The monthly reporting process can also play an integral role in safeguarding cash. Establishing key controls and keeping a close watch on daily, monthly and annual statements are good ways to begin to create a firm system of control.
Here are eight recommendations for safeguarding cash flow in the monthly reporting process:
1. Expenses should be reconciled to the budget and variances explained and accounted for.
2. All of the assets and liabilities of the company should be analyzed and compared to the prior month.
3. New vendor files should be reviewed for proper setup and authorization.
4. If applicable, payroll reports should be reviewed by department and compared to prior periods.
5. Monthly reports should reflect all daily, monthly and yearly non-cash adjustments and write-offs, by both the attorney and the client.
6. Management should manually review all reports for accuracy.
7. A monthly roll forward of accounts receivable must be maintained. Deposits must be reconciled to bank activity, additions must be reconciled to billing reports, and non-cash adjustments and write-offs must be reconciled to adjustment reports.
8. Each month, management should conduct a formal review of the budget and compare it to actual performance. This committee should review monthly profit-and-loss statements in order to carry out a detailed comparison of the expected budget to the actual budget.
- The accounting department should prepare a monthly narrative that explains any significant changes or discrepancies between the expected budget and the actual budget.
- Be sure to establish key controls such as supervisory review and bank statement and reconciliation approval for client funds, master funds and checking accounts.
- Be wary of having too many check signers, especially if monitoring controls arent firmly established. Consider requiring a second signature to help with control.
Cash flow is the most important "flow" in the FlowFirst management model. Its the initial cash investment, as well as the subsequent accumulation of cash, that helps fuel the other three flows. Safeguarding this vital asset goes hand in hand with safeguarding your business.
About the author
Alexander J. Hart of Cuban American decent is principal and founder of Hart Vida Raffo. With over 25 years of experience, Alex specializes in the areas of tax strategy and planning, business process improvement, and capital consulting. Whether advising on capital and financing strategy or consulting for privately-held professional services firms, Alex has the expertise and practical know-how to help any company optimize their business processes and make tactical financial decisions. He began his career at IBM in sales operations and accounting. He was a Controller for the N.Y. Post, has been a CFO for a medical device company, and has written a tax column called “Ask the Tax Guys” for Micro-Cap Review. Alex is a professional member of A.L.T.A. (Affiliated Lawyers of the Americas), a member of the National Association of Tax Preparers, and is a contributing author and mentor at Latin Business Today. Alex graduated from St. John’s University with a B.A. in Spanish and his M.B.A. in Finance. He obtained his accounting degree from Pace University.Website