Case Study 2020 Business Services Assignment
April 15 , 2020
The Board of a recently acquired Private Equity portfolio company had identified significant deficiencies in the accounting/finance function, most importantly the department’s inability to produce accurate and timely financial statements/reports. There was no confidence in the finance department and the company lacked a permanent CFO. The company needed an assessment of the situation and recommendations on how to fix the problems.
What We Did:
We first performed an assessment and reported back to the Board, identifying multiple deficiencies, many of which contributed to the inability to produce accurate and timely financials. We also completed a staff assessment and worked with an executive search firm to develop a profile for a CFO. We provided specific examples of each deficiency and possible remedial actions. CFOCP was then engaged to address the deficiencies, and work with company personnel to remediate them. CFOCP worked with the finance staff to develop a detailed closing calendar and identify and execute steps needed to remediate the deficiencies. Along the way, CFOCP made several recommendations to improve the tools and processes used by the accounting department, implement best practices and improve internal controls.
How We did It:
During the engagement, we encountered some accounts with unsupportable general ledger activity. In accounts such as Accounts Receivable, which should tie to the subsidiary ledger, netting entries were being recorded by the client to ensure that the balances agreed. This practice resulted in some GL accounts not having subsidiary ledger that supported the GL balance. In addition, the reconciliations included a significant amount of aged reconciling items which lacked adequate support.
The client’s allowance for loan losses policy was aligned with its UK parent, however, it was not GAAP compliant. We drafted and implemented a new policy to ensure compliance.
We also helped the remaining staff to step up and expand their knowledge and understanding of the systems and processes. Previously they had done some processes by rote at the direction of the former controller. We provided training for both the local and international finance teams and documented the processes as we went along.
In this engagement, we collaborated closely with local and international finance teams and the auditors. In the end we were successful in ensuring the client’s financial statements and supporting documentation were complete and accurate and the auditors issued a clean audit opinion on a timely basis as required by the regulators. We also provided the CFO with documentation of the financial and reconciliation processes.
by Dave Northrup, Director, CFO Consulting Partners
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