Accounting. Bookkeeping. Fraud.
Have I scared you now?
You may be wondering, “What is accounting?” Or “Are bookkeepers still necessary, given the advancement of technology?” Or maybe you’re wondering, “What is my company’s exposure to fraud?”
I will be reviewing each of these subjects in separate articles, so I’m not throwing spaghetti on the wall to see what sticks. I’ll show why each is important, and why it’s necessary to sweat the small stuff from the ground up, that your General Ledgers are going to be clean, compliant and consistent.
Here is an illustration of a nightmare scenario I experienced while working for a large accounting firm (which shall remain nameless.) Tax seasons are beyond intense; they can be Hell Week stretched out over several months. One year I was working on a package of tax returns that had multiple trial balances, all separate LLCs (Limited Liability Corporations) rolling up to a single return. The goal was to consolidate balance sheets across several sets of books and financial records, provided by the client’s internal controller. I had to facilitate the transfer of information between the internal accounting team, led by the corporate controller and/or the bookkeeping team, delegate the work to my staff at my own firm, consolidate the information, prepare a tax return, maintain compliance, and deliver to a partner for final review and signature.
Are you still with me?
This should have all been doable, but it wasn’t. There were quite a number of reasons, which didn’t preclude pressure from the Partner in Charge (PIC) to deliver on schedule.
Accounting errors made at the client’s end, which my team had to correct.
A great amount of tax questions on the trial balances from the bookkeeping team that ate up time.
High billable rates
In this scenario my rate was high – about $550 an hour. This meant I had to rely on lower level associates who had never been properly trained in correct bookkeeping/accounting practices, which led to rework and lost time.
Working with a $10,000 annual budget, by the time
the work hit my desk for review, there was already $35,000
of cost in the code, a.k.a., work in progress, & both
manager & partner review notes were t/b/d.
When I do review, my notes are extensive, detailed, technical and operational. It takes time getting answers from several avenues, more time lost.
Not surprisingly, I found myself severely overworked and underpaid, with no time for my family. I was miserable. And I didn’t have to be.
If we go back to the beginning, we can focus on how all roads lead back to accounting. If it’s still not clear, think of it like this. If the bookkeeper can handle the accounting properly, my staff can review properly, and not be overwhelmed with journal entries they are unfamiliar with, or other General Ledger detail items that require investigation. If the staff has been properly trained in debit and credit skills, they’ll be able to review the General Ledger properly, making the most productive use of the mundane time that was spent on the bookkeeping end, and focus their time on delivering the final product correctly and on schedule. The Manager gets a better, more reliable report, with confidence at the ground level all the way up to my desk.
This should be the norm, but I can testify from personal experience it is not. I have found the opposite to be true, and all too common in public accounting, yet it could be avoided. If all team members involved, from bookkeeper to signing Partner in Charge on the return, had a full comprehension of best practices in bookkeeping, then a more optimal process and product would be the result.
Yet you’re wondering, “With all the bookkeeping software on the market,
aren’t humans being supplanted by computers?” My answer is a curt “No!”
A topic for future articles, all and any software is only as good as the human operating it, and that human had better know the basics of bookkeeping and accounting and not rely on the app to know what’s correct, what’s compliant, and what’s consistent.
In my next article, I’ll discuss the inherent danger of bad accounting practices that can lead to fraud.
Thanks for reading,
Justin McAuliffe, CPA
Bellmore, New York
CMA Sandeep Kumar – Founder – CMA CLUB INDIA
Mob: +91-9311210010 / 9868600010
Email : firstname.lastname@example.org