MSOs lucky enough to have found the perfect accountant or bookkeeper should consider themselves blessed. For those struggling to find that right person to trust with accounting for your business, here are a few suggestions.
The first consideration should be whether you are looking just for a bookkeeper to handle the day-to-day accounting, or if you are looking for someone to provide not only clean numbers but also feedback and financial guidance.
If you use an outside CPA for financial guidance, then your bookkeeper at a minimum needs to be able to do the following (so these may be job description bullet points):
- Understand accounting principles including GAAP (Generally Accepted Accounting Principles)
- Reconcile balance sheet accounts including bank accounts, credit card accounts, loan accounts, work-in-process (WIP), receivables and payables
- Direct the follow-up of accounts receivables and maintain clean current balances
- Control payments and manage bank deposits
- Account for bills, post expenses correctly and ensure they are paid on time
- Identify out-of-balance conditions and know how to correct errors
- Manage payroll, returns and remittances if done in-house (or record it correctly if outsourced)
- Understand how sales and costs should be posting to the financial system, and be able to audit repair orders (ROs) for compliance
- Reconcile sales, receivables and sales tax between the management and financial systems
- Make adjusting journal entries
- Understand accounting for and balancing inter-company due to/due from accounts
But if you are relying on your bookkeeper to also provide financial feedback and a higher level of responsibility, he or she should also be able to:
- Manage cash flow and project surpluses and shortfalls
- Understand and report on industry key performance indicators (KPIs) at least monthly
- Run and analyze a profit and loss statement (P&L) to identify positive and negative trends
- Present a reconciled balance sheet to management monthly and to CPAs at year-end
- Assist with preparing an annual budget, and report on actual results versus budgeted
Once you have the person or staff in place to do all of that, periodically review to see how tidy a ship your accounting staff is running. Some common areas where I find deficiencies:
- Receivable balances that don’t reconcile between the financial and management systems (compare the accounts receivable aging reports from both systems)
- Excessive zero or negative balances in receivables, or excessive balances over 60 days (again, look at the accounts receivables aging report)
- Old items (especially cash) in undeposited funds (review undeposited items)
- Old unreconciled items in the bank account (view the bank reconciliation print-out showing uncleared items)
- Credit card payments made but expenses not recorded (look for negative balances in the credit card liability accounts)
- Old balances in accounts payable (anything over 60 days in the accounts payable aging report)
- WIP balances do not tie out to supporting documentation (review WIP report balances from the management system)
- Loan receivable and payable balances do not tie out (review loan statements or amortization schedules for current balances)
- Monthly sales totals do not match between the financial and management systems (review sales journals for the same period in each system, or ask to see the reconciliation)
- Sales tax balances at month-end do not equal the amount to be remitted (compare the sales tax return to the account balance)
- Due to/from balances between companies do not balance (review balance sheets of each company; an asset balance for one company should equal a liability balance for the other)
- Costs for an RO are posted to profit centers that do not correspond to the sales accounts (pick an RO and trace the sales and cost amounts and compare)
- Sales or costs posted to “miscellaneous” or “other” accounts without a specific profit center (review the P&L for misposted amounts)
- Recurring expenses are doubled up in one month or missing in other months (review the P&L by month)
- Paint material invoices are not properly broken out among various cost and expense accounts (select a sample and review the accounts they are posted to)
Your bookkeeper can be an invaluable asset to your business, once you find the person or staff with the right fit. But quality checking their work is as important as regularly checking the body work that goes out your doors.
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