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I thought I would share this article with my partners. Feel free to share with your contacts. This article was published by Ruthann P. Lacey. Ms. Lacey is a client and an attorney specializing in the legal needs of the elderly and those with special needs. Ms. Lacey is nationally recognized as an expert in these areas.

Legal Foundations for the Future

You’ve planned, budgeted, saved. You’re insured, and you may be debt free. But what would become of all this diligence if you suddenly became unable to continue to manage your affairs personally due to physical and/or mental infirmity?

In an abundance of caution, these three documents should be cornerstones in every

prudent adult’s legal and financial foundation:

1. Last Will and Testament. It is startling that as many as half of all adults do not have this most fundamental document in place when they die. Perhaps they don’t realize that if they die without a Will (intestate), the laws of the state — not they or their heirs — will determine who gets their property and is named guardian of their minor children. For instance, many Georgians might be surprised to learn that under current Georgia law, the estate of an intestate person is divided between the spouse and each child, with the spouse potentially receiving as little as one-third! In the alternative, by establishing a “Will,” you retain control by conveying your will, attitude and beliefs toward your family and assets. In it you can:

·        Designate the person whom you want to be the executor of your estate and give him the power to act without posting bond and filing reports with the probate court, if desired;

·        Specify the persons or charities you want to receive your real and personal property;

·        Name your children’s guardian and provide financially for their future. For example, parents oftentimes establish a Trust in their Wills to provide for minor children, grandchildren or those with special medical needs; and

·        Establish a Trust to provide for a spouse who is or may become incapacitated.

When drafting a Will, it is typically prudent to consult an attorney to ensure that it addresses your specific personal circumstances and any necessary legal issues. For example, a properly drafted Will can minimize or possibly even eliminate estate taxes, or can maintain Medicaid qualification for a spouse who is in a health care facility. Also, an attorney can ensure that the resulting document fully complies with prevailing state laws and takes advantage of special considerations that may be contemplated by the law. For example, in Georgia be aware that absent a provision to the contrary, even an existing Will is revoked by events such as marriage or the birth of a child. Also, like a number of other states, Georgia law recognizes “selfproving” Wills. Making yours self-proving will save time and money when the Will is probated. After it is drafted, your Will must be properly signed and witnessed or it won’t be valid. The original signed Will should then be kept in a safe place where it will be found when it is needed. Finally, it should be reviewed periodically to ensure that it continues to represent your wishes and comply with the law, which is subject to change in each legislative session.

2. Durable Financial Power of Attorney (DFPOA). While a Will determines what will happen to your estate after your death, this document controls how your business and finances are to be handled while you are alive but incapacitated. In it you name someone whom you trust to act as your “agent” in making financial and property decisions for you in the event that you become unable to do so. The term “Durable” pertains to specific essential language which enables your agent to act on your behalf if, and especially when, you become temporarily or permanently incompetent.

Does an attorney need to draft this document? Well, maybe not . . . unless you have a bank account, own real property, own investment assets, own a business, or wish to make gifts to family or charities. Although forms and computer programs provide the basics, they are basic; generic one-size-fits-all approaches cannot be sufficiently refined to thoroughly address each individual’s circumstances. Thus, it may well be beneficial to consult an attorney who is knowledgeable in this area to ensure that your circumstances are thoroughly and specifically addressed.

For example, particular language is necessary for your agent to accept your income, continue your business, or make gifts of money or property to friends or charity. Also, many financial institutions do not accept the basic document. Instead, they require that specific language be included to empower your agent with respect to your accounts held at their institution. In addition, real estate and investment assets should always be specifically described in the document. And it is recommended that you name at least one back-up agent, in case the first-named agent becomes unable to serve for any reason.

Having a DFPOA crafted especially for your circumstances will make it easier and less costly for your agent to act on your behalf. It also provides two significant benefits:

·        It enables decision making to be kept within the family unit – where you want it to be; and

·        It can eliminate the need for Conservatorship.

Avoiding Conservatorship is recommended for several reasons. First, conservatorship proceedings can be emotionally difficult for the family and the prospective “ward” to endure. At the hearing, evidence is provided to the probate court judge to demonstrate that the ward is no longer competent to make his own decisions. If satisfied, the judge then removes the ward’s legal rights to make his own financial or business decisions or engage in any financial transactions.

Second, the appointed conservator must be bonded and must file an inventory, a budget, and annual financial reports with the court. This can be expensive and very time consuming.

Third, conservatorships are cumbersome because court permission is required before the conservator can undertake action with regard to the ward’s property. For example, the conservator must always seek permission from the court to spend any principal of the ward’s estate, to sell stock, to make gifts, to enter into a contract on behalf of the ward, to continue the ward’s business, or to sell or lease the ward’s property. While this oversight may decrease the likelihood of malfeasance, it also dramatically decreases familial control at considerable emotional and financial expense.

Whether common prudence, sound legal advice or specific issues such as Conservatorship influence the decision to pursue a DFPOA it would, of course, be

wise to discuss your wishes and desires with your named agents. And as with your Will, once drafted it is critical that the document be properly signed and witnessed as required by state law. It should then be retained in a readily accessible location in the event that it is ever needed.

3. Durable Advance Directive for Health Care (DADHC). This document is conceptually similar to the DFPOA in purpose, but its focus is health care decision making. In fact, we used to call it a Durable Medical Power of Attorney.

In your DADHC you appoint and empower someone whom you trust to act as your agent in making your medical and health care decisions in the event that you become unable to do so. These include such decisions as the hiring and firing of physicians, admitting you to health care facilities, consenting to surgery, antibiotics, experimental treatment and making end-of-life decisions. Since a statutory DADHC form is readily available in Georgia, an attorney is not necessarily required in order to draft this document. However, a number of hospital situations have occurred both within and outside of Georgia in which this form was not accepted. This was a result of the failure of the “short form” to specifically enumerate the powers and authorities given to the agent.

In April 2003 a new federal law known as the Health Insurance Portability and Accountability Act (HIPAA) went into effect. The implementation and interpretation of this law by doctors, hospitals, and other health care providers has made it more difficult for family members to obtain information or medical records unless the provider has in hand a signed consent from the patient. As such, with affairs this critical — quite literally the possibility of life and death — you would be well advised to consider engaging an attorney who is knowledgeable in this area. Adequate legal counsel and proper drafting will ensure that your document enables your stated wishes to be carried out without obstacle. Counsel is particularly recommended if you have a unique medical condition and wish to indicate specific types of treatment that you do or do not desire.

As with the DFPOA and Conservatorship, the DADHC also has probate court implications. With this document in place, Guardianship can be avoided — which is strongly recommended for many of the same reasons that Conservatorship is discouraged. As with Conservatorship, it may be necessary for the guardian to obtain Court approval for certain personal and medical decision to be made on behalf of the ward, and annual reports must be filed with the Court. In the alternative, a well drafted DADHC enables personal and medical decision-making to be kept within the family and can make the task of the agent much easier in ensuring that you receive the type of treatment you desire.

As with the DFPOA, it is wise to name at least one backup agent in case the first-named agent is or becomes unable to serve. And it is strongly recommended that you discuss your wishes and desires with your agents so that they will have a full understanding of the treatment that you would want in any given medical situation.

Finally, it is equally critical that the DADHC be properly signed and witnessed as required by state law. A copy should then be given to each of your physicians and each person named as an agent or back-up agent for use if and when required.

Rounding out your planning process with each of these three essential documents enables you to rest assured that your will will be carried out no matter what your future may hold.

One Last Thing about Medical Decision Making. Making these important decisions and committing them to writing are important. However, just as important will be the conversation you should have with the agents you have named under your DADHC regarding your specific wishes for medical and personal decision making.

I recommend talking with all of the potential decision makers at one time, describing your wishes, and drawing on situations you are personally familiar with or those you have heard about in the media. What would you want if your health situation were the same as that of Terri Schiavo? Or President Reagan? Or Jacqueline Kennedy Onassis? It is this conversation that will give the agents the knowledge, the strength, and ultimately the peace of mind to make decisions as you wish them to be made. The documentation and the conversation are your gift to your agents.

LAW OFFICE

RUTHANN P. LACEY, P.C.

Concentrating in Elder and Special Needs Law

—

3541-E Habersham at Northlake

Tucker, Georgia 30084

Telephone: (770) 939-4616 • Facsimile: (770) 939-1758

www.elderlaw-lacey.com

Implementing FishBowl Inventory in a Manufacturing Business

In November 2009 I was hired to select and implement a business application in a Paint Manufacturing business. For the prior 15 years the company had used QuickBooks but had never gotten the training or consulting help to set up their inventory items correctly. They had tracked their COGS via countless spreadsheets and did manual Inventory Adjustments and Journal Entries each month to get to their COGS and Inventory Asset values. As you can imagine the accuracy of their financials was very suspect.

This company had enjoyed $3M to $4M in revenue the past few years with most of the sales coming from craft paints. They have a new product line called RESTORE which is a deck, dock, and concrete resurfacing paint which is fantastic. Two coats of this paint and your back deck or boat dock has lifetime protection from the elements. They expect to do $6M in 2010 on this product alone.

The owner and I shared a mutual friend who is an investment banker. The IB was discussing possible funding for the growth but was concerned about the accuracy of the financials as the company started this important phase. I was called in to determine if they could use the latest version of QB Enterprise to run their manufacturing operations, track inventory, and capture costs accurately through the manufacturing process.

At a high level they mix large batches of intermediate paint, then mix those with colorants and other chemicals in separate batches, and finally package the paint in 2oz, 8oz, 12oz, or gallon size products. The challenge was to get the final COGS of any individual product to include the costs of raw materials, paint, bottles, caps, boxes, shrink wrap, etc. Every cost along the manufacturing process had to be included in the finished good.

It didn’t take long to realize that QB was not going to handle this. So I then began a search process to find an application which would meet the demands of a SMB manufacturing operations. I identified FishBowl Inventory as a likely candidate and executed the evaluation and determined that it would indeed fit our needs.

During the month of December we extracted data from legacy applications to create Import files for:

6,000 Parts (raw materials, packaging, etc.)

1,000 Finished Products

4,000 Bill of Materials (Paint recipes and Finished Goods)

800 Customers

200 Vendors

We spent a month testing, training, and preparing for physical inventory and go-live on January 3, 2010.

We were very successful with this implementation. In the 5 weeks we have been running the business on Fishbowl Inventory we have completed over 500 work orders. There are 3 deliverables which are invaluable to this company:

1. They now know the exact cost of every single bottle/can of paint they package to 5 decimal places.
2. They know exactly which raw materials to purchase and when to purchase.
3. They know exactly which finished products to make and when to make them based on sales data.

Look for the RESTORE product in your area this spring/summer at the nearest Home Depot, Lowe’s, or ACE Hardware stores.

And, if you are looking for a Fishbowl Inventory expert . . . . call Rick Daigle, 404-787-5835, or email to rdaigle@b2bcfo.com.

Entrepreneurship Tested:  National CFO Services Firm’s Founder, Jerry L. Mills, Discusses Lessons Learned Regarding Copyright Infringements  

B2B CFO’s founder and CEO, Jerry L. Mills, shares how he handles and leads his company through difficult cases of theft, plagiarism and infringements on intellectual property rights

PHOENIX (Nov. 12, 2009) –    Some believe that imitation is the sincerest form of flattery, but Phoenix based entrepreneur and business expert Jerry L. Mills is not flattered and not amused by  others replicating his firm’s propriety materials.  In fact, this CEO of the nation’s fastest growing CFO services firm has a strong message to other business owners:  protect your intellectual property, or prepare to have it stolen.  

He does not say this with a light heart; his firm has dedicated tremendous resources this year to fight off blatant plagiarism of copyrighted content as well as cases of intellectual property rights infringement and theft.  

In June of 2009, searches for key phrases unique to B2B CFO’s Web site content resulted in a stunning discovery of dozens other businesses plagiarizing the company’s content word-for-word on their Web sites.  The problem was so widespread that this year alone B2B CFO has encountered more than 40 separate cases of plagiarism, including several competitors using B2B CFO’s registered trademark. 

As the nation’s largest CFO firm dedicated exclusively to serving small and mid-size businesses, B2B CFO works diligently on its online branding – constantly building fresh blog content, improving its Web site and investing in strategic Search Engine Optimization.  Now,  Mills and his company have set up procedures to handle most of the issues related to the plagiarism of the company’s Web site.  Mills  designated Rick Daigle, an Atlanta partner with an extensive I.T. background, as the company’s Website Plagiarism Specialist.  Daigle recommends using the website Copyscape and Google Alerts to help find offenders.

According to Daigle, when an offender is first identified, all relative evidence of the infringement is collected and saved.  Next, Mills and Daigle send a “cease and desist” letter notifying the offender of the laws against copyright infringement as a direct violation of the Digital Millennium Copyright Act (DMCA) and International Law. They give the offender 72 hours to correct the issue before turning the violators over to the firm’s law firm. 

  
In an economy where online commerce is crucial, protecting oneself against Web site plagiarism is absolutely essential to the small and mid-sized business owner.

  
But B2B CFO’s challenges with eager copycats did not end online.   The company has recently uncovered a case of another business using B2B CFO copyrighted materials offline as well.   To properly handle this case and to ensure that a proper precedent is set for any future theft of intellectual property, B2B CFO has filed a lawsuit against Kenneth Kaufman and CFO Wise citing infringement of copyrighted materials.

Mills advises copyright owners to consult with an attorney to see if the laws related to RICO (Racketeer Influenced and Corrupt Organizations Act) might help them in protecting their copyrighted assets by filing criminal copyright infringement, as well as asking for treble damages in a lawsuit.  

The ongoing theft and plagiarism have left Mills and his Partners in B2B CFO committed to continuous monitoring and protecting the company’s intellectual property.   

“We all have a vested interest in our company’s future,” said Mills. “And it is great to see the entire company united in our goal to eliminate cases of theft and plagiarism.”

Mills advises fellow business owners to take proper measures to protect the intellectual property of their Companies.   “Protect your rights by filing for trademarks, copyrights, and patents, and by having strict confidentiality agreements,” said Mills. “But know that regardless of your efforts, some will disregard these rights and steal your intellectual property.   Having proper documentation and protection upfront might help your employees and legal team with the tools to protect your intellectual property.”

ABOUT B2B CFO^®

B2B CFO^® is the nation’s largest CFO firm serving entrepreneurial, growth and mid-market companies with sales up to $75 million.  Headquartered in Phoenix, AZ and operating in 39 States, the firm was founded in 1987 by Jerry L. Mills.  The firm’s partners have an average of 25 years of experience and each partner is a senior level executive with a broad range of expertise.   For more information on the company, please visit www.b2bcfo.com

Jerry L. Mills, founder and CEO of the company, is a small business expert and a national speaker.  Mills is the author of “The Danger Zone – Lost in the Growth Transition” and “Avoiding The Danger Zone – Business Illusions” – non-fiction business books aimed at entrepreneurs.   To purchase a copy, please visit online at www.dangerzonebook.com.

MUST READ - QuickBooks Backups – a Primer and Disaster Story

I was recently contacted by the office manager of a property management company. They had recently experienced a disk drive crash on the computer used by the office manager. This drive also contained the active QuickBooks Company file. Their IT people had a backup process in place so initially there was no major concern.

It was only after the IT folks repaired the PC and restored data from backup media did they discover there was a problem with the QuickBooks company file. That’s when I was called in to help. What I found was a situation I routinely find when I first visit a new client or potential client. The IT people treat the QuickBooks company file as any other file when it comes to their backup methodology. Meaning, they simply include a Windows file copy of the QuickBooks company file onto the backup media.

THAT IS NOT SUFFICIENT and can result in data loss if the backup has to be restored!

Why is that? Because the QuickBooks data file is very much like a relational database (in the case of Enterprise it actually is a SQL Server) and has internal links and relationships which must have “referential integrity”. I won’t go into definition of that term but trust me when I tell you it is important!

These internal links and relationships can sometimes get broken over the course of time if there is an unstable IT environment. PC crashes, network disconnections, power failures, etc., are events which can cause a problem with referential integrity of the QuickBooks data.

So, how would you know if something caused an internal QuickBooks data problem? Simple! QuickBooks has its own Backup utility which will do a data verification every time the company file is backed up. In the event a data corruption occurs an error will appear and prompts you to Rebuild the data. At that time the Rebuild utility will run through the entire QuickBooks company file and repair any problems.

When the QuickBooks Backup utility is not used internal data corruption can continue to degrade the viability of the accounting data until the company file cannot be opened. Having the IT people restore a company file backed up with the Windows backup utility will only restore a corrupt company file. At that point you will experience data loss because the IT people will have to keep going back in time to find a viable backup file which QuickBooks can open.

In the case of the Property Management firm that called me in September, they had lost all 2009 data. As a last resort I sent the company file to Intuits Data Recovery team. The data was unrecoverable even by this team of experts.

A message to all B2B CFO Partners whose clients are using QuickBooks . . . . . please make sure they are regularly backing up their QuickBooks company file with the QuickBooks Backup utility. Do NOT take the word of the IT people that they are backing up the data. Make them show you!

If there are any doubt that the QuickBooks company file is properly protected feel free to call me at 404-787-5835.

Using TimeSlips to Create DashBoards for Professionals

As I continue to work with a law firm client we are developing better reports & dashboard for tracking the performance of the entire staff. We are now at the point where we want to implement a bonus plan which will drive the behaviors we want to increase revenue and profit. In order to implement that we must have the tracking mechanism in place.

Using the standard reports delivered in TimeSlips and changing a few filters to get the applicable data I am now able to produce a report like this for each staff member:

The data is extracted in the following manner:

This represents the Total Hours recorded in TimeSlips  this data is from the “Productivity by Period” report. Open this report, add a filter for the Slip Transaction Date, and a Sort by Professional. This will produce the month by month numbers for this line. You have to add Billable and Unbillable hours to get this line.

This represents the Hours recorded working on Client Files – this data is from the same report with another filter added to eliminate time not spent on client files. In our case we have non-client activities like marketing and vacation recorded to a “Non-Billable” client. For this line I filter “Non Billable” client activity out.

This represents the Billable Hours recorded  - this data comes from the report you just ran. For this line select only the Billable hours.

This represents the Fees Billed – this data comes from the Profitability by Period report. Like the previous reports you add a filter for the Slip Transaction Date, and a Sort by Professional. In the Report Options you want to check “Include Totals” and “Billed values reduced by credits”. The data for this line is labeled “Billed Total”.

The Effective Hourly Rate for Billable Activity -  this is calculated as Fees Billed / Billable Hours recorded.

The Effective Hourly Rate for All Client related Activity – this is calculated as Fees Billed / Hours working on Client Files.

The Effective Hourly Rate for All Activity – this is calculated as Fees Billed / Total Hours.

The Effective Hourly Payroll rate – this is calculated by taking the Gross Payroll expense for this professional / Totals Hours.

Hourly Contribution to Revenue – this is calculated as Effective Hourly Rate for All Activity minus Effective Hourly Payroll rate.

Contribution To Revenue – this is calculated by multiplying the Hourly Contribution to Revenue by Total Hours.

The metric you want to see trend up over time is Billable Hours recorded. If this goes up then all the other metrics will trend up. To influence this metric you must put all the workplace tools and processes in place to enable the revenue generating staff to spend as much time as possible on billable activity. Revenue generators should not spend time on administrative tasks. All staff should have a workplace and tools which allow them to be as efficient as possible.

If you enable professional staff to be efficient, to improve their workplace performance, and provide incentives to improve you will drive the behavior you want and end up with more cash!

What do 3-Time NASCAR Champ & B2B CFO^® have in common?

Goal Clarity!

Jimmie Johnson is the #48 Lowe’s car driver in the NASCAR Sprint Cup series. He has won the last 3 championships and is the car to beat each of the remaining 6 races. I personally do not think any other driver/team will beat Jimmie for the 2009 championship, or any year in the foreseeable future.  Why? Two reasons . . . . Goal Clarity and Crew Chief Chad Knaus!

Jimmie is clearly one of the best drivers in the Sprint Cup. But, he is not really any better than some of the other top 10 drivers like Tony Stewart or Jeff Gordon, both repeat champions. Nor is his equipment better than the other teams. NASCAR has gone to great lengths to impose parity in that regard.

So what separates the #48 team from the rest?

Certainly goal clarity plays a big part. From the beginning of the season when practice begins everyone on every team knows that the Championship team is not the one with the most wins . . . . the championship team usually does not have the most wins. It is the one with the most top 10 and top 5 finishes as well as wins, and fewest mistakes made!

So, if everyone on every team knows this why has Jimmie won the past 3 years and will the next 5?

Chad Knaus! When it comes to crew chiefs this guy is hands down the best! The Tiger Woods of NASCAR. Chad is crystal clear about what it takes to get his car to the points lead. If his car is good enough to win that day they usually win. If it’s not good enough to win then he will make it good enough for a top 5 finish. And if it’s not good enough for a top 5, he’ll make it good enough for a top 10. But, equally as important . . . . the team will make no mistakes! They won’t have the fastest pit times, but they won’t drop lug nuts or run over air hoses. That is the real key. I have never seen the #48 team make a mistake in the pits.

It is really interesting to watch and listen to Jimmie and Chad talking during the race. They can be running at the back of the pack but they are calmly talking about what the car is doing at that point of the race. At each pit stop adjustments are made to make the car a little better. In almost every race Chad has put Jimmie in position to win in the last 20 laps.

The difference between 1^st and 2^nd place now with 6 races remaining is 12 points. Both drivers have the same number of wins and top 5 finishes. Jimmie has one more top 10 finish.

Goal Clarity is fundamental to success. Having the right goals wins championships.

Title: Inspirational People – More Examples of Goal Clarity

Dr. Robert Langer . . . . Colonel Pamela Melroy . . . . Dr. Irwin Jacobs . . . . what do these people have in common?

In one of my volunteer roles I am the chairperson of the Sponsorship Committee for the Atlanta Chapter of the MIT Enterprise Forum. The mission of this non-profit organization is to provide programs, training, and support for the entrepreneurial community in Atlanta. I get to rub elbows frequently with the members of the Executive Committee and Advisory Board, all of whom are MIT alumni or community leaders in one way or other.

This seasons programming includes programs featuring the above mentioned people, and each of them have truly remarkable stories.

Robert S. Langer is the David H. Koch Institute Professor at MIT. (There are 14 Institute Professors at MIT; being an Institute Professor is the highest honor that can be awarded to a faculty member.) Dr. Langer has more than 750 issued or pending patents worldwide. He has published more than 1,000 articles and earned more than 150 major awards.

Colonel Pamela Melroy has flown more Space Shuttle missions than any other NASA astronaut.  Melroy served as pilot on two flights and was the mission commander for another.  She has logged over 924 hours (more than 38 days) in space.  Pam Melroy left the agency in August 2009 and now serves as Deputy Program Manager, Space Exploration Initiatives, Lockheed Martin. Prior to the Space Program, Col. Melroy was a test pilot in the USAF.  She is a graduate of Wellesley College and earned a masters degree at MIT.

Dr. Irwin Jacobs is a professor, lifelong entrepreneur, and quite possibly the godfather of wireless technology.  He started his first communications consulting company in 1968 and sold it for millions, retiring in 1985.  Three months later he started Qualcomm in his den with 6 other former employees. By 1989 they demonstrated their cell phone technology to the industry and introduced it commercially in 1995. Current Qualcomm revenues are $2.75 billion with thousands of employees worldwide.

These people could not have accomplished what they have in their respective careers without having and practicing goal clarity constantly. You don’t just wake up one day and find you have accomplished many great things. You have to know what the goals are, how you will get there, and work hard every day to reach the goals. There is no magic formula for success.

I am fortunate to be involved in this organization. I get to be part of a wonderful community effort and make a real contribution by adding sponsors. I have made this a part of my goals. My goal is to have more sponsors by the end of my term than the organization has ever had.

I’m now off to hear Dr. Langer speak.

Effective November 1, 2009 the new "Red Flag Rules" go into effect. Is your business affected by this? Do you know what will be required of your business in order to comply?

Many businesses will be required to comply with the requirements of these new rules which will be enforced by the Federal Trade Commission (FTC) and the National Credit Union Administration (NCUA). You may need to develop a written program to prevent, detect, and minimize therisk and damage from identity theft.

The good news is that there is a wealth of material available to learn about the new rules and how to develop a program for compliance. Additional good news is that the partners at B2B CFO^®  are standing by and ready to assit you to determine if you are required to implement a program, and quickly develop adn implement a program.

You can find a wealth of information at the FTC website, http://www.ftc.gov/redflagsrule. Additionally, the following article may be helpful.

Contact Rick Daigle, rdaigle@b2bcfo.com, 404-787-5835, for a complimentary assessment to determine if you must comply with these new Red Flag Rules.

The “Red Flags” Rule: Are You Complying with New Requirements for Fighting Identity Theft?

by Tiffany George and Pavneet Singh

The expression “red flag” signals “Danger: Be alert to problems ahead.” For millions of consumers every year, identity theft is more than a threat — it’s their reality. The economic, psychological, and emotional harm to victims can be devastating. But businesses often bear the biggest part of the monetary damage from identity theft.

It’s everyone’s responsibility to do what they can to fight identity theft. But businesses and organizations that offer credit or other financial services can be the first to spot the red flags that signal the risk of identity theft, including suspicious activity indicating that identity thieves may be using stolen information like names, Social Security numbers, account numbers, and birth dates to open new accounts or raid existing ones.

Under the Red Flags Rule, which went into effect on January 1, 2008 *, certain businesses and organizations are required to spot and heed the red flags that often can be the telltale signs of identity theft. To comply with the new Red Flags Rule — enforced by the Federal Trade Commission (FTC), the federal bank regulatory agencies, and the National Credit Union Administration (NCUA) — you may need to develop a written “red flags program” to prevent, detect, and minimize the damage from identity theft.

Are you covered by the Red Flags Rule? If so, have you put into place the new procedures the Rule requires?

Who Must Comply

Although every business or organization with an ongoing relationship with consumers should keep an eye out for the possibility of identity theft, the Red Flags Rule applies only to “financial institutions” and “creditors." To determine if your business or organization is covered by the Rule and required to develop a written identity theft Program, you’ll need to answer two questions:

1. Is your business or organization either a “financial institution” or “creditor,” as those terms are defined in the Rule?
2. If so, do you have “covered accounts”?

A “financial institution” is a bank, savings and loan, credit union, or other entity that holds a “transaction account” belonging to a consumer. A “transaction account” is an account that allows the owner to make payments or transfers. Examples include checking accounts, savings accounts that permit automatic transfers, and share draft accounts. Another example would be a brokerage account that allows consumers to write checks.

Your business or organization is a “creditor” if you regularly:

• extend, renew, or continue credit;
• arrange for someone else to extend, renew, or continue credit; or
• are the assignee of a creditor who is involved in the decision to extend, renew, or continue credit.

Under the Rule, “credit” means an arrangement by which you defer payment of debts or accept deferred payments for the purchase of property or services. In other words, payment is made after the product was sold or the service was rendered. Some examples of creditors are finance companies, automobile dealers, mortgage brokers, utilities, and telecommunications companies. Even if you’re a non-profit or government agency, you still may be a creditor if you accept deferred payments for goods or services. However, simply accepting credit cards as a form of payment does not make you a creditor under the Rule.

If you determine you’re a financial institution or a creditor, the next step is to see if you have “covered accounts.” There are two types of covered accounts. One is an account used mostly for personal, family, or household purposes that involves multiple payments or transactions. Examples include credit card accounts, mortgage loans, car loans, margin accounts, cell phone accounts, utility accounts, and checking or savings accounts.

The other is one for which there is a foreseeable risk of identity theft. For example, one type of account that should be considered for coverage because it may be vulnerable to identity theft is a small business or sole proprietorship account. In determining whether you have such an account, consider the risks associated with how the accounts may be opened or accessed — i.e. what type of interaction and documentation is required — as well as your experience with identity theft.

If your business or organization is a financial institution or creditor, but does not have any covered accounts, you don’t need a program. But if you have covered accounts, you must develop a written program to identify and address the red flags that could indicate identity theft.

How To Comply

The Rule doesn’t tell you specifically what your red flags program must look like. Instead, it gives you flexibility to implement a program that best suits your business or organization, as long as it meets the Rule’s requirements.

Your starting point for developing a program is the Guidelines issued with the Red Flags Rule, available at www.ftc.gov/os/fedreg/2007/november/071109redflags.pdf. (The Guidelines are on pages 63773-63774 of the document.) The Guidelines list the issues you must consider in developing and maintaining a program appropriate for your business or organization. You also should draw on your own experience and knowledge about identity theft risks in developing your program.

There are four basic steps to designing a program to comply with the Rule:

1. Identify relevant red flags;
2. Detect red flags;
3. Prevent and mitigate identity theft; and
4. Update your program periodically.

In addition, your program must spell out how it will be administered. The program should be appropriate to the size and complexity of your company or organization, as well as the nature of your operations.

Identify Relevant Red Flags

Under the Rule, financial institutions and creditors with covered accounts must develop a written program to identify the warning signs of identity theft.

The Guidelines describe the following categories of warning signs — red flags — that your program must identify and address:

• alerts, notifications, or warnings from a consumer reporting agency;
• suspicious documents;
• suspicious personally identifying information;
• suspicious activity relating to a covered account; or
• notices from customers, victims of identity theft, law enforcement authorities, or other entities about possible identity theft in connection with covered accounts.

When identifying red flags, consider the nature of your business and the type of identity theft to which you might be vulnerable.

Detect Red Flags

Once you’ve identified the red flags that are relevant to your organization or business, you must establish policies and procedures to detect them in your day-to-day operations.

For example, you may spot red flags when you verify a consumer’s identity, authenticate customers, monitor transactions, or verify requests for changes of address. Some red flags may seem harmless on their own, but can signal identity theft when paired with other events, say, a change of address coupled with the use of an address associated with fraudulent accounts.

Prevent and Mitigate Identity Theft

Your program must include appropriate responses to your red flags to prevent and mitigate identity theft. These responses could include monitoring an account, closing an account, not opening a new account, contacting the consumer when you spot a red flag, or a combination. Sometimes you may determine that no response is necessary. In other cases, certain events — such as a recent data breach, a phishing fraud that targeted your business or organization, or another suspicious activity — may raise the risk of identity theft and require specific preventive actions.

Update Your Program Periodically

Because identity theft threats change, your program must describe how you will update it to ensure that you are considering new risks and trends.

Administering Your Program

No matter how good your program looks on paper, the true test is how it works. Your program must describe how it will be administered, including how you will get the approval of your management, maintain the program, and keep it current.

According to the Rule, your program must be approved by your Board of Directors or, if your business or organization doesn’t have a Board, by a senior employee. The Board or designated senior employee also must approve any material changes to the program. Your program should include staff training as appropriate, and provide a way for you to monitor the work of your service providers. The keys are to maintain oversight of the program, keep it relevant and current, and ensure that all necessary members of your staff — from the boardroom to the mail room — are on board. A program that stays in a filing cabinet isn’t a good program.

Penalties for Noncompliance

Although there are no criminal penalties for failing to comply with the Red Flags Rule, financial institutions or creditors that violate the Rule may be subject to civil monetary penalties. But there’s an even more important reason for compliance: It’s just plain good business. It assures your customers that you are doing your part to fight identity theft.

Have questions about how health care providers can comply with the Rule? Email RedFlags@ftc.gov.

* On October 22, 2008, the Federal Trade Commission issued an Enforcement Policy statement that delays enforcement of the Red Flags rule until May 1, 2009 (http://www.ftc.gov/opa/2008/10/redflags.shtm). Although the Rule is in effect, the FTC will wait until May 2009 to enforce it. This does not affect enforcement of the address discrepancy and credit card issuer rules. Nor does it affect compliance for entities not under the jurisdiction of the Commission.

Tiffany George and Pavneet Singh are attorneys in the Federal Trade Commission’s Division of Privacy and Identity Protection.

Title: Osprey Parenting - A lesson in Goal Clarity from Mother Nature

Osprey - Pandion haliaetus - One of the largest birds of prey in North America.

This past Saturday my wife and I were relaxing on our dock at Lake Allatoona. Just down the shore from our cove is an osprey nest. We have watched in awe year after year as the resident osprey couple hatches and raises another set of chicks. In the past 15 years we have watched numerous chicks raised and leave the nest. But in all that time we have never actually seen the father osprey catch a fish for the family.

As we were enjoying the calmness I noticed an osprey hovering and circling at the end of our cove. I told Mary I thought he had found the next meal. Sure enough seconds later the osprey dove into the water, came up with a fish, and flew by us returning to the nearby nest. As I watched in awe at the beauty and simplicity of the moment the seed was planted for my next blog article on goal clarity

For a period of 4 months or so, while the mother is hatching, raising, and protecting the chicks, it is the father osprey with the sole responsibility of providing 6 fish per day for the family. Now that is goal clarity! And that is the same type of almost single-minded focus business owners must have in order to remain successful today. Business owners who can identify and focus on the 1 or 2 things which are most important to their business while virtually ignoring all else will be successful and grow a great business.

In many cases the things a business owner must focus on are somewhat predictable; what do I need to do to increase sales? What do I need to do to improve profit? What do I need to do to control costs? How can I find better people to help me run my business? Do I have the right systems, technology, and business process in place to optimize the use of time and resources?

The smartest and best business owners learn from the lessons of successful people and organizations. They read good business books like “Good to Great”, “The Road to Organic Growth”, and of course, “The Danger Zone”. They also search out mentors and other professional resources to support them.

In the natural world around us there are ample lessons to be learned, and these lessons can be applied to our business and personal lives.

If you think you have it tough, go catch a fish with your bare hands!!!

I January I started work with the owner of a specialty law practice. The owner wanted help in 2 broad areas. First, he wanted help, or really someone to take over the financial operations of the practice so he could focus on the business, clients, and staff. Second, he wanted to grow the business by adding lawyers and paralegals.

The first two months were spent implementing QuickBooks as the accounting solution, and integrating systems and processes to get data from Amicus Attorney and TimeSlips into QB. This was followed by two months working off old WIP from the past 3 years, invoicing and collecting for work done in the past 3 years, and general clean up of the timekeeping and activity tracking system. The next two months were used to put more formality, documentation, and discipline into the accounting and recordkeeping systems.

During this period I also tried to find a local expert resource in TimeSlips. I was not able to find an acceptable resource so I rolled up my sleeves and learned how to use the TimeSlips reporting capabilities to extract statistics which we could use to implement a formal measurement system.

In many law firms the key revenue driver is billable hours. So, once the historical basis is set regarding the billable hour % for each timekeeper you can set a goal for increasing the billable %. This should also be accompanied by a reward system designed to drive the desired behavior and outcome.

Through the analysis of TimeSlips data I was able to extract this billable performance for the firm:

So, an increase in billable activity of only 5% would have covered all payroll and benefit related cost for a payday. A 10% increase would have covered payroll and benefit related costs for a month. And this is from a team of two lawyers and one paralegal. We have recently added another paralegal to staff, and will add another lawyer next month.

Next I had to analyze the slip details for the non-billable activities to determine what the revenue generating staff doing which might be eliminated or reassigned. I used this data to prepare for a meeting with the owner to present a plan which included changes in staff job responsibilities, a P&L projection, and Cash Flow projection. The projections showed us ending the year with $465,000 cash in the bank. We started the year with $20,000.

The owner looked at me and asked if I was serious! When I replied that I was most certainly serious he asked me to prepare for a presentation at the next staff meeting a few days later. That occurred today and the presentation was met with much enthusiasm.

In conclusion, the detailed data contained in the TimeSlips database holds some valuable information. You can use this data to develop a systematic approach to increasing revenue and implementing a great measurement system.