In today’s fast-paced business environment, establishing and maintaining best accounting practices is an integral part of your organization to ensure solid financial data is kept. Doeren Mayhew’s business advisors share these tips to help maximize efficiencies and cash flow: 

1. Cash Management – Cash is key to effectively managing an organization and positioning it for growth. Consider the following to help manage your cash:

• Perform a daily reconciliation or review of cash balances by using online banking capabilities and booking adjustments into your system in real time.
• Maintain a cash worksheet to monitor cash balances effectively and in a timely manner.
• Conduct deposits and transfers of cash on a daily basis.
• Streamline your line of credit if you have one. If cash is limited, consider renegotiating terms of financing agreements to affordable monthly installments or evaluate if a sweep account would work for your organization. If it proves too costly, consider having certain direct deposits paid to the line rather than deposited. If you’re worried about your borrowing base calculation and its impact on availability over the next 30 days, review when you are billing and posting cash receipts.
• Evaluate cash-flow projections to help determine what level of cash and tracking is needed for your organization.
• Explore ways to shorten your overall cash cycle, such as matching timing of payables and invoicing, reviewing invoice billings timing and method of delivery (i.e., email or automated invoicing), performing consistent collection efforts and evaluating payroll schedule.

2. Accounts Receivable – Measure your accounts receivable performance and identify areas for improvement by establishing a monitoring key performance indicator (KPI). There are some ideas you can immediately implement to streamline your accounts receivables, such as establishing payment protocols for large orders or overseas customers, using an efficient delivery method to send invoices and ensure prompt payment, reviewing the KPI with key personnel regularly (preferably on a weekly basis), adhering to a thorough collections policy and documenting payment history for each of your clients. 

3. Inventory – Consider establishing procurement and sourcing practices to ensure proper inventory levels are maintained. Key inventory procedures should include:

• Cycle counts versus wall-to-wall counts.
• Month-end cutoff procedures.
• Allowances for obsolescence/physical adjustments – make sure it is written off by the end of the year for tax, if appropriate.
• Analysis days in inventory– to identify slow moving items.
• Un-reconciled receipts/received are not invoiced.

4. Fixed Assets – Your fixed assets represent an integral part of your operation, so consider the following to help ensure they are maintained effectively:

• Establish a capitalization threshold for items over a set amount.
• Record them individually, not as a group.
• Maintain a detailed description of assets.
• Work with your operations teams on cost/benefit assessments before purchasing new equipment.
• Analyze leasing versus buying major purchases.
• Review your asset listing to ensure assets exists and are in use.

5. Accounts Payable – An efficient accounts payable system ensures vendors are paid in a timely manner and also frees up working capital for the organization. To streamline your accounts payable process:

• Strengthen your purchasing approval process by defining thresholds to control purchasing.
• Have a strict cutoff at month-end policy – create accounting calendar with set dates that communicates cutoffs.
• Limit access to setup of new vendors – evaluate reducing the supplier base.
• Seek opportunities to negotiate better pricing from vendors (i.e., negotiating volume discounts).
• Review sub-ledgers for items such as duplicate check numbers/payments and miscellaneous accounts.
• Electronically store supporting information.
• Ensure all invoices are properly approved prior to payment. Verbally confirm with approver for large electronic payments to prevent fraudulent activity.

6. Bill and Pay – As your organization grows, the ability to track payments and invoices may become more challenging and can affect your bottom line. To help mitigate these issues, incorporate a bill-paying approval process that requires a manager approval, plus the date, account coded to and invoice/bill amount. If using company credit cards, create separate expense reports for charges on company credit cards versus reimbursable expenses, set credit card limits and get them all on one monthly statement. 

7. Notes Payable – To streamline this process, consider providing the person who posts the payment with an amortization schedule, analyzing agreements to understand covenants and tracking them regularly, and preparing borrowing base reports in advance. 

8. Accruals – To close early, estimate accrual by using last payroll of prior month. Consider adjusting your pay cycles to limit the need for an accrual (i.e., ending on last day of month). For all accruals, use reversing entries if your system has them. 

9. Month-End – Consider the following to help make this routine process more efficient for your organization:

• Reconcile large accounts weekly or daily to reduce workload at month or year end and identify issues timely.
• Use the accounting system cash reconciliation.
• Download bank transaction data directly into accounting system.
• Use a month-end close checklist to eliminate errors.
• Run a report of all journal entries and attach support.
• Print comparative financial statements and review variances for journal entries needed.

Doeren Mayhew's CFO Advisory pros work with a variety of clients to help maximize efficiencies within their organization.