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ACCOUNTING

Network: December 1990

Network reader-to-reader advice.
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Touchy About Money

As Leslie Hope's company grows, she's concerned about "keeping employees honest." Great Breaks, in Somerville, Mass., offers companies stress-reduction services, including massages. Hope's employees handle all the cash transactions and scheduling, and that provides opportunities for employees to pocket company profits (Cash in the Wrong Pockets, September, [Article link]). She asked Network readers for suggestions on keeping tabs.

* * *

Leslie Hope should encourage her clients to pay with credit cards or checks. If that doesn't solve her problem, she might want to provide incentives for her employees and her clients to keep records of each massage. Ms. Hope could issue each massage therapist a book of numbered receipts to be used for all transactions and pay each a commission based on the number of massages he or she performs. The commissions would be determined by the number of receipts the therapist hands in. To encourage customers to request receipts, Ms. Hope could offer a discount after, say, four massages.

Charles H. Scruggs

Director of Customer Requirements

ELSIN Corp.

Sunnyvale, Calif.

* * *

The simplest solution is to call customers at random after their scheduled appointment has ended. Ms. Hope could ask customers whether they are satisfied with the massage and if they have any suggestions for improving her service. If her employees are informed of these random follow-up calls, misdirected cash should not be a problem.

Durham Garbutt

President

Gardair Inc.

Louisa, Va.

* * *

Ms. Hope might choose to implement a follow-up program for all her clients, including those who cancel. She could design a postcard that thanks clients for their interest in Great Breaks and asks them to fill out the other side. She could ask whether they enjoyed their massage, whether they would like to be called again, and -- if they had to cancel their appointment -- whether they would like to reschedule. That way, Ms. Hope can provide a more complete service and put her employees on the alert. Maybe they'll think twice about fudging reports. One last detail: Ms. Hope should pay the postage on the card. It's worth her peace of mind.

Shoshanna Szuch

Owner

A Type Design Inc.

Millis, Mass.

I'll Gladly Pay You Tuesday

Nancy Moser thought she might find some answers to her company's problem with unpaid bills in Inc.' s June article "Getting Paid" ([Article link]), but few of our suggestions applied to her contracting company. Her clients, mostly general contractors, tell her they haven't been paid by the owner yet, so they in turn can't pay her (The Money Pit, September, [Article link]). Often it takes her more than 90 days to collect. One reader recognized the problem and offered some help.

* * *

Ms. Moser should calculate the amount she believes her clients are costing her company when they withhold their final payment. Then she should factor that cost into the contract. Offer it as a discount to clients if they pay their bills promptly. This will certainly increase her cash flow. It increased mine by 80%. James Lineback

President

Marlin Inc.

Myrtle Beach, S.C.

* * *

Tax Bites

The owner of a housecleaning service in Sacramento, who asked that we withhold her name, wrote to Network about Internal Revenue Service harassment (No Respect, September, 09900212). She employs 6 full-time workers and 84 independent contractors. She tries to comply with the law but remains the target of IRS scrutiny. When she asked her state representatives to work for clearer standards, they could promise little. One reader offered advice.

* * *

There are ways to fight back. The IRS considers that an employer-employee relationship exists when one individual has the right or ability to direct and control the work performed and the method of performance of another individual. In defining such a relationship, the IRS uses 20 common-law guidelines for employee classification. Your reader should make sure that the independent contractors meet those guidelines.

She can also file Form SS-8 to request a determination letter from the IRS concerning the status of a representative contractor. If all else fails and the IRS determines that those contractors should be reclassified as employees, the reader may be eligible for relief from retroactive assessments of payroll taxes, penalties, and interest charges. The employer must show that she has previously treated the workers as contractors and had good reason to do so.

Finally, I suggest the reader enlist the expertise of an experienced tax professional to advise her.

David P. Aniol

Senior Manager

Price Waterhouse

Chicago

Letter of Recommendation
"Business is good," Eric Stetzel wrote in the September Network (Tracking Taxes, [Article link]), "so good that we're considering national expansion." The president of Panoramic Corp., a dental and medical X-ray equipment company in Fort Wayne, Ind., has one problem: keeping track of various state tax laws as he expands beyond his home state.

* * *

A company in Berwyn, Pa., called Vertex Systems Inc. may be able to help Mr. Stetzel. It offers services that track state payroll and sales taxes. Its phone number is (215) 640-4200.

Kevin Mackenzie

Vice-President

J. L. McKay Corp.

Cornelius, Ore.

Last updated: Dec 1, 1990




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