Making Financials Real

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Our niche at Rohloff Associates is “Making REAL forward-thinking decisions based on REAL financials.” We aren’t the “stereotypical” CPA that just takes our client’s numbers and plugs them in. We want to provide value to our clients and get them financials that are REAL to make educated decisions.

So let’s define REAL. Bad info in means bad info out, so we go the extra length to ensure that you’re informed with quality data that’s meaningful to your big decisions. People remember what they did this past month, but it’s much harder to remember what happened last year. We are continuously asking questions and providing feedback to you in a timely manner so we can close out your books on a monthly basis. Operating in REAL time mitigates surprises.

Here’s what we do to make it happen:

  1. Reconcile necessary accounts – This includes bank accounts, credit cards, loans, and anything else on the list.
  2. Make necessary journal entries – Is there depreciation or interest break out?
  3. Review your books – Do the numbers we’re seeing track with the associated budget?
  4. Compare last year’s month to this year’s month – Are there any unreasonable discrepancies between January 2022 and January 2021?
  5. Compare the prior year to date (YTD) to the current YTD – Is there anything incomplete, abnormal, or missing from this Q1 compared to last year’s Q1?
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Successful Businesses Depend on Accurate Decisions

The stereotype of “accountants just plug numbers into a spreadsheet” exists for a reason. When you have accurate financials, you have the capability to make decisions based on facts as opposed to educated guesses based on last year’s income. We’ll compile the data and, based on our findings, will give you actionable and relevant insights. Business decisions will separate you from the competition, so it’s important that you’re confident in your decisions and leave nothing to chance. This is especially the case with financial decisions, and even more so in the ever-changing and unpredictable business landscape. The world is moving at the speed of light, so falling behind on something so critical could make for extremely costly mistakes, including:

  • Owing more taxes than expected because of inaccurate income.
  • Losing money from uncollected or unverified receivables.
  • Being unable to obtain funding/financing when it’s needed the most.
  • Making a bad or misinformed hiring decision.
  • Pursuing a product or service that appears to be profitable but isn’t.
  • Undervaluing your company during a merger or acquisition.

As we work through our proven process with clients, the first thing we do is tie out all accounts on the balance sheet. If the balance sheet is accurate, the current year’s expenses and profit will follow suit. It’s impossible to provide accurate advice if the balance sheet has inaccurate data, so Rohloff Associates prioritizes the balance sheet.

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Components of the Balance Sheet

Bank Accounts – Beyond Just a Reconciliation

We start by analyzing your bank accounts, including if you have uncleared checks. We look at the age of your uncleared checks to see if they’re over 90 days old. If they are, we need to make sure they’re accurate. If not, we need to properly reverse it out. At year-end, we’ll look at your January bank account statement to ensure that checks cleared in the future don’t relate to the current year’s expenses. It’s then possible to follow up on missing check numbers and close any loops that may exist.

Accounts Receivable – Aging and Accuracy

By looking at the aging and accuracy of your accounts receivable, we can find takeaways that lead to very meaningful decisions. Accounts Receivable should only have a debit balance. If there’s a negative balance, fixing it becomes the priority. We also look at the age of your receivables. If they’re older than 90 days, what’s the realistic probability that you will be paid the outstanding amounts. Checking accounts receivable is not something that only needs to be done once a year. They should always be checked on a regular basis!

Depreciation and Fixed Assets

We’ll look to set up monthly recurring entries for the expected amount of depreciation expenses on your balance sheet, and document any items that are lost or missing. This prevents a large balance from piling up in December, which will negatively impact your monthly financials. If there is a large asset purchase, sale, or trade in the middle of the year, we’ll update your financials, recalculate the depreciation expense, and enter in the gain/loss in the month it occurred.

Accounts Payable – Aging and Accuracy

When dealing with accounts payable, it’s important to maintain only a credit balance. If there’s a debit balance, we prioritize fixing this. Then we ask the question – how old are your payables? If they’re over 90 days old, what’s the probability that they will be paid the outstanding amounts? This should be checked regularly.

Credit Cards – Beyond Just a Reconciliation

If your business has uncleared credit card expenses it’s important to correct it if it’s outside the current reconciliation. At the end of the year, look at January’s credit card account and ensure that anything charged in December is entered into December’s books.

Loans, Including Employee Advances

We always look to tie out our client’s loans on a monthly basis for principal and interest. We’ll request any relevant loan documents that have occurred during the year to ensure all tax deductions have been tracked. If you don’t have an amortization schedule, request one from the lender to track your monthly schedule. Additionally, if the loan is wrapped up into another loan upon the sale or purchase of the asset, we’ll make sure to track that instance and accurately close out the loan in the process.

In addition to these processes, employee advances should also be considered, as they need to be reported as a reduction in the company’s cash account and an increase in an asset account.

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Monthly Review of Profit and Loss

If the balance sheet is accurate, the current year’s profit and expenses will follow suit. As we tie out the balance sheet, an item may be coded in a spot on the profit and loss (P&L) that isn’t 100% accurate, but we know the expense has occurred. Examples of how we accomplish this include:

  • Review your meals to make sure that all entertainment expenses are accounted for.
  • Review the miscellaneous accounts and your office account to see if there are any fixed or non-deductible assets.
  • Check for reasonableness by looking at prior months, budget forecasts, and similar resources to check if they’re in line. If so, there’s no need to get stuck in the weeds.
  • In the meantime, don’t add unnecessary accounts that convolute the report. Less is more! Every purchase doesn’t need its own line item. Groupings should always be appropriate.
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Accuracy vs. Perfection

There is a fine line between being accurate and being perfect. While we strive for perfection, we do not want it to come at the cost of efficiency and being immaterial. If the perception of the financials is reasonable and materiality is reasonable, the accuracy should be sufficient. We do not need to spend 10 hours searching for an immaterial item, nor do we want to hold up several months of accounting. This will defeat the purpose of closing the books and having timely financials.

While we love to dig into a good “mystery” of financials to untangle the web, we find extreme joy in being able to provide clients with REAL financials to make the best possible decision with the most up-to-date information available.

We work hard on continually improving and ensuring that we’re always at the top of developments in the industry and new trends. You dedicate your time and energy to being an expert in your field, so outsourcing to a firm like Rohloff Associates is your shortcut to mastering your finances. Reach out to our team to learn more, and we’ll equip you with the tools to make informed decisions, no matter how complicated your situation is.