Today we are thankful for some good challenges and numerous blessings we have received over the past year in business and on the personal side. All of us had our ups and downs but in the end the peace ruled in our hearts as we’ve been receiving the gifts of amazing grace.

2008 has been a fantastic year for Retail Hero, marking the release of 4 new add-ons for Dynamics RMS, being accepted into Microsoft’s prestigious Dynamics President’s Club and inclusion into the Microsoft Canada Excellency Program. This year we released the following helpful add-ons for Dynamics RMS:

•  Ship-T, an add-on that automatically calculates and applies the destination-based sales tax
•  Team Commission, that lets you calculate commission for sales teams in which members hold different weights and rates
•  Happy Checks, a loyalty program that mails the customer a coupon once they collect an X amount of points
•  Quick Tender, which lets you process single-bill transactions by clicking a picture of the bill on your right-hand side toolbar

With having in our back pocket about two dozen various RMS add-ons, at the end of the year we started refocusing our development team towards the coming POS 2009 platform. POS 2009 will start gradually replacing Dynamics RMS in 2009, but RMS 2.0 will still be around for at least about couple of years on the number of reasons. We expect our most popular add-ons such as Hero Points, Happy Checks and Q-Rewards and others become compatible with POS 2009 in the early next year.

This year we also had interesting surprises. Our major local RMS competitor abruptly closed the doors leaving quite few customers stranded without support. Our team rushed to the rescue but we were also temporarily overwhelmed as the number of support calls had dramatically increased. Therefore we keep working on enhancing our customer support services while keeping them affordable, which always has been our priority.

Another surprise came just few days ago as a prominent POS developer had been implicated in enabling tax evasion (see the article below). The lesson learned: retail technology could be created and used for good or bad and it takes integrity and moral judgment to refuse some, even seemingly profitable, opportunities.

In the end our thanks also go out to you - our loyal customers and partners who inspire us to be the best in business. Without your continuing feedback and encouragement, none of our successes would have been possible.

Best of luck to you in the New Year!

Statement of Direction Announced. In November 2008 Microsoft made public the long awaited Statement of Direction regarding its POS technologies. The document indicates that over the next few years there will be serious shift in the product line.

POS 2009 - What's in the Name? The next generation POS product is called “POS 2009”. The software is built on the foundation of POS 2.0 (a minor Dynamics point-of-sale product currently available only in the USA) with quite few enhancements, of which the one most important is programmability. The feature allows the third party independent software vendors (ISVs) develop various extensions similar to how it is done with the current RMS 2.0

Availability. POS 2009 will become available during Q2 2009. Microsoft will offer migration tools for the customers to migrate from both POS 2.0 and RMS 2.0. The RMS customers which are current on the service plan, will receive the software free of additional charge.

Pricing. At this point the pricing is unknown however it is expected to be at same level as the current RMS pricing (i.e. $1,190 USD per license plus $214 USD for the annual service plan).

Languages. POS 2009 will be localized in only English and available in the USA, Canada, U.K. and Australia. The future POS 4.0 will be offered in other languages.

Service Plans. BREP. Business Ready Enhancement Plan will be renewable each year and include access to the updates, service packs, knowledge base, online training etc. BRAP, BRAP+. Business Ready Advantage Plan which is currently available for RMS 2.0 and includes 6 support calls to Microsoft per each license, will not be offered with POS 2009. However, the customers will be able to purchase Premier Support and Professional Paid support plans.

RMS 1.3/2.0 Lifetime. POS 2.0 and RMS 1.3 will be discontinued within 45 days after the general release of POS 2009. RMS 2.0 will be discontinued within 45 days after the general release of POS 4.0 in H2 2010

Microsoft will continue supporting RMS 2.0 in between the releases of POS 2009 and POS 4.0

Profits with technology? Not in an illegal way...

The news broke in mid December 2008 - a provincial newspaper reported on its front page that an established point-of-sale software developer had been implicated by Canada Revenue Agency (CRA) in enabling tax evasion allegedly by manufacturing and making available to its customers so called “sales suppression software” also known as “a zapper” (“Cooking the Books”, Vancouver Sun, December 11, 2008) . The Richmond, BC-based Infospec Systems has been developing and selling POS software under the market name Profitek since 1985.

The news sent shock down the spines of thousands of Profitek’s customers and resellers world-wide. According to the news release, four local restaurant owners were charged with 25 counts under the Federal Income Tax Act with hiding for the tax purposes over $3.8 million–worth of sales. The search warrants were executed in the head offices of Infospec Systems with seizing the client list, software code, sales notebooks, computer files and other documents.

It is obvious what is coming next: whether or not the CRA’s allegations regarding Infospec's involvement in manufacturing the “zappers” turn out to be true, the Agency will perform swiping and, perhaps, potentially devastating audits on as many Profitek’s customers as they can. With reported 5,000 inspectors involved into the investigation there may be quite a few retail businesses receiving the dreaded letter or phone call around this Christmas.

What Are The Zappers

Wikipedia defines a “zapper” as: “An automated sales suppression device or a software that falsifies the electronic records of point of sale (POS) systems for the purpose of tax evasion.”

The scam is not new. Some crafty technicians were able to alter sales data even in the old electronic cash registers, which were more difficult to tamper with. It was elaborate process prone to all kinds of flaws and easily detectable by a trained tax auditor. Nevertheless it had been popular with some unsavoury retailers.

With data now conveniently located in a database on the computer’s hard disk, it is much simpler to write an intelligent computer program called a “zapper”. Such a program would automatically detect the most-convenient-to-erase sales records (normally, cash-only transactions) and balance the end-of-day report to hide the missing data.

Of course, not every POS program is vulnerable to tampering. Many have built-in tamper-proof features, e.g. Dynamics RMS keeps a binary image of each receipt it produces including the daily Z-Reports, which makes it much more difficult to alter data. However, no protection is good enough if the very developer of the software opens a way to “zapping” the sales transactions through a back door.

World-Wide Problem

The problem is old and world-wide. According to an article in New Work Times (Aug 29, 2008), the zapper programs have been found not only in North America, but in Germany, Sweden, Brazil, Australia, France and the Netherlands.

In the Canadian Province of Quebec alone since 1977 the revenue agency had carried 713 searches and busted many zapper programs, including some in the 39-restaurnat chain Nickels, created by the singer Celine Dion. The Dutch equivalent of the I.R.S. followed a customer zapper maker’s list to 1,200 stores.

In 1993 the owner of Stew Leonard’s Dairy in the United States was convicted of skimming over $17 million over 10 years. In the Detroit case in 2006 the I.R.S. alleged that the owner of 12 Lebanese restaurants had used a zapper to hide over $20 million in cash. The money hasn’t been recovered as it was sent to Lebanon in cashier’s checks in support of a terrorist organization Hezbollah. The businessman was indicted but never apprehended as he became fugitive in Lebanon.

Lessons Learned

Some countries voiced for a legislation requiring software vendors get their system certified with the tax authorities. For example, the Germany’s Minister of Finance demanded that a “control chip” must be installed at each cash store. Though such legislation may certainly be useful, it may also add overhead and increase the cost of retail operations, causing higher consumer prices – a bad idea during the economic slowdown. But there are few things an observant retailer should keep in mind:

• If you have been using zappers in your retail operations, it’s not too late to come forward. In the recent article in National Post the author reminds the readers that tax evasion is a serious criminal offence. In Canada, CRA offers the Voluntary Disclosure Program which promises no penalties or prosecution to those who chose to come forward. Similar programs have been offered by I.R.S. in the USA
•  Purchase the POS software from a reputable vendor. Choosing wrong may not only lead to absence of the support and upgrades in the future, but also open doors to the unwanted audits and unnecessary harassment from the tax authorities, even if your organization is not involved in tax scheming.
•  Don’t buy on price alone – cheap software and hardware have no place in the business environment. Remember that it is a investment – not a holiday gift, therefore the business systems should not be purchased at Best Buy. Carefully check out the software and hardware capabilities, warranties, available support options, customers references etc. before making the decision.
• Consider contacting your local or national elected legislation representative in order to introduce a law requiring certification of the POS systems similar to PCI standards in credit card processing.