Deeper into the Numbers
• Cash - Were internal controls related to cash followed? Was spend approved following internal processes? No one should have unilateral control over cash…different person for approval, spend and reconciliation processes. Is there a cash overage or shortage based on projections? Review spend against budgeted thresholds. Review spend on the balance sheet.
• Inventory balances – Were internal controls related to inventory followed? Purchase orders approved, random verification of items purchased either on the floor or sold or obsolete.
• Review collection cycle – aged accounts receivable balances Review accounts receivable. Is the collection cycle improving or lengthening? Is our sales and collection process clear? Do we need to send clients to collection? Do we have the right clients?
• Review debt (short term and long term) – Review credit card balances, lines of credit as well as long term debt. Were these accounts reconciled and all debt paid according to terms? If there was an increase or new accounts, was there adequate approval and reasoning for the increase?
• Review liabilities to ensure adherence to compliance (payroll tax and sales tax filed and paid timely)
• Confirm transactions of a personal nature to ensure proper accounting treatment to the equity section. Is owner(s) taking cash from the business? Asset protection or compliance issues.
• Review recurring expenses – are there opportunities to decrease expenses? Are there recurring expenses or contracts that need to be ended. Review accounts such as utilities, rent, computer and internet, dues and subscriptions and insurance. Be aware of lapses contract periods or a vendor change.
• Review Gross Margin – a material fluctuation may indicate categorization mistakes or flaws in inventory management. • Review customer acquisition costs – marketing and sales process working or needs improvement?
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