Accounting Wishlist for Business Owners

With 2020 upon us, we are looking at a few areas within the accounting and finance function that can be critical to the success of a small business. Sometimes these areas are being overlooked or the functions simply aren’t being performed. If that is the case, we hope you’ll take some time in the new year to address these areas and think about how you and your organization can improve.

Budgets: If your company has never budgeted before, it is something worth considering for the new year. As a business owner, you have certain plans and goals for the business, and it is important to track your progress during the year against those goals. This not only gives you the piece of mind of knowing where you stand financially, but more importantly it can help to address areas of the business that are performing well, areas that need improvement, and costs that could potentially be cut.

It’s also important to make sure that you aren’t budgeting just for the sake of saying that you did it. Budgets, and the comparisons of actual vs. budget, should be meaningful. You should change or adapt your budget if there are significant changes that warrant doing so. You should also look for important trends, whether positive or negative, when evaluating your actuals vs. budget.

Internal Controls and Security: Fraud continues to increase in frequency each year, and the ways in which it is committed continues to become more complex. As the business owner, you should evaluate your internal controls and make sure that there are no significant weaknesses that could make your business susceptible to fraud. A few quick items to considers:

1. Is there one person in the organization that performs various duties, including handling cash, that could have an opportunity to commit fraud?
2. Are you reviewing bank reconciliations each month, and receiving the bank statements directly from the bank?
3. Do electronic transfers require multiple levels of approval for certain dollar thresholds?
4. Do employees have a way of anonymously reporting fraud or potential fraud?

These are just a few items that should be considered. Ultimately, you need to understand your processes, both within operations and the accounting function, to identify where weaknesses might exist. There are comprehensive checklists available, and you can also consider having colleagues or external parties provide input.

IT and Security Controls: This one isn’t necessarily specific to accounting, but it is an extremely important area to consider. Like fraud, security breaches and cyberattacks continue to increase and become more complex. At this point, every business should carefully consider the implications of their IT and security structure. If you don’t have IT personnel in-house, you probably need a third-party consultant who has expertise in IT and security to help set up or improve your system and controls. Things like anti-virus, dual-factor authentication, and back-up procedures are imperative. But in addition to that, you also need to take time to educate your employees on best practices as it relates to security. Employees need to be cautious when opening attachments or initiating transactions that are requested by email. Employees should also be using strong passwords and changing those passwords on a periodic basis, without just updating the last character in the password.

Timely financial reporting: As a business owner, you need to be able to adapt quickly to changes in the marketplace that impact your financial results. If you aren’t getting timely financial statements on a monthly basis, reacting to those changes can become much more difficult. You don’t want to find yourself halfway into the year before you realize you had an unexpected loss in the first few months of the year. At the latest, you should have financial statements provided within thirty days of month-end. Otherwise you are reacting late, and you aren’t using financial reporting as a tool to improve the business and increase profitability.

Automation: Technology continues to improve and can be utilized to automate processes. This can save your team time in performing various functions, which ultimately means saving money. It can also improve accuracy, speed up the month-close, and can free up employee’s time to spend on more value-added activities. You can start by working with accounting personnel to brainstorm a list of activities that are the most time-consuming. Using that list, you can try to identify processes that could potentially be automated and then research options for how the automation can be accomplished. It could be utilizing a new application or software program that automates what used to be a manual process. And the automation doesn’t have to be overly complex. Things as simple as processing checks can be improved with new technology; there are now applications where you approve bill payments online and the vendors providing these applications will physically write and mail the checks on your behalf for a nominal cost. This not only saves time but can also reduce the risk of fraud and help you move to a paperless office.

While there are many other areas to focus on and improve, we hope this list helps you identify some improvements you can make in the new year.