Frustrate-Proof Your Accounting Practices

“Alright, I understand, but let’s all calm down for a second…”

I wonder how many times I’ve had to repeat this phrase in the tranquil, soothing tone best used for interrupting explosions of rants and fits? The capability to ease rattled nerves derived from financial frustrations is an everyday occurrence when you run a busy accounting firm; learning how to properly put out fires comes with the territory:

Step 1: Amidst the raised voices, hair pulling, head pounding, flushed faces, and finger pointing—clearly identify the immediate problem, from the proper source, as fast as possible.

Awesome Fire Examples Include:

An unexpected tax bill for $22,582.65 just came in today’s mail. The bill is due in three days or you must appear in court…in a state on the other side of the country.

An incorrect invoice was sent to your best customer. You promised them $10,400. The accounting clerk sent $50,400.

At 8am in the morning, you sit down your coffee mug and load up your emails. First email for the day from your bank: “0” in the Checking Account…when $368,457.16 was there when you closed down yesterday.

You’ve been sitting in a financial review meeting for two hours now, and you still have no idea why your business is projected to have a Net Loss of -$200,000 when you were preparing to declare the end of year bonuses.

 

Step 2: Amidst the raised voices, hair pulling, head pounding, flushed faces, and finger pointing, state in a tranquil, soothing tone, “Alright, I understand, but let’s all calm down for a second…”—if necessary, try to take your own seat while saying so to encourage others to do so as well.

 

Step 3: Explain, as quickly as possible, how you intend to immediately handle the situation. Even when you have no idea what’s going on or how it happened, at least give the impression of control.

 

Here’s how to put it all together in real-time:

A tax bill for $22,582.65 just came in today’s mail. The bill is due in three days or you must appear in court…in a state on the other side of the country.

“Alright, I understand,” you say over the CEO’s screams of dismay, “but let’s all calm down for a second and here’s what’ll happen. I’ll give their tax office a call as soon as I get to my desk to first verify that this isn’t a mistake, and secondly I’ll make an arrangement for at least a 24-hour payment extension whilst we review the documentation they send over. More than likely there’s been a miscommunication with our tax firm, so I’ll get them on the phone, too, and then based off of the combined feedback, you and I will set a course to figure this all out. Fair enough?”

 

After dealing with enough of these issues over the span of decades, it becomes obvious to me that the best defense is a good offense! Frustrate-proof your accounting tasks today in order to avoid unwelcome surprises tomorrow with these three helpful tips.

 

Offense # 1 – Decrease Paperwork Errors

 

It’s quite embarrassing to notice obvious errors in documents to your customers, investors, and vendors; and while humans make mistakes, because we aren’t robots, there are some apparent causes for consistently making unnecessary mistakes:

 

Lack of focus – Organizations nowadays seem to encourage a culture of multi-tasking; however, if you intend on completing a new-customer phone order, signing off on a FedEx package, overhearing loud bouts of laughter from your colleagues down the hall, while hitting SEND on another customer invoice, is it truly surprising you forgot to include a line item of $250 for IT cost? Now you have to (at best) recall the email, revise the invoice, and resend it to your customer with an apology. Be still, turn down the noise, and focus. Don’t be afraid to tell someone, “Just a moment, please”, if they’ve suddenly interrupted your work, until you can quickly conclude your task.

 

Unclear, undocumented, instructions – My firm is jam-packed with manuals, memos, informative emails on how to perform every single task for our clients. Documentation is a requirement when you represent other businesses, most especially if it involves non- routine assignments. When accountants receive clear and documented instructions, the margin for error decreases drastically. Furthermore, if an error does arrive, it’s easier to discover if an accountant was handed the wrong information. So for every process and procedure within your business, document everything! If a stranger to your organization couldn’t sit down and perform your steps perfectly, you need to revise your instructions.

 

Automation is your friend – If anyone manually types a document (spreadsheets included), assume that there’s a high margin for error. Yes there’s Spellcheck, and your spreadsheet might have all levels of formulas in it, but it’s still a manual report. Create your invoices in an accounting software system where you fill in the blanks and it’ll generate the document. You won’t have to worry about saving and sending the wrong version, misspelling, deleting a formula, updating totals, etc. Find the most appropriate accounting software solution for your accounting operations – not your business operations – for the best results. For example, your business might be a construction subcontractor, but the top of the line construction accounting software might be inappropriate and too complicated, whereas QuickBooks would be perfect, and vice versa.

 

 

Offense # 2 – Decrease Cash-Related Fires

 

Surprisingly, no one gets upset when an unexpected check comes in the mail from a customer or outside source…but the world goes to chaos when undesired cash disbursements appear.

 

Missing Cash – ACH payments and wires are a business norm now more than ever, which makes tracking cash a challenge when you’re a large volume business. But when a materially unplanned withdrawal shows on your bank transaction history, here are the Do’s and Do Not’s to your response:

Do Not: Immediately start rumors of fraud/embezzlement or finger point to any employee.

Do: Immediately review the list of cash disbursements outstanding to ensure it wasn’t from a prior transaction. Some vendor payments can take up to 90 days to be cashed. If you cannot determine who withdrew the funds, however, and it was not an outstanding payment, immediately call your bank account representative to dispute the transaction. If the activity is fraudulent, remember that your bank account is insured and work with your case manager so that the charge can be immediately reversed, if possible, throughout the investigation

 

Check Run Errors – What can be more frustrating than forgetting to pay a vendor on your recent check run, or paying the wrong vendor completely? If there was ever a place to document your accounting requirements, it must be for Accounts Payable!

Dates. The beginning of you AP Procedure Checklist begins with your dates. When will you print checks? What is the deadline for your vendors to submit their invoices? What is your internal date for approving and processing all invoices?

Vendor setup. You know what’s frustrating? Sending a check to the wrong business address. Printing a check when they were promised a wire. Invoice rejection because AP lacked required documentation of insurance, W-9, and any instruction memos. Take the time now to properly setup and maintain your vendors in order to avoid hassles later.

The Who. Where should your vendors submit invoices? To a certain email? Handed to an administrator?

The How. How should a received invoice be documented? Stamped by your receptionist? Filed into a specific email folder? Immediately placed into a certain area?

Invoice Approvals. Establish an invoice approval workflow. The complexity of your business should determine the levels within your workflow, but the general rule is to ensure that (1) invoices are sent to the most appropriate personnel for immediate approval, and (2) everyone in the approval queue must know their due dates for approving invoices, and the consequences should they forget.

Reports first. Cash Flow reports are mandatory. The personnel releasing payment must review an updated cash flow report to ensure the availability of cash. Skipping this step can have disastrous results regardless if you have $10,000 in the bank or $1,000,000.

Written Instructions: Who is sending out your payments? Managers? The accountant? Is a vendor picking up a check? The more information you document, the less unwanted surprises you’ll receive.

 

Offense # 3 – Decrease General Accounting Surprises

 

Let’s face it, surprises keep the work day interesting, but the majority of accounting-related surprises arrive from a lack of preparation, communication, and detail-orientation.

 

Your Accounting Department – If you’re a large organization with only one Staff Accountant handling everything, accounting frustrations should be a daily norm. Do not expect one accountant to be experienced to manage every aspect of your accounting. Like lawyers, accountants have specialties: tax accountant, auditor, general ledger accountant, payroll accountant, billing clerk, accounts payable clerk, etc. Your accounting department should be staffed in-house to appropriately support the entire operations of your company. Outsource all other accounting necessities. For example, a local pet grooming shop handles daily vendor and customer payments making one Staff Accountant suitable to only complete those transactions efficiently. Payroll, taxes, and financial reporting are outsourced to a local accounting firm.

 

Financial Meetings – A common business practice is to hold monthly or quarterly financial review meetings among managers and executives. However, what’s on the agenda outside of glimpsing briefly through an Income Statement? Financial meetings should have a clear itinerary to avoid wasting time and under-communicating. So how to hold a financial meeting:

Financial Review Checklist

#1.  Only invite appropriate personnel who can offer valuable explanation and/or assist with future decisions.

#2.  Your invite should include the following – (a) time and place of meeting, anything under one hour is not a sufficient meeting, (b) copy of all reports that will be discussed along with material notes from the accountant, (c) the order of discussion and possible questions that will come up.

#3. First on agenda to discuss: Review everything about your sales numbers including budgets/actual/variance/projections/accounts receivables status

#4. Second on agenda to discuss: Review operating expenses that are high priority for your operations, primarily selling, direct labor and materials, and corporate allocations such as insurance and benefits. Review budgets/actual/variance/projections/accounts payable status

#5. Third on agenda to discuss: Review non-operating expenses such as loan statuses and interest, depreciation, and taxes, and all levels of compliant projections. Review budgets/actual/variance/projections

#6. Fourth on agenda to discuss: Review your cash from a big-picture standpoint. Do you have positive cash flow for the current month or quarter? If not, what are you going to do about obtaining cash? Get financing? Make more collection attempts on outstanding invoices? Push more sales? Also, are you happy with your policies and procedures surrounding cash; if not, now is the time to agree on changes.

#7. Fifth on agenda to discuss: Review your profit margins from a big-picture standpoint. Is your business performing to budget? If not, what drastic changes can you make? If yes, is it time to issue dividends or declare bonuses?

#8: Questions and Tasks: Now is the time to review all of the questions and any tasks that are left to be resolved. Repeat them, and assign them to the personnel who will resolve them, and then dictate how the resolutions will be communicated: email, conference call, follow-up meeting?

 

Once you start frustrate-proofing your business as it relates to your accounting, you’ll surprisingly find that the amount of fires you put out diminish completely because everyone’s paying attention to details, you’re all communicating together, and you’re  prepared.