Paper Plunge

Date: May 15, 2013

3 Steps to Go Paperless 

By Adam Wren

Wernher Von Braun, the rocket scientist who designed the rocket that helped put a man on the moon, once said, “We can lick gravity, but sometimes the paperwork is overwhelming.”

For small business owners, this sentiment rings true. Although most aren’t trying to put a man on the moon, they are trying to run their businesses, create jobs and keep the economy going. Government paperwork, though, can keep them grounded.

In NFIB’s 2012 Small Business Problems & Priorities report, small business owners rated federal paperwork at No. 15, and state and local paperwork No. 16, among the most pressing issues facing their business. That’s up a handful of spots from 2008, when owners were last polled—meaning the problem is getting worse for about 1 in 5 respondents. And while it doesn’t command headlines like Obamacare or taxes, it is a subtle but painful experience for owners. Almost like a paper cut.

“What we find when we talk to members or other business owners is that it’s not one form that’s the problem—it’s the entirety of every form they need to fill out,” says Dan Bosch, NFIB’s manager of regulatory policy. “That’s when you really see how much time you’re spending on all these things. At some point, our members just want to run their businesses.”
The Obama administration has issued 3,500 new regulations, including a glut of red tape that costs up to $26.7 billion in the first three years, according to a Weekly Standard article that quoted Susan Dudley, director of George Washington University’s Regulatory Studies Center. Can anything be done to stop Washington’s ridiculous paper caper?

Papered Over

The paperwork problem is not new. In fact, it’s a problem the government has been tracking—in lengthy paper reports and legislation, ironically—as far back as the Paperwork Reduction Act of 1980, which mainly dealt with the Office of Management and Budget’s ability to issue federal information collections.

While it’s nearly impossible to quantify how much time small business owners spend on all local, state and federal paperwork, we do know this: A decade ago, the federal Small Business Paperwork Relief Task Force found that each year, businesses and citizens spend 8.2 billion hours and $320 billion to satisfy paperwork requests from the federal government. Today, with the Obama administration issuing regulations that are five times more burdensome than under the Bush administration and three-and-a-half times more burdensome than under the Clinton administration, those figures have no doubt increased, according to an analysis by the George Washington University Regulatory Studies Center.

We also know that federal tax paperwork consumes the most time and resources. Small business owners spend about $74 an hour complying with the IRS, and firms with fewer than 20 employees face a compliance cost of $1,584 per employee, according to NFIB data. On an annual basis, U.S. businesses spend about $95 billion on tax-related work.

And that’s only the paperwork associated with one federal agency. It’s not counting the dozens of other agencies, plus local and state government paperwork.

“Unfortunately, we’ve all became jaded because it is just what you have to go through to do business,” says NFIB member Frank Goodnight, president of 12-employee printing business Diversified Graphics Inc. in Salisbury, N.C. “The thing is, we never know from month to month whether the government is going to come up with something new that they require. And if that happens, you have no choice; you have to supply that information.”

Like other small business owners, Goodnight’s operation is required to fill out a lot of paperwork. For starters, there’s the North Carolina Sales and Use Tax documentation, which he must fill out every day (he tasks one employee with the daily job, which requires about five minutes a day, or roughly 21 hours a year). “We collect it for no benefit,” Goodnight says. “Back in the old days, we were compensated for filling out the sales tax [information]. Now, we’re not.” Just for the privilege of collecting sales tax information for the state, Goodnight and other business owners must fill out a form, the NC-BR, a two-page form asking for basic information such as the company’s type of ownership and whether the business uses a cash or accrual accounting method.

Then there’s state unemployment insurance paperwork. As does any small business owner, Goodnight must furnish the state with a listing of employees, their gross wages and overtime wages—every month. Then, he must describe each employee’s duties. To supplement that data, Goodnight must furnish the federal Form 941 (a four-page quarterly employer’s tax document) and state unemployment quarterly reports.

3 Steps to Go Paperless

Even though federal, state and local agencies have moved their required forms to electronic documents accessible online, papers—and paper-covered desks and offices—are still common. How to eliminate it?

Lindsey Holmes, owner of LCH Business SM & Tech, a digital marketing and organizational firm with offices in Newark, N.J., and Washington, D.C., says she’s found a perfect solution. It revolves around the software Evernote, a digital filing cabinet that allows you to store essential documents, emails and Web pages.

“It’s a command center for my business for $45 a year,” says Holmes, who blogs about how she integrates the software into her business as one of Evernote’s Small Business Amabassadors. The service is free, until you’ve used your monthly storage allotment of 100 megabytes. Evernote Premium grants a larger upload capacity and costs $5 a month, or $45 a year. All your data is stored in the cloud. Even more storage is available for multiple users, with packages starting at $10 per user, per month.

Here are Holmes’ tips on getting started.

1. Create folders. The software allows you to create various folders for different aspects of your business. You might create a folder where you store information about each client, for instance. Or, you might create a folder where you store companywide passwords (you can protect all of your data with a password, as well).

2 Collect receipts. Holmes uses her smartphone and a mobile scanner to take pictures of, scan and store her receipts in Evernote.

3 Do your taxes. Holmes also uses a folder in Evernote to store all her financial information. It’s a move that makes doing taxes seamless. “By the time tax time comes, I share my financial ‘notebook’ with my accountant,” Holmes says. “He takes care of everything else and sends me a bill.”

– A.W.

“The information requested covers the first, second and third quarters of the present year and the last quarter of the previous year for our company,” says Diane, Goodnight’s wife, who has helped Frank manage the business’ paperwork burden for 39 years. “Once I have compiled this information, which takes about two-and-a-half hours, I transfer the figures to a two-page form, which I finish filling out. The total time is usually three hours. For an office with a lot of staff, that might not seem like too much, but for a small office, it is considerable.”

Next, on the federal level, there’s a list of hazardous materials for Goodnight’s business to maintain and share with the Occupational Safety and Health Administration. “We use a sink cleaner, and that has to be included on our hazardous materials list,” he says. “It takes time to fill that out and send it in, and this is the same stuff you clean your sink with at home. That’s just the ludicrous nature of it.”

Then there’s the U.S. Department of Commerce Yearly Report, an eight-page form that Goodnight must complete each year, seeking such obscure information as what type of printing equipment his business uses. Does he use a lithograph, or does he prefer gravure printing? If he does flexographic printing, how much of it is label printing versus advertising printing? And, by the way, if he does gravure printing, what kind of products does that include?

“Just to fill out the form takes three hours,” Goodnight says. “The amount of information that we have to glean from our records takes anywhere from four to five more hours. Honestly, I do believe in reading this form that a lot of this stuff is information that goes and sits on somebody’s desk and is never seen again. But we don’t have a choice. When they send these forms out, [they require] a reply.”

It’s enough to make any small business owner throw up their hands in defeat.

“There are no congressional votes on [paperwork-creating rules and regulations],” Goodnight says. “There’s no logic behind some of them. For example, if the [U.S. Environmental Protection Agency] decides they need a report on the chemistry we use in the printing industry, they make you do it. And there’s nothing you can do about it. It’s really a non-productive part of our weekly business costs. The bottom line is that if the government would just get out of the way, small businesses could get the economy wheeling in a second.”

And Goodnight’s paperwork load is lighter than that of an owner in a more heavily regulated industry, like NFIB member J.D. Monlezun, who owns Medical Technologies, a healthcare equipment company in Lake Charles, La. One of its biggest customers is Medicare, which brings with it a ton of additional paperwork and regulatory hurdles.

Monlezun, who bills about $4 million in annual revenue with 30 employees, estimates that he spends the equivalent of 40 percent of his monthly payroll to comply with federal regulations and manage the paperwork burden. Twenty-five of his employees, he estimates, do some of this paperwork every day.


Paper Cut

Solving the paperwork problem is complex. At its core, paperwork is a side effect of rules and regulations, says NFIB’s Bosch. “Agencies need to look long and hard at whether the information they’re collecting is actually needed,” Bosch says. “There have been several attempts to do that on a federal level with not much success.”

For instance, more than a decade ago, Congress passed the Small Business Paperwork Relief Act of 2002. Among other actions, the law requires federal agencies such as the EPA to have a single point of contact for small business owners.

Before that, there were several other congressional attempts to reduce the paperwork burden. The Small Business Regulatory Enforcement Fairness Act of 1996 required agencies such as OSHA and EPA to work with the Small Business Administration’s Office of Advocacy to “solicit advice from small businesses before the agency issues a proposed rule that may have a significant impact on a substantial number of small entities.”

Yet another effort to solve the paperwork issue is pursuing a waiver of fines for first-time, non-harmful paperwork violations. “One of the things we’ve always pushed for is, if you make a mistake in paperwork that doesn’t involve anyone being injured…that the agency should explain to the business what it did wrong, how to fix it, and not issue a fine,” Bosch says.

Another attempt led by NFIB in 2012 was successful, and saved small business owners untold amounts of time and money: repealing Obamacare’s 1099 requirement, which would have required business owners to submit a form for every business-to-business transaction over $600.

“Requiring business owners to spend countless hours and money to change their bookkeeping system to comply with this mandate is not a proven method to improve tax compliance,” wrote NFIB Senior Vice President Susan Eckerly in a Jan. 18, 2012, letter to Assistant U.S. Secretary of Tax Policy Emily S. McMahon. “In addition, there is not a clear understanding about how this additional information will be used … The compliance burden would be too complicated, leading to mistakes in providing the correct information to the IRS.”

In February of last year, the IRS reversed its position. But NFIB’s Bosch predicts that the paperwork burden will grow when Obamacare comes into full effect next year. “A lot of this paperwork isn’t in effect yet, but it will be in 2014,” he says. NFIB is working with Congress to get some of the most burdensome provisions, the employer mandate provision (which brings with it—you guessed it—more paperwork), removed from the law.

To Goodnight, the North Carolina printer who spends so much of his time on paperwork, the issue runs deep and is not likely to be solved anytime soon. The problem has grown over the years, he says; it will take years to solve.

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