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Comment on cloud contracts
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Ken-
You mentioned a critical word in your August 31, 2012 post: BACKUP
Those close to me know that I have a strong background in IT as well as physical security….I will put my 2 nickels worth on this one…
The key to any business, no matter how large or small, is a comprehensive Disaster Recovery Plan (DRP) and a Backup. Most business owners don’t understand the difference between a backup and disaster recovery. These are two very different animals.
Backups: used to restore lost files in the event one comes up missing, mistakenly deleted, corrupted or lost in a theft..like a laptop.
Disaster Recovery: similar to backup but is on a larger scale – it is a complete snap shot or image of a disk drive(s) or server. This image allows you to restore the system quicker than an operating system reinstall and copying files (known as bare metal restore). Disaster doesn’t necessarily mean a weather disaster. A disaster is when a business loses its server data volume and its employees can’t work for hours, days or weeks. When one loses its data and there is nothing to restore it from, that information is gone for good.
It is critically important to have the ability to restore your business’ IT to a stable working order in the least amount of time. You have a backup? Great. When was the last time you tested it?
Keeping your data on the cloud is exciting and has its benefits. No hardware investment. No upgrade worries, etc...but what happens when your cloud service provider goes offline. What are their terms of service? Where is that contract now? We choose to keep all of our data in-house and have redundant backups which is part of our DRP.
We are in the business of protection, but we also need to be mindful of protecting ourselves as well.
John Romero
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Ken,
Thank you for your assumption on the definition of a "cloud". When people use a new term to describe something, it sure would be handy if they included a definition of what the **** they were talking about.
Paul Berry
VSA Security Systems, Inc.
Columbus, Georgia
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Question re writing off bad debt
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Ken
I must say I truly enjoy reading your newsletter, the information is always so helpful. I live in Louisiana and have a Security Alarm Business. This is more of a tax question.... the contracts that have been defaulted on and are ultimately write offs, could those amounts be considered losses and tax write offs. Any information would be greatly appreciated.
Holly Jones
Crown Security
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Answer
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If you are on the accrual basis, which means you book income as you bill it, then you can write off, deduct, the bad debt that you don't collect. So on an accrual basis you sign up a subscriber for 5 years at $20 RMR. As soon as you get the contract you book income of $1000. If the subscriber defaults after the first year and you can't collect on the contract, you write off $800 [perhaps less depreciation].
If you're on a "cash" basis, that means you book income as you receive it. Therefore the execution of the contract has no bearing on income because you won't book any income until you collect money, and then you'll book only what you collect. If you don't collect it you can't write it off because you didn't book it in the first place.
Accountants and tax attorneys can no doubt give a better answer.
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follow up question on How much insurance [from Sept 6, 2012 article]
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Ken
Is it normal to be named as an additional insured on the central station's insurance policy, and do you have to carry the same amount of insurance yourself as well? Or is this just a central station's policy?
anon
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Answer
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A dealer is not likely going to be named on a central station's policy as an additional insured, unless you happen to be the central's principal dealer. More likely the central station is going to require a dealer to name the central station on the dealer's policy as an additional insured. Using the same insurer pretty much resolves that conflict. Best if both dealer and central station carry their own insurance. A dealer needs to be mindful that a central station may require that the dealer indemnify the central station in the event of a lawsuit. The dealer must carry appropriate insurance for that contractual indemnity, or accomplishes the same by adding the central station as an additional insured.

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