Q: Can you recommend some common best accounting practices to help ensure my company is maintaining strong financials?
I often recommend these key accounting practices to ensure strong financials are in order:
Well-established leadership. A strong management team usually includes a skilled CFO or controller, depending on your company size. Typically, this individual is responsible for managing multiple tasks with minimal owner supervision, including human resources, information technology, risk management and general office operations. If you feel your company has outgrown a bookkeeper, but is not necessarily ready to hire a full-time CFO or Controller, consult with your CPA to obtain their assistance in this function.
Timely information is key. A best accounting practice is to close the previous month’s accounting records by the 15th of the following month. This allows management to analyze the company’s financial information early enough to resolve any issues. If management isn’t aware of a problem until three months later, it’s often too late to remedy to situation.
Identify Key Performance Indicators (KPIs). Reviewing KPIs with your management team will help them better understand the financial trends of the company. Sometimes, these are pretty basic such as gross profit and net profit. Other times, these are more operational such as amount of material installed per month or week.
Effective accounting systems. We often see companies stick to their current software even after they’ve outgrown its capabilities. While a software conversion can be painful, a robust ERP software package will drastically improve company efficiency.
Mike Kuchar, CPA, CCIFP, is a Shareholder at Doeren Mayhew. With nearly 20 years’ experience in public accounting, Mike focuses on specialized audit services, as well as internal controls, fraud analysis, litigation support, succession planning and tax planning for his clients.