Internal Accounting:
An Overview of Controls Needed
Most businesses have financial records that accurately reflect their activity,
but no entity is safe from accidental or intentional mishandling of funds.
One of the best ways to minimize the risk of a financial mishap is to
perform a review of your business's internal accounting procedures and
controls. Although this cannot replace an internal audit performed by
a CPA, a review of the following areas will allow you to see how your
business measures up, and may show you whether your business has weaknesses
and is in need of professional help to strengthen its internal accounting
controls. Here are some questions you should ask about your businesss
financial activity: Accounting
and bookkeeping
Records. Do you keep regular accounting records? Are they properly
organized and, are they balanced regularly?
Checks. Do you use prenumbered checks, and do you have a set policy
for completing and signing checks? Is the person completing the check
different from the person signing the check?
Bank reconciliations. Are bank reconciliations performed each month?
Who performs this task? Does anyone review it?
Petty cash. Is there a fund for petty cash? Is there a maximum amount
that can be withdrawn? Who has access to it? Who supervises it? Where
is it located?
Mail and receipts. Is the person who opens the mail different from
the person who posts the mail receipts and checks?
Bank deposits. Are different persons responsible for preparing the
bank deposits and making the deposits?
Accounts receivable and billing
Receipts. Are the receipts you use, prenumbered? Are cash receipts
balanced daily? Is there a procedure to ensure that the daily deposit
total equals the amount collected in a day?
Billing forms. Are all bills entered into a billing system?
Tracking. Is there a way to ensure that all products, services, or
consultations are | tracked and billed?
Electronic transfer of information. Do you transfer information or
make payments electronically? Do you have a mechanism to check whether
the electronic transmissions were received?
Verification. Is there a method of verifying the accuracy and timeliness
of payments | received?
Entry adjustments. Is there a policy on how to and who can adjust
entries and perform write-offs? Is the policy followed?
Collection
Aging. Is an accounts receivable aging report printed and reviewed
in detail? This will help an office assess how well Its collection efforts
are doing.
Statements. Are monthly statements on account balances sent to all
customers who have balances due?
Reminders. Do your statements have dunning messages? (A dunning message
is a friendly reminder at the bottom that the account is overdue by
a certain number of days.)
The above is just a starting
point, but it can assure you that all of your business is being accounted
for, or it may signal to you that your business has certain financial
weaknesses, and may need some fine tuning. If so, you may want a more
detailed audit performed, and our office would be happy to assist you.
Strategic Planning Necessary
for All Businesses
As you know, there are many changes happening in the marketplace. These
changes are occurring rapidly, making it difficult for many businesses
to keep up, and making long-term planning impossible. So, you can no
longer afford a "business as usual" attitude. Businesses need to decide
how they intend to position themselves in the future not to grow the
business, but many times just to maintain their net income and stay
competitive.
As a result, most businesses should consider developing a strategic
plan. The best forum for this is a strategic planning meeting or retreat.
The first step in the planning process is to meet and discuss how the
business will address the future and whether or not a strategic planning
meeting might be needed. Decide if planning for the future is in fact
important and whether this process might get all of the employees, partners,
or members on the "same page." Also, decide if such a process would
in fact benefit the business, not only in the short term, but the long
term as well. Strategic plans seem to work very well for those businesses
that seem to "drift" along year to year. These are the types of businesses
that run along smoothly without any evident problems, both internally
and externally. Everyone perceives there are no problems. However, as
soon as there are, changes, these businesses often fail to react and,
in the end, are impacted greatly.
After deciding that a strategic plan would be beneficial, the next step
is to set a specific date for the strategic planning meeting. All employees
should attend. So as to not take away from workday schedules, this meeting
is usually held on a Saturday, or even over an entire weekend. Some
businesses want to "get away from it all" and schedule their retreat
at an out of town location.. You will also need to decide if a facilitator
is necessary. If so, this person can be the businesses CPA, or an independent
consultant can be hired.
Before the meeting, gather input from all of the people who are going
to attend about those issues they really want brought up and discussed.
This is usually given to the facilitator, who will then use this information
to develop the meeting agenda. If you are still wondering whether such
a meeting is worthwhile, the following is a sample, outline that can
be used at the strategic, planning meeting; it covers important topics
that can't be handled in a normal workday meeting-topics that need time
and thoughtful discussion. Even if you don't have a planning meeting,
reading through the outline might spark some questions you want to ask
yourself about your business.
Outline for a strategic planning
meeting
1. Discussion of Desired Outcomes from the Meeting
A. Common understanding of where the business is today
B. Everyone needs a cooperative view of "soft spots" and opportunities
for improvement.
C. Everyone needs to develop a consensus of where the business wants
to be in the future.
D. Everyone must agree to design an action plan and implement it.
2. Business Overview and Discussions
A. Financial overview
B. Billing and collection benchmarks
C. Business overhead
D. Accounts receivable status
E. Financial history
F. Income levels-past and present
G. Overview of current business personnel
H. Other (As determined by facilitator or the participants)
3.Participant Observations
About the Business-Be Specific
A. Positive points about the business (These should be emphasized)
B. Negative points about the business
4.Overview of Competition
A. Who are the business's competitors
B. Penetration, and growth of competitors
C. Trends in the industry
5.Review of Key Objectives
and Critical Success Factors
A. What makes the business unique
B. What makes the business successful
C. What is the vision of the owners and personnel
D. Review key undertakings of past year
6.Top Issues Now Facing the
Business
A. How the business intends to address each issue
B. A detailed discussion should follow, including any obstacles that
must be overcome to effectively address the issue
7.Issue 1:
A. How the business intends to address the issue
B. Obstacles to overcome to ensure success
8.Issue 2:
A. How the business intends to address the issue
B. Obstacles to overcome to ensure success
9.Goals for Next Period
A. Strategic undertakings for the business
B. Financial goals for the business
C. Other key efforts for the business
Summary
A. Summarize key successes/challenges
B. Reiterate key goals
C. Create action plan committee
D. Set next meeting to review implementation status | 