207 (9/30/13) at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539850572 (last visited 11/26/13).

37 See Speech 9/19/13 at http://www.sec.gov/News/Speech/Detail/Speech/1370539845772 (last visited 11/26/13).

38 See Speech (10/9/13) at http://www.sec.gov/News/Speech/Detail/Speech/1370539872100 and Speech 9/19/13 athttp://www.sec.gov/News/Speech/Detail/Speech/1370539845772 (both last visited 11/26/13).

39 See Speech (10/9/13) at http://www.sec.gov/News/Speech/Detail/Speech/1370539872100 (last visited 11/26/13).

40 See Speech (10/9/13) at http://www.sec.gov/News/Speech/Detail/Speech/1370539872100 (last visited 11/26/13).

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.