How to Save American Business

The Accounting Mess

You've said that you want to streamline tax-reporting requirements for America's small businesses, and I believe you. In one speech, you estimated that 2.6 million small-business owners would save 61 million hours as a result of tax simplification and the resulting reduction in paperwork. Regulations, you noted, put an enormous strain on the small-business sector. Those of us in the sector couldn't agree more.

Unfortunately, our reporting requirements have become more onerous, not less, in the past four years, thanks mainly to passage of the Sarbanes-Oxley Act in 2002. Although it was intended to regulate reporting in publicly held companies, it has had a huge impact on private companies like ours because of what accounting firms have done with it. Sarbanes-Oxley has created a whole new business for them. To comply with the act's rules, they've adopted new audit standards that dramatically increase the price of an audit. Our accounting firm told us recently that our auditing bill would almost double, from $50,000 in 2003 to $90,000 in 2004, because the firm would need 250 more hours to audit our books this year than it needed last year. That shocked our employees, who told me to find another accountant. But I suspect another firm will charge just as much. The new regulations, and the new penalties, have increased demand for accounting services and created an accountant shortage, driving up prices across the board. All of us who did nothing wrong are paying through the nose for the sins of Enron and WorldCom.

It's not too late to reverse some of these regulations, and I hope you'll press Congress to do so. They obviously need some teaching as well. You should remind them that, when they pass laws and makes rules, they need to think more about the effect the changes will have on small entrepreneurial companies. That's where the future lies. We're not going to see any more Microsofts or Wal-Marts being built from the ground up. Big companies aren't where it's at. Young people are instead starting their own small businesses in the communities where they live. Local organizations like the chambers of commerce are helping these upstarts, but the federal government has done little or nothing for them, as far as I can tell. If that's going to change, you'll have to lead the way.

But enough. By now you're undoubtedly asking, "Who are these guys, and what do they really know about the U.S. economy and global economics?" Well, we're just an employee-owned company that loves hearing you talk about creating an ownership society. We realize that at the end of the day, quarter, year, or even the end of a presidential term, change begins at home. The revolution starts with us on the factory floors and in the service bays. It is our responsibility to make sure we are capable of competing and contributing to a better community and a better quality of life here and throughout the world.

We're just asking for a little help in holding down our overhead. I know that you feel strongly about tax issues, and I agree that they're important, but I haven't talked about them here because it's the escalation of invisible costs that's killing us these days. That's where we really need your assistance. We're like the little train that kept saying, "I think I can! I think I can! I think I can!" We think we can too, if you help us make sure our overhead doesn't weigh us down too much.

Oh, and by the way, please don't feel that you have to answer this letter in person. Not that we wouldn't like to see you again. You're always welcome here in Springfield.

Respectfully, Jack Stack

Jack Stack, a longtime contributor to Inc., is CEO of SRC Holding Corp. in Springfield, Mo., and co-author of The Great Game of Business and A Stake in the Outcome. This article was written with Nadine Heintz and Bo Burlingham.

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