The Association of Certified Fraud Examiners (ACFE) released its biannual 2016 report last week.  According to the report, the typical organization loses 5 percent of its revenue to fraud each year.  The losses caused by fraud reported in the study found an average loss of $2.7 million per case, with $150,000 being the median loss. We’ve compiled a shortlist of their findings focused on small to medium sized businesses.

The most common form of occupational fraud found was asset misappropriation, which occurred in more than 83% of cases and caused a median loss of $125,000.  Financial statement fraud was much less common (less than 10% of cases reported) but caused the most damage, with a median loss of $975,000.

While corruption was more a common fraud risk in large organizations, check tampering, skimming, payroll and cash larceny schemes were twice as prevalent in small organizations as in larger organizations.

Small Organizations are at the most risk. Organizations with fewer than 100 employees were the most likely to suffer from fraud in the study, representing about 30% of the cases reported. The median loss suffered by those firms was $150,000, the same as those suffered by large organizations (10,000+ employees) and more than organizations with 1,000-10,000 employees.

Small organizations are particularly vulnerable to fraud because they a significantly lower implementation rate of anti-fraud controls and have fewer resources to withstand losses. Small organizations also are much less likely to have anti-fraud controls in place than larger organizations.

For the full ACFE executive summary, go here.

While no company, even with the most robust internal controls, is completely protected from fraud, it’s important that entrepreneurs put measures in place that protect their company’s financial and management data.  Internal controls are critical in the process of setting and achieving operational objectives, accurate and reliable financial reports, and compliance with applicable laws and regulations.

For more information, contact Talley & Company today.

If you’re planning to do some egg-dyeing or egg-hiding for Easter, prepare to spend a little more for a carton than you did last year. In February 2016, the average retail price of eggs was $2.27 per dozen, which is considerably higher than the $2.07 per dozen last Easter. Grocery-store prices are still showing the effects of the avian influenza outbreak that hit the U.S. last year, which drove prices up almost 18% nationwide in 2015, when nearly 40 million egg-laying chickens died. While that won’t stop Americans from spending $17.3 billion on Easter this year, here’s what you can learn from it.
Costs of eggs not your problem? If you are a business owner, you most likely know just how much cost increases outpacing revenue gains can affect your profitability. Even if you’re in a field as remote from food as the semi-conductor business, changes in your supply chain, production process, logistics or distribution system, and any number of additional forces can have a major impact on your profitability. While there’s little anyone can do about sudden disasters like the Avian flu outbreak last year in the egg industry, there are plenty of warning signs that come with more everyday events impacting your business.
With the right advisors working with you to set up and analyze your financial data, you can effectively ascertain many negative and positive trends affecting your bottom line well before they hit mainstream news. Knowing where to look and having it at your fingertips can help you develop solutions before experiencing deep cuts into your bottom line.
Talley & Company has helped clients find best practice solutions to implement systems and controls that identify leading & lagging indicators, allowing them to capitalize on growth trends in their product lines while maximizing profits. From inventory controls that help monitor and actively increase cash flow on a day-to-day basis, to budgeting & forecasting tools to see both where you’ve been and where you are going, Talley & Company has your business’ profitability covered.

The professionals at Talley & Company are here to help monitor, protect, and put to work your hard-earned money in the most profitable way possible. Call Talley & Company today.

Erin Andrews recently was awarded a $55 million verdict in her peephole lawsuit, but unsurprisingly, the IRS may be the real winner in the case. The perpetrator, Michael Barrett is on the hook for $28 million whereas the Marriot franchisee and operator, West End Hotel Partners LLC and Windsor Capital Group Inc., face the remaining balance of $27 million.  Though the verdict will likely face an appeal by the hotel franchisee and operator and the perpetrator will unlikely have the funds to pay up, taxes may be the biggest thing standing between her and a big pay day.
The IRS treats damages for physical injuries (e.g. broken bones from an auto accident) as tax-free. So are damages for physical sickness. But since 1996, your injury must be “physical” to be tax-free. The IRS says your injuries must be visible, so Ms. Andrews may have trouble treating the damages awarded to her as tax-free. She was understandably humiliated and clearly suffered emotional distress. But without being able to argue something considerably more ‘physical,’ it is all subject to tax.
Ms. Andrews may have more tax-mitigating options available by choosing to settle out of court. In a settlement both parties can attempt to iron out the tax issues and tax reporting, with varying amounts of success. 
Attorney fees can be a tax trap, too. If you are the plaintiff and use a contingent fee lawyer, you’ll usually be treated (for tax purposes) as receiving 100% of the money recovered by you and your attorney, even if the defendant pays your lawyer directly.
Ms. Andrews did the right thing and showed an enormous amount of courage by standing up for herself in court. From a financial viewpoint, her case presents an excellent example of the significant tax implications revolving around settlements/judgments that not everyone is aware of.
If you’re planning on doing estate planning for the first time in 2016, or want to make sure your current planning documents aren’t out of date, staying on top of the latest changes is important. Here are several updates to keep in mind if you need to establish or revisit your estate plan in 2016:
The estate-tax exemption. For 2016 you can leave bequests (gifts to other individuals upon your death) worth up to $5.45 million (up from $5.43M last year) free of any federal estate tax. If you’re married, both you and your spouse are entitled to separate $5.45 million exemptions. If one spouse dies and does not use up his or her full exemption, the leftover exemption amount can be transferred to the surviving spouse.
The gift-tax exemption. You can also give away a cumulative total of up to $5.45 million to whomever during your life without owing any federal gift tax. If you’re married, both you and your spouse are entitled to separate $5.45 million gift-tax exemptions. If one spouse dies and does not use up his or her full exemption, the leftover exemption amount can be transferred to the surviving spouse.
The $14,000 annual gift tax exclusion remains the same. For those with large estates, the $5.45 million estate-tax exemption isn’t enough. That’s where the $14,000 annual gift tax exclusion rule can help. Gifts made under the $14,000 annual gift tax exclusion rule (more on that below) will not trigger any federal gift taxes, nor will they reduce your federal gift-tax or estate-tax exemptions. However, gifts in excess of the $14,000 will reduce both your federal gift-tax or estate-tax exemptions dollar for dollar.
The benefit of making gifts up to the exclusion amount: they reduce your taxable estate, and they shift any taxable income generated by the gifted money to your kids, who are probably taxed at a lower rate than you. Gifts under the annual gift tax exclusion rule don’t cut into your $5.45 million gift-tax or estate-tax exemptions, but they chip away at your taxable estate. So your estate tax exposure can over time be reduced by taking advantage of the annual gift tax exclusion.
For a full list of the must-know facts that will affect estate planning in 2016, contact Talley & Company today.
Last week the IRS warned that email and texting scams aiming to trick U.S. taxpayers into providing personal data have surged 400% in 2016 so far. The schemes involve phishing (“fishing” for information and “hooking” victims) messages designed to trick taxpayers into believing the emails and texts represent official communications from the IRS, tax software companies or others in the tax industry. Here’s what you need to know.
What to Look For in These Scams
You may receive an official-looking email or text message from what appears to be an official source, whether the IRS or someone in the tax industry. The messages typically ask for data related to tax refunds, filing status, or seek confirmation of personal information, including ordering IRS transcripts or verification of IRS Personal Identification Numbers.
When you click on the links (which you shouldn’t be doing), you are sent to what appear to be government websites that ask for Social Security numbers and other personal information that identity thieves can profit from filing false tax returns. The sites may also contain malware that infect taxpayers’ computers and enable cyber-thieves to gain access to files or track consumers’ keystrokes to get personal data.
It is important to keep in mind the IRS generally does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.
Also Note That the IRS Will Never:
  • text/email you demanding immediate payment, nor will the agency call about taxes owed without first having mailed you a bill;
  • demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe;
  • require you to use a specific payment method for your taxes, such as a prepaid debit card;
  • ask for credit or debit card numbers over email/text/phone; or
  • threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
Accounting Today recently released a summary of the IRS’ “Dirty Dozen” list of the top tax scams for 2016. You can view it here.

 

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Who is Martin Shkreli? If you google “most hated man in America”, he is the top hit -in fact, the entire first page of results is devoted to him. So why the animosity? Most of it stems from his controversial decision as former CEO of Turing Pharmaceuticals to increase the price of a medication produced by the company by 5,000 percent. His actions have drawn the ire of many already, but now you can add the IRS to that list as well.
The Internal Revenue Service has filed a tax lien for $4,628,928.55 against Martin Shkreli, the former CEO of Turing Pharmaceuticals. The tax lien against Shkreli comes from unpaid 2014 taxes of $4,625,496.70 and unpaid 2013 taxes of $3,431.85, according to Gawker.com which broke the news first.
Shkreli became infamous last year when he and his company Turing Pharmaceuticals increased the price of Daraprim, a lifesaving HIV medication produced by the company by 5,000 percent, from $13.50 to $750 for each pill. A decision he said he regretted, not because of what he did, but because he didn’t raise the price higher. Democratic presidential candidate Hillary Clinton denounced him: “Price gouging like this in the specialty drug market is outrageous.” Republican opponent Donald Trump also attacked Shkreli. “He looks like a spoiled brat to me,” Trump said.
Heat coming from the IRS may be the least of Shkreli’s worries at the moment though: In an unrelated securities fraud case, Shkreli is accused of using money from a pharmaceutical company that he founded, Retrophin, to pay off investors in his hedge fund. Retrophin filed suit against him last August for $65 million. His other drug company, Turing, replaced him as CEO last December following his arrest.
This may be one of the rare occasions where most individuals will be rooting for the IRS.
Talley & Company
Advice. Solutions. Results.
John Elway: 2004 Inductee to the Pro Football Hall of Fame. Back to back Super Bowl wins. It would be hard to argue that the number one pick of the 1983 NFL Draft did not have an illustrious career as a football player. One thing he wasn’t quite as good at apparently though, was investing his money.
Back in 1998, Broncos owner Pat Bowlen proposed a no-brainer deal to Elway. In the deal Bowlen offered Elway the right to buy a 10 percent share of the Broncos for $15 million. But that wasn’t all. Elway would also be given the option to buy another 10 percent of the franchise by forgoing the deferred salary Bowlen owed him on the condition Elway would become a special assistant to Bowlen, which would lead to a COO position. The amount of deferred salary on the table? $21 million.
If Elway wasn’t pleased with his investment in the Broncos, Bowlen offered him the opportunity to back out by selling back his interest in 2-5 years for $5 million more than the original purchase price. In addition, Elway would receive eight percent interest on his investment a year. He would also have right of first refusal to buy any other stake in the team if the family sold to another interested party.
So, what did Elway decide after having nine months to mull over this seemingly no-lose deal? He walked away from it and decided to invest his money elsewhere, often with mixed results.
Fast forward to 2011: Elway is named Executive Vice President of Football Operations and General Manager for the Denver Broncos but has no stake in the franchise. According to a Forbes estimate, the 20 percent stake he passed on, based on a Forbes 2015 valuation of the team at $1.94 billion, is now worth $388 million, which would have been a whopping 646 percent return on the 1998 investment, adjusted for inflation, had Elway accepted Bowlen’s offer.
While only John Elway and his closest advisors can say for certain why he would pass up what seemed to be a “touchdown” deal, it sounds like he fumbled the snap on a very good investment opportunity.
Founded in 1989, Talley & Company is the premier consulting and financial services firm dedicated to advising high net worth individuals and their closely held entities with the strategic business solutions that deliver meaningful results.
Here’s something you might not know: Over 75,000 beers and 21,500 hot dogs are expected to be served during this year’s Super Bowl. But what happens when you mix the Denver Broncos, Carolina Panthers and a host stadium located deep in the heart of Silicon Valley? You get the most technologically advanced Super Bowl to date.
This Sunday, Levi’s Stadium plays host to the biggest prime time football event of the year: Super Bowl 50.  Given the fact that it is located in an area with a rich history of innovative technology, it’s only natural that the Santa Clara stadium would want to flex its technological muscles.
Levi’s Stadium has 400 miles of fiber and copper cable and 1,200 WiFi access points ready and waiting to  handle the data needs of a sold out crowd, all so fans at the big game can post selfies with their friends, snapchats of the latest play, and order food straight from their smart phones with the Super Bowl app. “We built this stadium based on three pillars,” Al Guido, the 49ers’ chief operating officer said, “technology, sustainability and the fan experience.”
Levi’s Stadium boasts 10 times the bandwidth the NFL mandates at other stadiums, and was battle tested last March when the stadium played host to WrestleMania 31. The “Super Bowl” of wrestling saw more than 76,000 fans take to their smart phones to the tune of 4.3 terabytes of data. That’s the data equivalent of downloading more than 68,000 hours of music. Stadium officials predict that this year’s data usage during the championship game will top last year’s Super Bowl record of 6.4 terabytes set in Arizona.
Everyone remembers the power outage during Super Bowl XLVII (aka the “Blackout Bowl”) that lasted more than half an hour.  On this Super Bowl Sunday, we’ll see if Levi’s Stadium’s network can handle the data-storm caused by all the smartphone-wielding football fanatics.
We’ll keep our fingers crossed.
Leading-edge businesses are partnering with The Talley Group to leverage technology to meet the needs of their growing businesses.  From IT infrastructure solutions to management information, analysis and reporting, we are the premier business consulting practice to entrepreneurs and their closely-held businesses.
For more information on how Talley can help your business leverage technology, contact us today.
After years of resisting, eBay has finally broken the silence on what it earns from StubHub, the popular ticket-selling marketplace it required for a reported value of $307 back in early 2007. While the e-commerce giant continues to guard StubHub’s impact to its overall business by choosing not to disclose the profit StubHub generates, or its margins, the information released highlights the ticket reseller’s strong performance at a time eBay’s marketplace business is slowing down
It turns out StubHub is eBay’s fastest growing business, generating 34% year-over-year sales growth and annual revenues of $725 million, roughly 9% of total sales. In the fourth quarter of last year, StubHub generated over $1 billion in gross merchandising volumes (GMV), a 30% year-over-year rise.  During the same quarter, eBay’s total GMV remained flat at $21.8 billion.   
The disclosure of StubHub’s strong performance also comes six months after eBay spun off its highly profitable payments arms, PayPal. Carl Icahn, billionaire activist investor, successfully campaigned for eBay to spin off its PayPal business, a move that already appears to be bearing fruit for investors. 
Talley & Company knows how critical structuring and financing buy/sell transactions are to entrepreneurs and family-owned businesses. We are here to help connect you to the right lender or equity group to fit your unique growth plan, present your company’s financials and “story” in a manner that increases favorability with lenders/equity groups and structure the transaction in the most tax-efficient manner. 
For more information about how Talley & Company and its affiliates can help you plan, negotiate, structure and execute on your growth strategy, contact us today. 
Depending on where you call home, you may have noticed lately that more and more items ordered from Amazon.com are being delivered by fleets of white trucks with the Amazon logo emblazoned on their sides.  In a move signaling a bigger push into the shipping industry, Amazon is expected to acquire French shipping company Colis Privé, as part of a plan to go head to head with FedEx, UPS and DHL according to The Seattle Times.
Amazon’s acquisition of Colis Privé is part of a bigger move by Amazon to rely less on multinational shipping companies to ship their products.  The potential benefit of owning the shipping network could potentially have a substantial impact for Amazon’s bottom line when taking in account rising shipping costs. In 2014, the company spent over $8.7 billion on shipping, up from $6.6 billion in 2013. It seems likely that after managing the logistics of its core revenue-generating, Amazon could then extend their logistics capabilities as a service to other organizations. 
This move would not surprise many, as Amazon is no stranger to disrupting industries. What started as the computing infrastructure that powered the company’s website (the largest retailer in the world) became the building blocks to what would transform into the biggest business in cloud computing by far. Amazon has transformed the way organizations utilize computing power by allowing clients to purchase computing power on an hourly basis which is ideal for projects whose capacity needs fluctuate at certain times. 
With the pending acquisition of Colis Privé, Amazon appears ready to disrupt another industry.
Growth through acquisition, is often mistakenly considered the exclusive domain of the largest companies. However small and midsize company looking to achieve substantial growth can benefit just as well. For more information about how Talley & Company can help you plan, negotiate, structure and execute on your growth strategy, contact us today.

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