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When Does a Hospitality Business Need More Than Just Basic Bookkeeping?

For many hospitality businesses, bookkeeping is where financial management begins.Recording transactions, reconciling accounts, and generating financial statements are all important functions. However, as a business grows, basic bookkeeping may no longer provide the information needed to make strategic decisions.The question is not whether bookkeeping is important. The question is whether it is providing the …

For many hospitality businesses, bookkeeping is where financial management begins.

Recording transactions, reconciling accounts, and generating financial statements are all important functions. However, as a business grows, basic bookkeeping may no longer provide the information needed to make strategic decisions.

The question is not whether bookkeeping is important. The question is whether it is providing the insights needed to manage a more complex operation.

Bookkeeping Records What Happened

Bookkeeping serves an essential purpose.

It helps track:

  • Revenue
  • Expenses
  • Payroll
  • Accounts payable
  • Bank activity

This information creates the foundation for financial reporting and tax compliance.

However, bookkeeping is primarily focused on recording historical activity. It tells you what happened, but not always why it happened or what actions should be taken next.

Signs Your Business May Need More Financial Support

As hospitality businesses grow, owners often need deeper financial analysis and planning.

Common indicators include:

Multiple Revenue Streams

Restaurants, hotels, breweries, event venues, and entertainment businesses often generate revenue from multiple sources.

Understanding profitability by department, service line, or location becomes increasingly important as operations become more complex.

Expansion Plans

If you are considering:

  • Opening a new location
  • Renovating existing facilities
  • Adding services
  • Purchasing significant equipment

You may benefit from financial forecasting and cash flow analysis beyond traditional bookkeeping.

Cash Flow Challenges

A business can be profitable and still experience cash flow pressure.

If cash balances seem inconsistent despite strong revenue, additional financial analysis may be needed to identify the cause and develop solutions.

Limited Visibility Into Key Metrics

Many owners know their total revenue but have less visibility into operational performance indicators.

Understanding labor percentages, food costs, occupancy trends, and profit margins often requires more detailed reporting and analysis.

Financial Reporting Should Support Decision-Making

As a hospitality business grows, financial information should help answer questions such as:

  • Which services generate the strongest margins?
  • Are labor costs increasing faster than revenue?
  • Is a new location financially feasible?
  • How much cash is available for future investments?
  • What should be expected at year-end from a tax perspective?

These conversations move beyond bookkeeping and into financial advisory and planning.

The Value of Regular Financial Reviews

Many hospitality owners review financial statements only when preparing taxes or meeting with lenders.

More frequent reviews can provide valuable insights throughout the year.

Regular financial discussions can help identify:

  • Profitability trends
  • Cost increases
  • Cash flow concerns
  • Growth opportunities
  • Tax-planning considerations

Having accurate information available throughout the year often leads to better business decisions.

Building a Stronger Financial Function

Moving beyond basic bookkeeping does not necessarily mean hiring a full internal finance department.

Many hospitality businesses benefit from additional support such as:

  • Financial statement analysis
  • Cash flow forecasting
  • Budget development
  • Tax planning
  • Strategic business advisory services

The right level of support depends on the size, complexity, and goals of the business.

Looking Ahead

Bookkeeping remains an important part of financial management. However, growing hospitality businesses often reach a point where recording transactions is no longer enough.

Owners need information that helps them evaluate performance, plan for the future, and make informed decisions.

At DBC, we work with hospitality businesses to provide financial insights that go beyond basic bookkeeping. From reporting and forecasting to tax planning and strategic advisory services, we help owners better understand the financial side of their operations so they can focus on serving their guests and growing their businesses.

This article provides general tax and accounting insights and is not intended as advice specific to your organization or a substitute for personal consultation. We do not provide legal advice. Because every organization’s circumstances are unique, we encourage you to consult with your legal, tax, or accounting advisor regarding your specific situation.

Preparing Your Hospitality Business for Long-Term Growth

Growth can be exciting for hospitality business owners. Strong occupancy rates, increasing reservations, and positive customer feedback often create opportunities to expand.However, sustainable growth requires more than demand. It requires planning.Whether you’re considering adding a new location, renovating existing facilities, expanding services, or increasing staffing levels, preparing for growth can help reduce risk and …

Growth can be exciting for hospitality business owners. Strong occupancy rates, increasing reservations, and positive customer feedback often create opportunities to expand.

However, sustainable growth requires more than demand. It requires planning.

Whether you’re considering adding a new location, renovating existing facilities, expanding services, or increasing staffing levels, preparing for growth can help reduce risk and improve long-term success.

Start With Your Financial Foundation

Before making significant investments, it is important to understand your current financial position.

Key areas to evaluate include:

  • Cash flow trends
  • Profit margins
  • Debt obligations
  • Working capital availability
  • Seasonal revenue fluctuations

Growth initiatives often require substantial upfront costs before they begin generating additional revenue. Understanding your financial capacity helps determine what the business can realistically support.

Understand What Is Driving Growth

Not all growth opportunities create the same value.

For example, increasing occupancy rates at a hotel may require a different strategy than expanding banquet services or adding a second restaurant location.

Before investing, consider:

  • Which services are generating the strongest margins
  • Where customer demand is increasing
  • Which operational areas have room for expansion
  • Whether current demand is sustainable

Growth decisions should be based on data rather than assumptions.

Evaluate Staffing Needs Early

Labor remains one of the largest expenses in hospitality.

As businesses grow, staffing needs often increase before additional revenue fully materializes. Recruiting, onboarding, and training new employees takes time and resources.

Owners should evaluate:

  • Current staffing capacity
  • Management bandwidth
  • Training requirements
  • Employee retention trends

A growth strategy is only as strong as the team supporting it.

Plan for Capital Investments

Many growth initiatives require capital expenditures.

Examples may include:

  • Property renovations
  • Equipment purchases
  • Technology upgrades
  • New locations
  • Facility expansions

Each investment should be evaluated based on expected return, financing requirements, and long-term business objectives.

The goal is not simply to spend money on growth. The goal is to invest in areas that strengthen profitability and guest experience.

Monitor Performance as You Grow

Growth should be measured continuously.

Regular financial reviews help identify whether growth initiatives are producing the expected results. Key performance indicators may include:

  • Revenue growth
  • Profit margins
  • Labor efficiency metrics
  • Customer acquisition and retention rates
  • Operational performance and utilization measures

Monitoring performance allows owners to make adjustments before small issues become larger challenges.

Think Beyond the Next Season

Hospitality businesses often focus on immediate operational demands. Long-term growth planning requires a broader perspective.

Questions worth considering include:

  • Where do you want the business to be in three to five years?
  • What investments will support that vision?
  • How will market conditions affect future growth opportunities?

The most successful growth strategies align short-term decisions with long-term goals.

Growing with DBC

Long-term growth rarely happens by accident. It requires thoughtful planning, disciplined financial management, and ongoing evaluation.

At DBC, we work with hospitality businesses to assess growth opportunities, evaluate financial impacts, and develop strategies that support sustainable expansion. Whether you’re considering a renovation, a new location, or broader operational changes, our team can help you make informed decisions that support long-term success.

This article provides general tax and accounting insights and is not intended as advice specific to your organization or a substitute for personal consultation. We do not provide legal advice. Because every organization’s circumstances are unique, we encourage you to consult with your legal, tax, or accounting advisor regarding your specific situation.

Red Flags That Might Trigger a Construction Audit

An audit rarely arrives at a convenient time, and for construction companies, the stakes can feel especially high. Large contracts, fluctuating job costs, and complex billing structures mean that even small inconsistencies can draw unwanted attention. Many contractors are surprised to learn that the issues most likely to trigger an audit often start with …

An audit rarely arrives at a convenient time, and for construction companies, the stakes can feel especially high. Large contracts, fluctuating job costs, and complex billing structures mean that even small inconsistencies can draw unwanted attention. Many contractors are surprised to learn that the issues most likely to trigger an audit often start with everyday processes that slip out of alignment long before tax season arrives.

Understanding these red flags allows contractors to address problems early, strengthen internal systems, and reduce the likelihood of an audit disrupting their workflow or slowing down a busy season.

Inconsistent or Incomplete Job Costing

Job costing is the foundation of construction accounting. When costs such as labor, materials, equipment, or subcontractor payments are not recorded accurately, it raises questions about how revenue and expenses are being tracked. Missing or inconsistent records can signal deeper issues with financial controls.

Strong job costing practices provide clarity and show auditors that your financial reporting reflects actual project activity.

Large Fluctuations in Revenue or Profit

Construction revenue often fluctuates based on project timing, but dramatic swings without documentation attract attention. An auditor may review records closely if income appears unusually high or low compared to the previous year.

Contractors can reduce this risk by reviewing:

  • The percentage of work completed
  • Timing differences between project starts and finishes
  • Shifts in the types of projects accepted
  • Unusual cost patterns or billing cycles

Clear explanations help demonstrate that the changes are part of normal business operations.

Misclassification of Workers

Classifying workers as subcontractors instead of employees is a common issue in construction. Because payroll taxes and benefits differ, regulators examine these classifications carefully.

Red flags include:

  • Subcontractors performing the same tasks as employees
  • Workers who rely solely on your business for income
  • Missing or incomplete subcontractor documentation

Correct classification protects both your business and your workers.

Issues With Sales Tax or Use Tax

Sales and use tax rules vary widely across states. Multi-state contractors, in particular, face challenges when materials are purchased in one state and used in another, or when exempt purchases are not documented properly.

Potential triggers include:

  • Missing records for tax-exempt purchases
  • Incorrect application of rates
  • Underreported use tax obligations
  • Inconsistent documentation of material usage

Reliable tracking helps avoid compliance issues.

Poor Documentation for Subcontractor Payments

Subcontractor payments draw scrutiny when documentation is incomplete. Auditors expect to see W-9s, signed contracts, payment records, certificates of insurance, and accurate 1099 filings.

When this documentation is organized and consistent, contractors can demonstrate compliance quickly and confidently.

Inaccurate or Delayed Revenue Recognition

Construction revenue recognition is complex because projects span multiple reporting periods. Errors in applying the percentage-of-completion method or failure to update estimates can create discrepancies in reported income.

Strong WIP reporting supports accurate revenue recognition and reduces the risk of audit adjustments.

Cash-Intensive Transactions

Large or frequent cash transactions can raise questions for auditors, especially when documentation is limited. Cash payments without clear project assignments or receipts may lead to deeper investigation.

Detailed tracking helps show that all transactions are legitimate and properly recorded.

Weak Internal Controls

Internal controls play a significant role in preventing errors. Auditors often look closely at businesses with inconsistent financial practices or limited oversight. Warning signs include:

  • Unreconciled accounts
  • Missing approval processes
  • Lack of separation between financial duties
  • Irregular review of financial reports

Stronger controls reduce both mistakes and audit risk.

Preparing for a More Confident Future

Audits are far less disruptive when contractors maintain clear, consistent financial practices. By understanding what triggers auditor attention, construction companies can strengthen internal systems, reduce risk, and build a financial foundation that supports long-term stability.

At DBC, we help construction companies improve job costing, documentation, and financial controls so they can approach each year with greater confidence. If you would like support reviewing your processes or preparing for an audit, our team is ready to help.

This article provides general tax and accounting insights and is not intended as advice specific to your organization or a substitute for personal consultation. We do not provide legal advice. Because every organization’s circumstances are unique, we encourage you to consult with your legal, tax, or accounting advisor regarding your specific situation.

Tax Strategies for Managing Subcontractor Payments

Subcontractors play a central role in most construction projects. Their work influences schedules, budgets, and overall project performance. They also create specific tax responsibilities that contractors must manage carefully. When subcontractor payments are handled inconsistently or without proper documentation, it can lead to compliance issues, unexpected tax liabilities, or delays at year-end.With the right …

Subcontractors play a central role in most construction projects. Their work influences schedules, budgets, and overall project performance. They also create specific tax responsibilities that contractors must manage carefully. When subcontractor payments are handled inconsistently or without proper documentation, it can lead to compliance issues, unexpected tax liabilities, or delays at year-end.

With the right systems in place, managing subcontractor payments becomes more efficient, predictable, and aligned with tax requirements. Strong processes help contractors stay organized while building a clearer financial picture for each project.

Confirm Proper Worker Classification

One of the most important tax considerations is determining whether individuals are truly subcontractors or should be classified as employees. Misclassification is a common challenge in construction and can lead to significant penalties if not addressed.

Contractors should review whether the worker:

  • Controls their own schedule
  • Provides their own tools and equipment
  • Works for multiple clients
  • Has autonomy over how work is completed

If the contractor controls most aspects of the work, the individual may need to be classified as an employee. Accurate classification protects the business and supports tax compliance.

Collect and Maintain Proper Documentation

Before issuing any payments, contractors should collect the subcontractor’s W-9 form. This ensures that taxpayer identification information is correct and establishes whether year-end 1099 reporting is required.

A strong documentation process typically includes:

  • W-9 forms on file before work begins
  • Signed contracts outlining scope, payment terms, and responsibilities
  • Proof of insurance and licensing when required
  • Organized payment records for each subcontractor

Consistent documentation reduces risk and makes year-end reporting much smoother.

Track Subcontractor Costs by Job

Subcontractor payments must align with job costing to reflect the true cost of each project. When payments are not assigned accurately, job profitability becomes difficult to track, and tax deductions may not align with actual project expenses.

Tracking costs by project helps contractors:

  • Monitor subcontractor spending against the budget
  • Identify variances early
  • Maintain accurate WIP reporting
  • Strengthen future estimating

Clear costing improves financial visibility across the entire project portfolio.

Review Contract Terms With Tax Implications in Mind

Subcontractor agreements often include specific billing structures, retainage rules, and payment schedules. These terms influence when payments are recognized and how they appear on financial statements.

For example, retainage amounts may delay when expenses are recorded, and milestone-based billing can impact cash flow forecasting. Reviewing these terms before the project begins helps contractors plan accordingly.

Ensure Timely and Accurate 1099 Reporting

Most subcontractors require a 1099-NEC at year-end if total payments meet reporting thresholds. Missing or inaccurate 1099 filings can create penalties and additional administrative work.

To streamline compliance, contractors should:

  • Review payment totals for each subcontractor
  • Confirm taxpayer information matches W-9 forms
  • Issue 1099s before IRS deadlines
  • Maintain organized electronic and physical records

Preparing throughout the year reduces the stress of year-end reporting.

Understand When Withholding May Be Required

In rare cases, contractors may need to withhold taxes from subcontractor payments if the subcontractor does not provide valid taxpayer identification information. This is known as backup withholding. Although not common, contractors should be aware of this requirement to avoid IRS issues.

Plan Ahead for Tax Deductions

Subcontractor payments are generally deductible as project-related expenses. However, the timing of these deductions depends on the business’s accounting method.

  • Under the cash method, deductions occur when payments are made.
  • Under the accrual method, deductions occur when expenses are incurred.

Understanding how your accounting method impacts subcontractor deductions can improve tax planning and forecasting.

Strengthen Communication Between Accounting and Project Teams

Field teams often know when subcontractors complete work, submit invoices, or encounter delays. Accounting teams manage payment timing and reporting. When these groups communicate effectively, subcontractor payments become more accurate, organized, and aligned with financial goals.

Regular updates help ensure that subcontractor activity is captured correctly in both job costing and tax reporting.

Bringing Clarity to Subcontractor Management

Managing subcontractor payments effectively requires structure, communication, and a clear understanding of tax rules. With strong documentation, consistent job costing, and thoughtful planning, contractors can reduce tax risk and maintain a more accurate financial picture.

At DBC, we help construction companies strengthen their subcontractor management processes, improve compliance, and build financial systems that support confident decision making. If you would like guidance on organizing subcontractor payments or reviewing your tax strategy, our team is here to help.

This article provides general tax and accounting insights and is not intended as advice specific to your organization or a substitute for personal consultation. We do not provide legal advice. Because every organization’s circumstances are unique, we encourage you to consult with your legal, tax, or accounting advisor regarding your specific situation.

How Monthly Financial Reviews Can Improve Year-End Tax Outcomes for Agriculture Businesses

For many agricultural businesses, tax planning becomes a year-end conversation.By then, most of the year’s decisions have already been made. Revenue has been received, expenses have been paid, equipment may have been purchased, and cash flow has already moved through the business.Year-end planning still matters, but the best tax outcomes are often shaped much …

For many agricultural businesses, tax planning becomes a year-end conversation.

By then, most of the year’s decisions have already been made. Revenue has been received, expenses have been paid, equipment may have been purchased, and cash flow has already moved through the business.

Year-end planning still matters, but the best tax outcomes are often shaped much earlier. Monthly financial reviews give farmers and agribusiness owners a better view of where the year is heading, making it easier to make informed decisions before December arrives.

Tax Planning Starts With Good Information

Strong tax planning depends on accurate, timely financial information.

When books are only reviewed once or twice a year, it becomes harder to understand true profitability, cash flow, and taxable income. That can lead to rushed decisions at year-end, especially when trying to reduce income or manage deductions.

Monthly reviews help answer important questions throughout the year:

  • Is income tracking higher or lower than expected?
  • Are expenses increasing in certain areas?
  • Is cash flow strong enough to support new purchases?
  • Are estimated tax payments still appropriate?
  • Are there upcoming decisions that could affect taxable income?

These questions are easier to address when there is time to plan.

Better Visibility Into Income and Expenses

Agricultural operations often face fluctuating income and expenses. Commodity prices, input costs, weather, equipment repairs, and timing of payments can all affect financial results.

Monthly financial reviews help identify changes early.

For example, if income is trending higher than expected, there may be time to evaluate options before year-end. That could include reviewing prepaid expenses, retirement plan contributions, capital purchases, or income deferral opportunities.

If income is lower than expected, the focus may shift toward preserving cash, adjusting estimated tax payments, or delaying certain expenses.

Either way, the business is making decisions based on current financial information rather than a year-end estimate.

Avoiding Rushed Year-End Decisions

When tax planning waits until the end of the year, decisions can become reactive.

This is especially common with capital purchases. A farm may consider buying equipment to reduce taxable income, but the purchase still needs to make sense operationally and financially.

Monthly reviews create more room to evaluate whether a purchase fits the business. Owners can consider cash flow, financing, equipment needs, and long-term value before making a decision.

The tax benefit may be helpful, but it should support a sound business decision rather than drive it.

Managing Cash Flow Alongside Tax Strategy

Tax planning and cash flow planning should work together.

A strategy that reduces taxable income may not be the right choice if it creates unnecessary pressure on cash flow. Similarly, delaying income or accelerating expenses may help in one year but create challenges in the next.

Monthly reviews help business owners see the full picture. They can evaluate how tax decisions may affect loan payments, operating expenses, payroll, input purchases, and future liquidity.

This is especially important in agriculture, where timing and seasonality can make cash flow uneven throughout the year.

Improving Estimated Tax Planning

Monthly reviews can also help improve estimated tax planning.

When income changes significantly during the year, estimated tax payments may need to be adjusted. Waiting until year-end can result in underpayment, overpayment, or missed planning opportunities.

Regular financial review allows owners and advisors to monitor taxable income throughout the year and make more informed adjustments as needed.

Building a Stronger Year-End Planning Process

Monthly financial reviews do not replace year-end tax planning. They make it more effective.

By the time year-end arrives, the business should already have a reasonable understanding of income, expenses, cash flow, and potential tax exposure. That makes the final planning conversation more focused and practical.

Instead of trying to solve everything in December, the business can confirm the plan, review remaining opportunities, and make final adjustments with more confidence.

A Better Rhythm for Decision-Making

Agricultural businesses operate in a changing environment. Monthly financial reviews provide a regular rhythm for evaluating performance and making decisions with better information.

This process can help owners:

  • Track profitability throughout the year
  • Identify tax-planning opportunities earlier
  • Make stronger capital-purchase decisions
  • Manage cash flow more effectively
  • Reduce surprises at year-end

The goal is not to create more administrative work. The goal is to make financial information more useful.

A Final Thought

Year-end tax outcomes are rarely shaped by one decision. They are usually the result of many decisions made throughout the year.

Monthly financial reviews help agricultural businesses stay ahead of those decisions. With timely information and regular conversations, owners can better align tax planning, cash flow, and long-term business goals.

At DBC, we work with agricultural businesses to review financial performance, evaluate tax-planning opportunities, and prepare for year-end with a more complete understanding of the business. If you want to strengthen your planning process, monthly financial reviews are a practical place to start.

This article provides general tax and accounting insights and is not intended as advice specific to your organization or a substitute for personal consultation. We do not provide legal advice. Because every organization’s circumstances are unique, we encourage you to consult with your legal, tax, or accounting advisor regarding your specific situation.

Understanding Michigan Sales and Use Tax Rules for Not-for-Profits

Many not-for-profit organizations assume that tax-exempt status automatically means exemption from sales and use tax. In reality, Michigan’s sales and use tax rules are more nuanced, and misunderstanding them can lead to unexpected liabilities, compliance issues, or missed opportunities for exemption.Understanding when exemptions apply and when taxes must still be paid is an important …

Many not-for-profit organizations assume that tax-exempt status automatically means exemption from sales and use tax. In reality, Michigan’s sales and use tax rules are more nuanced, and misunderstanding them can lead to unexpected liabilities, compliance issues, or missed opportunities for exemption.

Understanding when exemptions apply and when taxes must still be paid is an important part of maintaining compliance and protecting organizational resources.

Understanding Sales Tax vs. Use Tax

Before exploring exemptions, it is helpful to understand the difference between sales tax and use tax.

Sales tax is generally charged on taxable purchases made within Michigan.

Use tax applies when sales tax was not collected at the time of purchase, often involving online, out-of-state, or remote vendors. In these situations, the purchaser may be responsible for remitting the tax directly.

For many not-for-profits, use tax compliance is frequently overlooked because the obligation is less visible than sales tax charged at checkout.

Are Not-for-Profits Automatically Exempt?

One of the most common misconceptions is that federal tax-exempt status automatically exempts an organization from Michigan sales and use tax.

In most cases, this is not true.

While certain qualifying organizations may be eligible for exemptions under Michigan law, exemption from federal income tax under Section 501(c)(3) does not automatically eliminate sales or use tax obligations.

Organizations should evaluate their specific activities, purchases, and fundraising efforts to determine whether exemptions apply.

Common Areas of Confusion

Purchases Made by the Organization

Some purchases made directly by qualifying not-for-profit organizations may be exempt from Michigan sales and use tax. However, exemptions often depend on factors such as:

  • The organization’s exempt status
  • How the item will be used
  • Whether the purchase is made directly by the organization
  • Proper documentation provided to the vendor

If an employee or volunteer makes a purchase personally and later seeks reimbursement, the transaction may not qualify for exemption even if the item is ultimately used for organizational purposes.

Fundraising Sales

Many not-for-profits generate revenue through fundraising events, merchandise sales, auctions, or special campaigns.

These activities can create sales tax obligations depending on the nature and frequency of the event and the items being sold.

Organizations should carefully evaluate:

  • Merchandise sales
  • Ticketed events
  • Silent and live auctions
  • Online fundraising stores
  • Sales conducted through third-party platforms

Assuming that all fundraising revenue is automatically exempt can create compliance risks.

Online and Out-of-State Purchases

As organizations increasingly purchase software, supplies, equipment, and services online, use tax becomes more relevant.

If a vendor does not collect Michigan sales tax, the organization may still owe use tax on the purchase.

Regular reviews of accounts payable records can help identify transactions where use tax may apply.

Best Practices for Maintaining Compliance

Establish Clear Purchasing Procedures

Organizations should develop policies that identify:

  • Who may make tax-exempt purchases
  • Required exemption documentation
  • Approval processes for purchases
  • Procedures for tracking taxable transactions

Clear policies reduce confusion and help ensure consistent treatment of purchases.

Review Fundraising Activities Annually

Fundraising methods often evolve over time. A review of planned events, merchandise sales, and online fundraising activities can help identify potential sales tax considerations before issues arise.

Monitor Use Tax Exposure

Many organizations focus heavily on sales tax while overlooking use tax obligations.

Periodic reviews of vendor invoices and online purchases can help identify areas where use tax may need to be accrued and remitted.

Maintain Supporting Documentation

Organizations should retain exemption certificates, vendor documentation, invoices, and records supporting tax-exempt purchases.

Good recordkeeping can simplify audits and help substantiate exemption claims if questions arise.

Why This Matters

Sales and use tax compliance may not receive the same attention as financial reporting or annual filings, but it remains an important part of sound financial management.

Even small errors can accumulate over time, particularly for organizations making frequent purchases or conducting multiple fundraising activities throughout the year.

Understanding the rules helps not-for-profits avoid unexpected liabilities, strengthen internal controls, and ensure resources remain focused on advancing their mission.

How DBC Can Help

At DBC, we work with not-for-profit organizations to navigate complex tax and compliance requirements, including sales and use tax considerations.

Whether your organization is evaluating exemption eligibility, reviewing fundraising activities, or assessing use tax exposure, our team can help identify potential risks and develop practical compliance strategies.

Proactive planning today can help prevent costly surprises tomorrow while allowing your organization to remain focused on serving its mission and community.

This article is intended for informational purposes only and should not be construed as legal, tax, or accounting advice. Because every organization’s circumstances are unique, we encourage you to consult with your legal, tax, or accounting advisor regarding your specific situation.

Potential Refund Opportunity for Certain COVID-Era Penalties and Interest

A recent decision from the U.S. Court of Federal Claims may create a protective refund-claim opportunity for some taxpayers. In Kwong v. United States, the Court of Federal Claims held that, under the version of §7508A(d) applicable to the COVID-19 disaster declaration, the mandatory disaster postponement period began on January 20, 2020 and ended …

A recent decision from the U.S. Court of Federal Claims may create a protective refund-claim opportunity for some taxpayers.

In Kwong v. United States, the Court of Federal Claims held that, under the version of §7508A(d) applicable to the COVID-19 disaster declaration, the mandatory disaster postponement period began on January 20, 2020 and ended on July 10, 2023. The court applied that interpretation to hold that the taxpayer’s refund suit was timely. The decision is broader than the COVID relief the IRS announced during the pandemic, which generally postponed only specified filing, payment, refund-claim, and other time-sensitive deadlines for limited periods.

The United States has appealed the decision to the Federal Circuit. If the taxpayer-favorable interpretation is sustained, some taxpayers may have refund or abatement opportunities for penalties, additions to tax, or interest tied to filing, payment, refund-claim, refund-suit, installment-payment, or other covered deadlines during the affected period.

Who Should Review This?

Taxpayers should consider reviewing their records if they paid, were assessed, or requested abatement or refund of:

  • Late-filing or late-payment penalties
  • Certain estimated-tax penalties
  • Interest connected with tax liabilities whose original filing or payment deadlines fell during the affected period, including potentially calendar-year 2019 through 2022 federal income tax liabilities
  • Installment-agreement payments or other covered IRS payment obligations due during the affected period
  • Amounts connected with refund claims or refund suits the IRS treated as untimely

This may also matter if the IRS denied a refund claim as untimely or if a taxpayer did not file a claim because the claim appeared to be outside the normal limitations period.

Timing Matters

Refund claims are subject to strict statute of limitations rules. Most taxpayers will need to file claims by July 10, 2026. Waiting for final court resolution may result in losing the opportunity.

Filing a protective claim may help preserve your ability to recover amounts while additional guidance and litigation continue. These claims are typically filed on Form 843 and must be submitted on paper, which adds an administrative layer and makes early action important.

How De Boer, Baumann & Company Can Help

Evaluating this opportunity requires a detailed, fact-specific review. Our team can help identify whether you are impacted, quantify potential refunds, and prepare claims within the required timeframes.

If you would like us to review your situation, please contact us to discuss next steps.

This article provides general tax and accounting insights and is not intended as advice specific to your organization or a substitute for personal consultation. We do not provide legal advice. Because every organization’s circumstances are unique, we encourage you to consult with your legal, tax, or accounting advisor regarding your specific situation.

Stronger Not-for-Profit Leadership Starts With Stronger Board Partnerships

Not-for-profit leaders carry a tremendous amount of responsibility. They balance mission delivery, staffing challenges, fundraising pressure, board expectations, and community impact, often while working with limited resources. The commitment behind that work is undeniable. What becomes difficult, however, is sustaining momentum when leadership energy is constantly stretched across competing priorities. Strong organizations are rarely …

Not-for-profit leaders carry a tremendous amount of responsibility. They balance mission delivery, staffing challenges, fundraising pressure, board expectations, and community impact, often while working with limited resources.

The commitment behind that work is undeniable. What becomes difficult, however, is sustaining momentum when leadership energy is constantly stretched across competing priorities.

Strong organizations are rarely built through hard work alone. They are built through intentional leadership practices that strengthen relationships, improve governance, and reinforce organizational credibility over time.

Below are three areas not-for-profit leaders should prioritize to build stronger, more sustainable organizations.

Invest in Internal Relationships First

Leadership effectiveness starts internally. Before organizations can grow externally, leaders need strong relationships with staff and leadership teams.

Employees want to feel heard, valued, and connected to the organization’s mission. Leaders who create that environment often see stronger collaboration, higher engagement, and better long-term retention.

Simple actions matter more than many leaders realize. Listening carefully during conversations, inviting feedback, and acknowledging staff contributions all help build trust. Employees are more likely to stay engaged when they believe their work and perspective genuinely matter.

Formal authority alone does not create loyalty or respect. Those are earned through consistency, communication, and support.

Build a True Partnership With the Board

Board engagement is another critical area that separates thriving organizations from struggling ones.

Boards play an important governance and fiduciary role, but the strongest not-for-profits move beyond compliance-focused relationships. Effective leaders view their boards as strategic partners.

That partnership requires open communication and meaningful discussion around organizational direction, impact, and long-term priorities. Board members often bring valuable professional experience, industry insight, and community relationships that can strengthen decision-making when properly engaged.

One practical approach is to dedicate a meaningful portion of board meetings to strategic conversation instead of reports and operational updates alone.

For example, leadership teams and board chairs can guide discussion around questions such as:

  • What measurable impact are we having on those we serve?
  • What differentiates our organization from others in the community?
  • Where do we see the greatest opportunities for growth or improvement?
  • What risks should we be discussing more proactively?

Those conversations help boards become more engaged, informed, and invested in the organization’s success.

Communicate Impact Consistently

Many not-for-profits believe they are “the best-kept secret in town.” Unfortunately, that mindset can limit fundraising, community engagement, and long-term sustainability.

Organizations cannot assume donors, stakeholders, and community partners fully understand the value of their work unless that impact is communicated consistently and clearly.

Leaders should regularly evaluate how well they measure and share outcomes. This includes both quantitative metrics and meaningful stories that demonstrate mission impact.

A helpful question for leadership teams to consider is this: if your organization had a “stock price,” what would it reflect today?

While not-for-profits are mission-driven rather than profit-driven, organizational reputation still matters. Strong financial stewardship, measurable outcomes, and visible community impact all contribute to stakeholder confidence.

Donors are far more likely to support organizations that demonstrate results, strategic direction, and operational stability.

Leadership That Strengthens Long-Term Sustainability

Building stronger staff relationships, developing meaningful board partnerships, and consistently communicating impact are not independent leadership responsibilities. They work together to strengthen organizational culture, governance, and sustainability.

For many not-for-profits, these areas become even more important during periods of uncertainty or growth. Organizations that invest in communication, accountability, and strategic alignment are often better positioned to navigate operational and financial challenges over time.

At DBC, we work with not-for-profit organizations to support financial oversight, governance practices, and long-term operational planning. Strong leadership and sound financial strategy often go hand in hand when organizations are working to expand impact and strengthen sustainability.

To read the original article by Dennis C. Miller, visit: https://thenonprofittimes.com/npt_articles/partnering-with-the-board-3-key-areas-to-develop/

Understanding Functional Expense Allocation and Why It Matters

For not-for-profit organizations, financial reporting is about more than simply tracking revenue and expenses. It is also about demonstrating accountability, transparency, and responsible stewardship of resources.One area that often creates questions for organizations is functional expense allocation.While it may seem like a technical accounting requirement, how expenses are allocated can significantly impact financial reporting, …

For not-for-profit organizations, financial reporting is about more than simply tracking revenue and expenses. It is also about demonstrating accountability, transparency, and responsible stewardship of resources.

One area that often creates questions for organizations is functional expense allocation.

While it may seem like a technical accounting requirement, how expenses are allocated can significantly impact financial reporting, grant compliance, and donor confidence. A thoughtful allocation process helps organizations present a more accurate picture of how resources support their mission.

Understanding the Purpose of Functional Expense Allocation

Functional expense allocation refers to the process of categorizing expenses based on their purpose within the organization.

In not-for-profit financial statements, expenses are generally grouped into three categories:

  • Program services
  • Management and general
  • Fundraising

This reporting structure helps stakeholders understand how the organization uses its resources to support mission-driven activities compared to administrative and fundraising efforts.

For many organizations, this information appears in the Statement of Functional Expenses, which is required for certain not-for-profit entities.

Why Functional Expense Allocation Matters

Functional expense reporting provides transparency to donors, grantors, board members, and regulators.

It helps answer important questions such as:

  • How much of the organization’s spending directly supports programs?
  • Are administrative costs reasonable for the size and complexity of the organization?
  • How are shared costs being managed and reported?

Accurate allocation also supports stronger internal decision-making. When leadership understands the true cost of programs and operations, it becomes easier to evaluate efficiency, budget effectively, and plan for growth.

Common Expenses That Require Allocation

Some expenses clearly belong to a single function. For example, program supplies used exclusively for client services would typically be recorded as program expenses.

Other costs support multiple functions and require allocation across categories.

Common shared expenses include:

  • Salaries and employee benefits
  • Rent and occupancy costs
  • Technology expenses
  • Insurance
  • Utilities
  • Office supplies

For example, an employee who spends time overseeing programs, attending administrative meetings, and assisting with fundraising activities may have compensation allocated across multiple functional areas.

The key is using a reasonable and supportable methodology.

Choosing an Allocation Method

There is no one-size-fits-all approach to expense allocation. The appropriate method depends on the nature of the organization and the expense being allocated.

Common allocation methods include:

  • Time and effort tracking for employee compensation
  • Square footage for occupancy-related expenses
  • Headcount or usage-based calculations for technology and administrative costs

The most important factor is consistency. Organizations should apply allocation methods consistently from period to period and maintain documentation supporting how calculations were determined.

Clear documentation becomes especially important during audits or grant reviews.

Avoiding Common Allocation Issues

Functional expense allocation can become problematic when organizations rely on estimates without support or fail to review allocation methods regularly.

Some common issues include:

  • Inconsistent allocation practices
  • Lack of supporting documentation
  • Overallocating expenses to program services
  • Failing to update methodologies as operations change

These issues can create reporting inaccuracies and raise concerns during financial statement audits or regulatory reviews.

Regular review of allocation practices helps ensure reporting remains accurate and aligned with current operations.

The Connection Between Allocation and Strategic Planning

Expense allocation is not only about compliance. It also provides valuable operational insight.

Understanding the full cost of delivering programs can help organizations:

  • Evaluate program sustainability
  • Prepare more accurate grant budgets
  • Support funding requests
  • Make informed staffing and operational decisions

When organizations have a better understanding of where resources are being used, leadership can make more informed financial and strategic decisions.

Building Trust Through Accurate Reporting

Donors and grantors increasingly expect transparency around how organizations manage funds.

Clear and accurate functional expense reporting demonstrates accountability and reinforces confidence in the organization’s financial stewardship.

It also helps boards and leadership teams better understand operational costs and long-term financial needs.

A Final Thought

Functional expense allocation is an important part of not-for-profit financial reporting. While the process can feel detailed, it plays a meaningful role in transparency, compliance, and decision-making.

Organizations that take a thoughtful and consistent approach to allocation are better positioned to support their mission while maintaining strong financial reporting practices.

At DBC, we work with not-for-profit organizations to develop practical allocation methodologies, strengthen financial reporting, and support compliance requirements.

Whether your organization is refining its reporting processes or preparing for an audit, our team can help you evaluate your approach and build a stronger financial foundation.

Employee Spotlight: Sara Knight

Since joining DBC in 2023, Sara Knight has been a welcoming and steady presence in our Grand Haven office. As Front Office Administrator, Sara helps keep daily operations running smoothly while supporting both team members and clients throughout the office. Her role touches many areas of the firm, making her an important part of …

Since joining DBC in 2023, Sara Knight has been a welcoming and steady presence in our Grand Haven office. As Front Office Administrator, Sara helps keep daily operations running smoothly while supporting both team members and clients throughout the office. Her role touches many areas of the firm, making her an important part of the day-to-day experience for everyone who walks through the door.

Sara attended Eastern Michigan University, where she earned a degree in Communications with a minor in Sociology. Her background has helped shape the thoughtful, people-focused approach she brings to her work each day. Whether assisting clients, coordinating office needs, or supporting the team behind the scenes, Sara values creating a positive and organized environment for those around her.

One area Sara especially enjoys is continuing to learn more about the accounting profession and the work happening across the firm. Her curiosity and willingness to grow have made her a valued member of the team since joining DBC.

Outside of the office, Sara enjoys spending time with her husband, Andrew, and celebrating milestones with their son, Michael, who recently graduated from Spring Lake High School. She also enjoys thrifting, relaxing by her pool during the summer months, and unwinding after busy season. When asked what skill she would most like to master, her answer was perfectly folding fitted sheets, something many of us can appreciate. If given the chance to swap roles with someone at the firm for a day, she would choose George for the opportunity to experience a different side of the business.

Sara’s positive attitude, adaptability, and support for those around her make her an important part of our Grand Haven team. We are grateful for all she contributes and are proud to spotlight her this month!

About us

De Boer, Baumann & Company provides professional accounting, tax, and business advisory services to individuals and businesses in West Michigan and the surrounding areas. With expertise in a variety of industries, DBC specializes in comprehensive and innovative solutions to help clients achieve their financial goals.