Prepare for increasing business regs

Author Keith Jennings
August 01, 2009 - 12:00pm

As an owner or manager of a machining business, you have your hands full dealing with matters from the front office to the shop and everything in-between. Even so, nonproduction issues seem to be an increasing burden. With the dismal economic environment, just generating sales and paying insurance and other bills is bad enough, and now more responsibilities are being thrown at you in the form of expanded regulations that you’re supposed to understand and adhere to.

One thing that’s certain is shops need to get ready for greater scrutiny by government agencies. This includes more Internal Revenue Service audits of businesses supposedly chosen by “statistical sampling.” According to a speech given to the American Payroll Association, Anita Bartels of the IRS announced a forthcoming program that will increase audits of businesses for the next 3 years. My research doesn’t indicate machine shops will be specifically targeted, but many fall within the criteria for being more closely monitored on worker classification practices, officer/director compensation and fringe benefits. Even if your shop is in compliance, it can’t hurt to conduct an updated review of these activities.

Areas that haven’t been much of a concern will become more so as government agencies seek new revenue sources to pay for expanding services. Not only will the IRS be conducting more business audits, but some of the health care legislative proposals call for employees to be taxed for their employer-paid medical insurance premiums, which are currently tax deductible. If that’s not enough, company-paid cell phones are also a target; the IRS would like to tax personal calls made on those phones. I can see a record-keeping nightmare forming already. Some of this legislation is still being debated and maybe all of it won’t be implemented. However, there’s no doubt the environment is ripe for approval of such measures, in which case the likelihood of your shop being impacted is high.

Is there anything you can do to ensure you’re focusing on making great parts and not sidetracked with burdensome record keeping and other forms of compliance? Aside from the usual communication with legislators and support of trade organizations lobbying on manufacturers’ behalf, you should expect to deal with these issues in some form. First and foremost, a good accounting system and clean set of books is mandatory. Using an outside accounting firm to review and audit financials each month or quarter is highly recommended.

Hiring an outside payroll company that’s aware of evolving requirements is also wise. Many of them are hungry for clients, so now may be a great time to find a firm to handle your payroll or reevaluate your existing supplier to ensure its rates are competitive. Having them as a resource can provide serious peace of mind.

If you’re a small shop and able to handle payroll functions internally, a knowledgeable accountant or payroll consultant is essential to ensure you’re in compliance.

Whatever your situation, now is the time to clean up record-keeping procedures, verify payroll is set up properly, make sure you’re logging all those miles driven for company business, properly identify lunch receipts, keep personal calls on the company cell phone to a minimum and whatever else may better prepare you for possible regulatory review. When dealing with regulators, it’s much less stressful knowing your books are clean, your records are in order and you’re adapting to an ever-evolving situation—even if it doesn’t make any sense. CTE

About the Author: Keith Jennings is president of Crow Corp., Tomball, Texas, a family-owned company focusing on machining, laser cutting, metal fabrication and metal stamping. He can be e-mailed at 


Manager's Desk Columnist

Keith Jennings is president of Crow Corp., Tomball, Texas, a family-owned company focusing on machining, metal fabrication and metal stamping.