Archive for December, 2012

Prepare for tax season… its never too late… or too early :-)

December 31, 2012

This bears repeating annually…

Utilize simple recordkeeping software – quicken or MS money come preloaded on new computers

Categorize major expenses –

Home: mortgage, utilities, auto, contributions, taxes

Small business: office supplies, phone, advertising/marketing, dues…

Utilize the “Reconcile” feature and actually balance your checkbook on a monthly basis – catch errors when they happen rather than 6 months later…

Run “canned” reports on spending & actually look at them to see WHERE your money is going, looking for anything out of place, odd or unusual

Use a filing system – expandable folders, hanging folders, manila folders: Use Labels…

Personal

– Tax related documents – 1099s, W-2, real estate taxes, auto taxes, sales tax on major purchases, contribution receipts, purchase agreements

– Capital expenses – home improvements, major appliance purchases

– Other personal receipts that you need to keep – in order to return items or get service done

– Shred – To be shredded – wait at least 90 days before you shred just in case you need it later

Small Business

– AR Invoices sent –

Numerical copy kept in monthly folder or 3 ring binder
Copy kept with job/project information
– AR Checks received – copies attached to deposit slips

– AP Invoices received – folder by due date

– AP Invoices paid – alphabetically by vendor

– Capital equipment purchases – copies of AP invoices for depreciation purposes

– Bank reconciliations – folder for each account

– Credit card statement reconciliations – folder for each CC

– Advanced Accounting Issues:

Payroll records – whole system of PR / HR issues
AR aging reports – past due reports
AP aging reports – unpaid liability reports
Inventory – monthly counts / reconciliations
Depreciation spreadsheets
Prepaid expenses
Accrued expenses

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Budget Watch

December 12, 2012

Problem:

Large privately run organization prepared extensive annual budgets by each revenue/expense center (departments). Their process was extremely cumbersome and took many months to complete. Unfortunately, no one ever really analyzed the budgets themselves other than to approve them – if they showed a profit they were good to go; even though the budgets (and actual data) showed declining profit margins year after year.

I was hired to analyze the budgets: I analyzed seven years of data (the five prior years, the current year ending and the following year budget). Both actual and budgeted data was analyzed and graphed. The trend showed that although they were still making money, their expenses were growing at a much faster pace than their revenue was. This clearly showed that at some point in the future, if they did not change something, they would start to lose money. The analysis also showed that those trending lines were not the same for budgeted and actual data; which indicated a disconnect in the budgeting process.

The project was extended to monitor the Budget versus Actual analysis internally prepared each month to help the owners understand the analysis and to ensure the controls were operating as designed. The Budget Watch project lasted about 13 months until the owners were confident in their new control processes.

Moral:

Don’t wait until you start to lose money to look into your trending data. It is all right there, you just need to really look at it.