On the heels of a study that points out the imbalance in proportionate costs for small companies to comply with SOX, Accounting Today reports that The House Financial Services Committee voted that small and midsized public companies should be exempt from Sarbanes-Oxley audit requirements.

The result is a pending bill (Investor Protection Act) that will continue making its way through the legislative process.  But if it does progress it will be a game-changer for companies with market caps under $75 million, as the cost of audits has proven significant enough to alter companies’ strategy and perhaps even hold them back from peak performance. CFO magazine highlights the relief of small companies everywhere in this recent story, in which they note that:

Many financial executives say an exemption would mean the same level of integrity in their financials but with less cost. “We have a fairly good system of internal controls, and we’d like to keep that for our own well-being as much as anything else,” says Marty Schwenner, CFO of digital-power and motion-control systems manufacturer Magnetek, a company whose market cap dropped it from the accelerated filer range to the nonaccelerated filer range this year. “We view internal control as something that’s our responsibility whether or not Congress tells us it’s something that is.”

Mr. Schwenner took the words right out of my mouth, and I applaud his sense of obligation.  Internal controls will always be a crucial piece of the business that streamlines financials and paves the way for airtight fraud prevention, regardless of audit requirements.  We encourage non-accelerated filers to enjoy the potential relief of the exemption, but to remain vigilant when it comes to maintaining and monitoring their financial controls.

I shared - and gained - valuable insight participating in a panel entitled “What keeps you up at night?  Solving strategic financing challenges for today’s lean manufacturers“ for the Greater Boston Manufacturing Partnership last week.  Our panel discussion was focused on partnerships, mergers and acquisitions, and joint ventures, and it was interesting to see the parallels between evolving strategies for growth and the manufacturing drive for continuous improvement.

From a manufacturing perspective, specific management and execution models like Lean and Six Sigma become critical to not just propping up a company, but providing a process that yields ongoing benefits and maximizes shareholder exit value. Proactive work on the accounting and financial controls side, meanwhile, calls for a similar commitment to process and can similarly add value to an organization’s exit price.

A couple of key themes that arose during the panel included the significance of having transparent and current financials, and the necessary attention required for to problem-solving that truly gets to the root of the issue (in particular, the need to ask “why?” five times).

I appreciate the opportunity from the GBMP and look forward to contributing more in the future!

There has been a lot of discussion about the potential benefits of converting from a traditional IRA to a Roth IRA, spurred on by new rules that go into effect in 2010. Starting next year, the $100,000 income ceiling will be eliminated and married individuals filing separately will be allowed to convert a traditional IRA to a Roth IRA.

Determining whether you should convert can be a complicated and difficult decision. You must weigh the benefits against the income tax consequences and other potential drawbacks.

Here’s a quick rundown of advantages of converting:

- Qualified distributions from the Roth IRA will be completely tax free

- For nonqualified distributions from the Roth IRA, the portion of the distribution that represents your contribution is not taxable

- You do not have to take required minimum distributions from the Roth IRA after age 70½

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