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Accounting Department Schedule | Hire A CFO Edmonton

Hi and welcome to another edition of ask spirals CPA. Today we’re talking about your accounting department schedules. Have a y’all way here with me again, you always been dealing with the cold rather well, so we’ve had a minus 20 below for how long now? I don’t know if it’s like on and off now. We had some couple of days that it was pretty good and then the weekend was just like horrible. Okay. So the court I have for you today is from Gary Keller and it says, if you are what you repeatedly do, that achievement isn’t an action that you take, but a habit that you forged into your life. Uh when looking to Hire A CFO Edmonton, the statistic that I’ll bring up this 50% of all Canadian small businesses are out of business in five years. And you know that, uh, one of the top three reasons is that they run into cash. So, um, the story that we have here is business owners.

They don’t have a set schedule to keep their accounting up to date and they ended up making bad decisions based on poor information or out of date information. So you be worded the question, do you think these business owners should be asking, first of all, um, one of them is, does having a schedule for accounting functions? How keep records up to date? Yeah, 100%. You know, it’s the old of what gets scheduled gets done. Um, this is something that you have to do. So the time when you are actually going to process payments, process payroll, do the bank reconciliations, disburse the payments and then actually take the time to actually review the numbers. They should be set. They should be read in a calendar. You have to do them. If you don’t, you’re going to have out of date information, uh when you Hire A CFO Edmonton, mistakes are going to get made and it’s infinitely harder to go back and try to figure it out after than it is to just simply keep up to date in the first place.

Um, well how does having a schedule help you afford a more sophisticated CFO? So most small businesses, you know, the trap they get into is they think they need someone to follow them around all day. They think they need to be able to walk in the, across the office to someone, an issue, a check right away, um, or you know, complete a accounting function right away. But if you move to a schedule base where things have to be done on a schedule, now all of a sudden the efficiency of when you can tackle tasks, it just goes up dramatically. And your ability to, instead of paying that and designated person making, you know, 15, 20, maybe 25 bucks an hour, now all of a sudden you can afford a sophisticated ca the average small business because they don’t need them full time. They just need them part time.

But they have to be regimented. They have to be disciplined to execute on a schedule. Um, why should you do bank reconciliation before you pay your staff? So we have to know, you know, how much, if there’s enough money for those checks, clear a employees get, you know, a little bit upset when a, you don’t know who the checks were supposed to be there and they’re not. And we’re going to have to reconcile a banks anyways. So why are we doing some sort of secondary procedure and looking at the aggregate amount of the payroll and trying to, looking at the, the online bank balance and determining if is there enough for payroll? Let’s just do a bank reconciliation. We have to do a bank reconciliation, anything anyways, um, it’s the most sophisticated way to do it. So let’s do that. Bank reconciliation. Let’s see how much funds are available once all of the outstanding items clear.

And then let’s run payroll. Uh, you know, that’s the, the way to tackle it. Um, why is it efficient to batch payables with payroll? So now we’re going to have to disperse cash. And the same thing when it comes with payables is let’s do a bank reconciliation. Let’s see how much funds we have available. So if we batch them together, we do that bank reconciliation and then we see how much funds are available for payroll and payables. And we’ve just significantly cut down on the amount of times that we’re going to have to, you know, process any cash disbursements. So why do it every single day when we can do it once every two weeks? Um, there’s a lot more efficiencies plus, you know, by batching it with payroll, you know, sometimes suppliers have terms net 30, net, 60, um, but employees don’t have terms.

So by batching it with payroll now when we know we have enough to pay the employees, how much do we have left to pay the suppliers as opposed to trying to pay the suppliers on Wednesday. And then on Friday we’re trying to pay the employees and I’m going up the left. So, you know, batching, it’s, it’s efficient and it makes sure you’re most, yeah. You know, your, your, your employees are taken care of. Absolutely. Um, why is it more efficient to enter transactions prior to making payments? Okay, so the, the, we touched on it a little bit earlier, this, that risk where business owners, they want to, you know, write a check, send it EFT, and then you’re sitting there a week or two weeks or month or a year later trying to figure out what the heck was that EFT. No one has any recollection of what it was.

And we don’t have a, a, a, we ended up not having a source document, a receipt to support it. You know, we’re, we have some audit risks that we can’t defend. They don’t forget we have a GST audit under the way we, you know, we, we can’t cut the itcs and the GST we paid back. Um, it’s, it’s just more time consuming. You know, there’s a reason why big companies don’t just, you know, write checks. They submit the, you submit the bill, it goes through the checks and balances, and then all of a sudden the payments get issued. But small business owners seem to think that they’re different and it’s going to work better if they said police are dispersing cash all the time. Um, you know, it’s, it’s difficult. You end up, you don’t have enough information even to give them adequate records. Okay.

Because they don’t know what they burst that cash for specialty. Each transfer is now very common. That’s right. That’s right. Yeah. Um, after entering the transactions, should you review reports prior to making payments? Yeah, we should. We should make sure that these numbers make sense. So you know when we should be looking at, you know, compare it to monthly incomes, committed about the balance sheet and a comparative, mostly you didn’t come statement to see, you know, what these payments are going to look like once they’re boasted. Because you know, once we send the cash out, whether by check or electronic fund transfer that that cash is gone. Right. So what’s that reasonability test by actually looking at it in the accounting records? Does this make sense? And when I say make sense, is it consistent with what happened last period or what’s happened historically? Um, or was this completely offside that we should look into it before we’re dispersing cash here?

Um, what happens if payroll cutoff is too close to pay day? So he ended up with that payroll cutoff. And you know, let’s say you have a payroll cutoff on Wednesday and then you have a payday on Friday, um, that’s really, really tight to what ends up happening is a, you might not have enough money to make it. That’s always a concern too. So it places an unnecessary strain on your cashflow. Um, you know, you can put that a week out. All of a sudden you got, you know, another week to collect those funds. If it, if there’s any sort of cash crunch in the business, but B, it’s, you ended up, um, I guess taking shortcuts in the approval process. Um, you know, people are don’t have enough time to review it properly and payroll gets prepared and the owner just has to hit the submit button at the 11th hour or signed the checks without really having time to review it because we don’t have any time in the time that it takes to prepare it.

It’s not like, you know, a lot of there, there’s some preparation time that goes into preparing the payroll ordinarily. And then there’s an opportunity to ask some questions and make sure we got it right after. And then you know, an opportunity to have other people who review it to make sure it’s consistent with the, what everyone’s expectations were. And then you disperse the funds. But the closer you get to that deadline day, I would suggest that it needs to be at least a week in any business. So if you want to get paid on Wednesday, that cutoff needs to be the prior Wednesday. Um, and ideally it’s probably seven business days would be a useful as well, but certainly a week that cutoff needs to be. So you’re not taking shortcuts on the review and approval process and holidays. Yeah, holidays you by that Wednesday, Friday, what happens when it’s Good Friday?

Now all of a sudden it’s Wednesday, Thursday, they would cut off on Wednesday and you’ve got to pay them the next day. Um, you know, mistakes are going to get made there. Um, what are some entries that can be done at year end to increase efficiency? Yes. Some of the entries that you do at year end, although they’re extremely necessary, you know, if we’re trying to look at creating an efficient accounting department that’s running on schedule, is there some things that we have to do each and every month? So things like accruals, um, you know, depending on the size of the business, do we actually need to do a payroll accrual each and every month? Do we need to do an accounting accrual each and every month? Um, do we need to do an amortization entry each and every month? Um, you know, that’s a lot. That’s like cash transactions.

So often that can be annually as well as a lot of the passive investments like the, the uh , investment portfolios. If they own stocks or bonds, you know, the change in the market value, you know, extremely significant to keep an eye on that year end. But a month a month, you’re probably not going to change your business decision making based on what the market change near your stock portfolio is. So why are we spending this time, you know, to, uh, review that, uh, each and every month there’s a number of transactions like that that are, uh, correct when you Hire A CFO Edmonton. But they can probably be done at year end, you know, to get you the most efficient accounting department, uh, parcel, because the idea is to get the information that you need to make good business decisions, but don’t do any more work than that. Um, they shouldn’t be a make work project. Um, how should your monthly statement review and reviewed each payroll differ?

So when you’re, when you’re dispersing funds, you know, we’re, we’re doing that financial statement review. If you’re on a biweekly basis, you know, biologically survice if you have to pay someone weekly, weekly as suffice. And for that reason, I’d strongly recommend a lot of business owners they should go to biweekly to cut down on the leg work require. Um, but that biweekly review is, it’s more logistical in nature, you know, is it correct? You know, are we paying someone that doesn’t deserve to get paid? Um, you know, are we looking at a potential duplicate pain, that situation? Are the classifications correct? Do the reports make sense? That’s what we’re looking for. You know, with the, the review process with each payroll and payables. And then when it comes to a monthly, we’re still doing that. But we’re taking it one step deeper and looking at, you know, how, what was the performance like versus what we actually anticipated the performance to be or what our historical performance is and you know, what are some efficiencies that we’re, we’re noticing and what are some inefficiencies that we’re noticing and what are some, um, planning opportunities that we can, uh, we can do to improve the circumstances as well.

So it’s more a strategic base, so a on a biweekly or weekly basis or looking more, um, you know, compliance space. Is it correct? Does it make sense in a more granular level? And then on a monthly basis you’re still doing the same, but then you’d take it one step further and you should be taking think, thinking more strategically at that point. Um, why should you schedule a meeting with your CFO monthly rather than email? Yeah. So people think that they’re going to look at a report and it’s going to be inefficient. And I’ve been, I’ve been telling people, you know, for a while now, you know, as a, as a CPA, you know, I of course I’ve worked in conventional firms and you know, at one point we even bill by the hour. So, um, you know, if you have to have a discussion with another human being, a back and forth conversation, um, is extremely inefficient to do that by email.

Um, and this is something that you’re going to have to do and there should be questions you 100% should have questions if you don’t have questions, but that person who helping you with the accounting, um, you’re not looking at it diligently enough because even if the questions are just strategic in nature and what do you think we should do better, you know, that should, that should elicit some back and forth communication that’s, it’s going to be quicker if it’s scheduled. And so why should we try to use ad hoc, try to meet whenever we can? There’s nothing more important than reviewing your numbers. I mean, we’re in business because we want to make money. If we don’t make money, we run a business any longer. This is not something that you can avoid. It should be done every single month, and if it has to be done every single month and it’s going to have some sort of back and forth communication, you should have a set meeting with that person who’s helping you with those, those figures. It’s just the most efficient way to tackle it. So I think that’s what we have here today. Um, thanks so much for tuning in and you don’t feel free to hit that like, and subscribe button for future tips on how to, um, you know, help out with your business and, uh, you know, we look forward to seeing you again. When you are looking to Hire A CFO Edmonton give us a call. Thanks very much.