Virtual Bookkeeping Services

How do you fix accounts that don't balance? Where do you begin with a checking account that hasn't been reconciled accurately in years, literally? What do you do with a system spitting out rejected checks from customer authorized direct payments and the staff can't keep up? How do you deal with an inventory costing system that shows an inventory shortage every time you take a physical inventory?

Fix it backwards.

Example with the checking account: Reconcile the bank, best you can today. Don't try to re-audit the prior transactions. Start now and work backwards. Balance per the bank today, plus deposits in transit that we know about today, minus outstanding checks that we are confident about (meaning we know they have not cleared and they are less than 90 days old). What is the calculated balance that the books should show? What do they show? What is the difference? Do the same task next day. Find out what cleared that we had no idea was still outstanding. Find what checks or automatic bank draws occurred today that we did not know about. Post today's transactions. When the difference between the reconciled balance and the book balance is the same number for 5 straight days, you are done. Book the adjustment. What you did was work current data, current transactions, current bank activity only. Any old stuff is irrelevant. But, doing it this way, if old stuff shows up (like old outstanding checks you didn't know about) now you can catch them.

My favorite: the company I served as CFO was drawing pre-authorized bank drafts from customer accounts every month to pay their monthly bill. The data system was rejecting hundreds of the drafts every day, because the bank would not accept them. And the number was growing. We literally had a room full of rejected bank drafts. We had two staff people available to fix this. And we had hundreds of unhappy customers. How to fix? Backwards. We had already lost any goodwill with the prior customers. And we could not keep up with the ever growing number of rejected drafts. Why not? We would draw the payment, but if the customer had changed banks, or the amount of the payment was supposed to change (that happened a lot) and it did not match the pre-approved draft, then the transaction rejected. The systems were so far behind that the staff was working transactions more than 6 weeks old, and working forward. But, at 4 weeks, a new draft was drawn. The older one had rejected, so did the new one. Now we are further behind. Solution: Start with today's rejected drafts, fix all you can (we could fix about 200 with the 2 people we had, 300 were rejecting). Stop and set aside whatever you did not get done today. Forget about them. Work the ones that come off tomorrow, all you can, as fast as you can, then stop. Start again with today's rejects. And so forth. We were working from the current activity backwards, rather than trying to start from all of the historical transaction problems and bring them forward. In this case, it took about 6 weeks before the number of daily rejects fell below the number we could clear. Within a couple of weeks after that, problem solved. We fixed it backwards.

Inventory: When the physical inventory is always way off, there is either theft (sometimes) or a lousy accounting and manufacturing system (mostly). Start with now. Pick a few items and investigate the cause of the current shortage. Is the raw material, to work in process, to finished goods, accounting accurate at standard cost? Pick a few products or assemblies and fix them. Then do a few more. Work backwards. The shortages will gradually reduce. Then figure out which products are priced wrong, based on the now better cost data.

If there is no way, no staff, no records, no idea how to bring forward the historical accounting or transactions to current, then start from current activity and work backwards. It works.

Sincerely,

Randal Suttles CPA
B2B CFO®

Our firm provides part time Chief Financial Officer services to small and mid size companies. All of our services are delivered by the partner, each of whom has at least twenty years of relevant CFO experience. Clients deal only with experienced senior level executives. There is no contract. We work on a handshake.

If you or a business associate would like to learn more, please contact me.