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Have You Made the Mistake of Delegating the Financial Responsibility of Your Business?
Many business owners make the mistake of delegating ownership of their financial matters completely to another party. While it is important to engage the professional assistance of CPA's and internal CFO's to manage and oversee the financial affairs of your business, it is still crucial to take full ownership of them. Even if you hire someone to handle your accounting and bookkeeping there are still things you, as the business owner, should not totally surrender responsibility for.
The following are guidelines for you to use on a regular basis:
1) Compare actual results to budget. Each and every month compare your income and expenses to your budget. It's a great way to learn what's working and what's not working with your business. The goal is not to have an accurate budget... but for you to have a thorough knowledge of what is happening and to know if anything unexpected is going on. Don't just delegate the budget to someone else; as the business owner, you need to fully understand the budget and what decisions impact it directly and indirectly.
2) Look at canceled checks. Occasionally (say 1-2 times a year) conduct a thorough review of your bank statements, making sure to flip through the canceled checks. Ensure that all signatures are yours, and that you recognize the vendors. Scan the endorsements on the back. You know your business better than anyone else. So, review financial documents regularly for inconsistencies or gaps that may need to be addressed.
3) Review payroll register and hand out paychecks. In some industries, "padding" the payroll is a common problem. Regular review of the payroll register will prevent this from occurring. You never know what you may find with a simple review!
4) Review statements from vendors. Every now and then (maybe 3-4 times per year) take the time to open the mail and look at statements from vendors (many vendors don't send statements, but do send late notices). Here you want to make sure that your business is in good standing with vendors - long overdue invoices might be an indication that a check you thought was going to a vendor actually went in someone else's pocket, or that an invoice has been overlooked.
5) Review your Accounts Receivable and Aging. Check for "slow paying" patients, and make sure patient payments are being correctly applied. There is often opportunity to increase short term cash flow by addressing issues within accounts receivable.
6) Scan the check register. Periodically (every 3-4 months, or so) take a look at the check register just to make sure all the payees are familiar to you. Multiple checks written around the same time to the same vendor could be an indication that funds are being diverted. (You also might want to reduce the time spent writing and posting multiple checks.)
7) Take a physical inventory. Do you know how much inventory you really have? Accountants can be very helpful setting up inventory tracking systems, or you can use one of many available accounting software packages. Physical inventory should be taken at least once a year, but it is generally advisable to do it more frequently.
While you should have a hand in your business's financial affairs, you should also work with professionals. Your business should have a qualified and experienced CPA on staff to work with you quarterly and annually to address any and all financial issues and to help you work in a proactive financial manner. Your CPA should also help you develop an organization system for all of your business's documents. By being more organized, you and your business will run smoothly.
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