By Eileen Xethalis, Director and Head of Entrepreneurial Services Practice, CFO Consulting Partners LLC, April 26, 2011
CFO Consulting Partners is often retained to fix broken Accounting and Finance functions. When a prospective client requests an exploratory meeting to gauge whether we can help, the request typically is the result of many months of frustration on the part of the CEO/COO in dealing with the Finance and Accounting area.
Our active practice with growth companies has yielded some common traits that we believe are the root cause of untimely and unreliable management reporting, and/or high audit fees due to a lack of preparation for the audit.
Here are my ten painful oversights: The Company:
1. Has a chart of Accounts that grows organically- lack of planning when setting up the chart of accounts results in a higher work load in producing financial reports.
2. Does not keep a record as to the changes to the chart of accounts- A lack of record keeping as to changes in the chart of accounts is a red flag for lack of controls at the IT level.
3. Never closes the books- Leaves the door open to current events being booked in prior periods.
4. Does not adequately train staff on the proper use of accounting software and accounting related applications- Not training the accounting staff may lead to many problems such as; incorrect inventory, incorrect payroll records ( if not using an outside service) incorrect billing.
5. Does not have a closing calendar- Closing impinges on the rhythm of the daily work load. A calendar provides direction for the staff.
6. Does not adequately describe the assets being depreciated (start date, number of months of depreciation and so forth) and the company does not maintain easily traceable support documents. Support for the depreciation schedules facilitates smooth financial, income tax and sales tax audits.
7. Does not register to pay use tax on out of state purchases- The Sales & Use tax return is frequently overlooked; many companies do not deal with a retail customer and mistakenly believe they have no liability.
8. Never set benchmarks to evaluate the adequacy of the finance staff- Growth companies frequently go bare bones at startup with accounting staff. When to add? Who to add?
9. Never setup a tickler file to remind it to file annual registrations- Timely filing of annual reports maintains a good standing status and the ability to do business within a State.
10. Never sets up a tax calendar- A tax calendar is crucial when you have a presence in multiple locations; inclusive of federal, states and city filing dates.
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