Cyber Security & Fraud Prevention Measures for Manufacturers

Manufacturers large and small should be aware of the risks and defenses against cyber attacks and fraud. In its 2016 Cyber Security Intelligence Index, IBM X-Force Research group found that the manufacturing industry was the second most frequently attacked industry during 2015.  At the same time, the 2015 Manufacturing & Distribution Monitor survey conducted by RSM US found that 63 percent of manufacturers are uneasy about their ability to monitor and safeguard sensitive customer data from unauthorized access. 

For manufacturers, intellectual property, bank account and payroll systems are key targets for cyber criminals. Fraud schemes known as masquerading involve impersonating a supplier and requesting a wire transfer of funds. 

Intellectual Property
Based on one FBI estimate, blueprints, chemical formulas and other material stolen from U.S. corporate computers in 2010 reached almost $500 billion. David Pollino, Fraud Prevention Officer for Bank of the West outlines steps to protect against intellectual property espionage: 
  1. Define the intellectual property.  
  2. Identify all storage/locations. 
  3. Keep a current list of all the people (internal and external) who know company and trade secrets. 
  4. Give employees and vendors access to only the information needed to do their jobs.
Cyber Security
Bank accounts and payroll systems are particularly attractive to cyber criminals. Viruses can be used to transfer funds from bank accounts and payroll systems that house Social Security data. Pollino suggests basic cyber security measures should include: 
  1. Installing up-to-date anti-virus software.
  2. Education for employees about suspicious electronic communications.
  3. Enforcing two-factor authentication. 
  4. Maintaining a separate administrator account. 
Wire Transfer Fraud
In this fraud scheme, the criminal poses as a legitimate vendor and contacts the controller or other authorized person either by phone or through an email and requests a wire transfer of funds. Pollino suggests four steps to prevent this crime (also known as masquerading): 
  1. Put an approval process in place for large transactions.
  2. Use a purchase order model for wire transfers.
  3. Confirm and reconfirm the request through several communication methods. 
  4. Stay in touch with your bank.
These simple but effective measures can help a company reduce its exposure to fraudulent activity.

For more information, contact Scott Olinger, CPA, CGMA, CPIM at 800.880.7800 ext. 8466, or solinger@hsccpa.com. 
WOTC certification forms submission deadline extended to September 29, 2016
The deadline to submit WOTC certification forms for targeted groups hired between January 1, 2015 and May 31, 2016 has been extended a second time to September 29, 2016. 
The IRS issued guidance and transition relief to employers claiming the Work Opportunity Tax Credit (WOTC). The WOTC allows a credit for a portion of wages paid by taxable employers that hire employees who are members of targeted groups or wages paid by tax-exempt organization (as defined under section 501(c)) who hire qualified veterans. Many of the provisions of the WOTC were retroactively extended by the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) through Dec. 31, 2019. The PATH Act also amended the WOTC provisions to expand the definition of targeted groups to include qualified long-term unemployment recipients. The WOTC allows employers a credit for a portion of wages paid to certain new employees who are qualified veterans or are members of targeted groups.

Employers now have until September 29, 2016, to submit Form 8850 to DLAs for members of the following targeted groups hired between Jan. 1, 2015, and May 31, 2016:

Qualified IV-A recipients, Qualified veterans, Qualified ex-felons, Designated community residents, Vocational rehabilitation referrals, Qualified summer youth employees, Qualified supplemental nutrition assistance program benefits recipients, Qualified SSI recipients; and 
Long-term family assistance recipients.
The September 29, 2016, deadline also applies to an employer that hires a qualified long-term unemployment recipient between Jan. 1, 2016, and May 31, 2016. The term qualified long-term unemployment recipient means any individual who is certified by the DLA as: 
  • Being in a period of unemployment not less than 27 consecutive weeks.
  • Being in a period of unemployment that includes a period of time in which the individual was receiving state or federal unemployment compensation.
This guidance and transition relief provides employers with an opportunity to review their 2015 and 2016 hiring history and retroactively obtain certifications for employees falling under the definition of targeted groups or qualified long-term unemployment recipients in order to claim the WOTC on their 2015 and 2016 tax returns.

For more details read the entire article as published by RSM US LLP here or contact John Rittichier, CPA at 800.880.7800 ext. 8484, or jrittichier@hsccpa.com.
Disaster Recovery: Seven Questions Companies Should Ask -- and Answer about Their IT Systems
Disaster recovery planning is vital for every company, and a critical element of that plan must include IT Systems. Should disaster strike, an effective IT System recovery plan ensures that a company can continue to do business and serve customers. 
How prepared is your company to recover from a disaster affecting your IT systems? The answer to that question hinges on the answers to seven important questions. 
  1. Has your company embraced the importance of a disaster recovery plan?
  2. Are you thinking about the business, not just your systems?
  3. Do you know who knows what?
  4. Are you taking advantage of virtualization (the cloud)?
  5. How and where are your systems duplicated?
  6. Your disaster plan doesn't stop at the door, does it?
  7. Is everything documented and tested?
For more details on these seven questions, read the entire article as published by RSM US LLP here or contact Kyle Wininger, CPA, CICA, CVA, CFE at 800.880.7800 ext. 1412, or kwininger@hsccpa.com.
Raising Your Interest in Working Capital

The cash collection cycle (CCC) is an important measure of overall working capital performance. The CCC is a measure of how quickly a company collects on receivables, how much inventory they keep on hand, and the amount of time they take to pay their payables. Companies that work to improve their CCC will have an advantage over competitors by having better working capital that consists of less debt. In other words, this means more cash and less interest expense.

Reducing accounts receivable is the obvious way to improve CCC. If a company can collect sales faster, they will have more cash available. Collecting sales faster requires timely billing, verbal communication, and a strict credit-granting policy. Lowering inventory investment is another way to decrease the CCC. Inventory levels can be decreased by discounting outdated inventory, keeping only necessary inventory levels, and partnering with vendors to supply inventory on a consignment basis. The CCC can be further decreased by extending payment of accounts payable and negotiating better terms with vendors.

Decreasing the CCC is an effective way to increase working capital, without debt, saving you valuable dollars in interest expense.

For more information, read the entire article here or contact contact Scott Olinger, CPA, CGMA, CPIM at 800.880.7800 ext. 8466, or solinger@hsccpa.com.

From increased competition and continuous quality improvement demands to rising employee benefit costs and declining margins, manufacturers and wholesale distributors are facing greater challenges than ever before. In addition to the services you would expect from an accounting firm, we have a dedicated team ready to assist you with the unique challenges and issues facing your industry.

A number of our staff members belong to The Association for Operations Management (APICS) with some having achieved the CPIM and CIRM certifications. We understand your key issues and possess the drive and determination to help you manage your company on a proactive basis. This commitment positions us at the cutting edge of the industry and enables us to spot trends and deal quickly with the issues your company may be facing.

"When I started working in the family-owned business 40 years ago, Flanders had only seven employees. Today, we have approximately 650 employees and operate in 5 countries. Our relationship with HSC has been a key asset in achieving this growth. They have provided innovative ideas in tax strategies, operations, and succession and estate planning. HSC serves with a 'client first' attitude."

- David Patterson, Co-owner, Flanders
Disclaimer: The information contained in this email is for general guidance on matters of interest only. The publication does not, and is not intended to provide legal, tax or accounting advice.

Harding, Shymanski & Company, P.S.C.
800.880.7800 | info@hsccpa.cm  | www.hsccpa.com 

View our profile on LinkedIn