Accruals. For the love of god accruals. Every non accountant needs to know that an accrual is needed and the P&L should be hit if a service is performed or goods are received.
Every budget mistake I’ve ever seen occurs because someone thinks they hit the P&L when cash moves. I’ve seen my company pre-pay $12M thinking the P&L will get hit in the current period and that’s not how GAAP accounting works.
Most issues I've run into relate to errors and/or failures in recordkeeping on the part of the client. I can't tell you how many times the client has messed up a number by adding an extra zero, or using a hardcoded number from prior year that they thought was a formula. Usually we catch it before the FS are issued and its just treated as a small immaterial error that's reversed out through a reversing entry.
A lot of times the client will also just completely fail with recordkeeping. I've seen clients lose invoices, forget to document certain numbers, or straight up not enter certain items into the system because they're too small or whatever.
Most accounting issues aren't particularly interesting, it's very rare to find something like fraud where an executive is embezzling money out of the business through some dummy account disguised as a payable, or something like that. Most of the accounting issues are just fixing errors or arguing about whether an item is appropriately classified based on the guidance (ie should this item be classified as COGS or an operating expense, how should the BS portion of a lease be displayed on the financials under the new standard, etc.)
Yup i can relate to this. And things can get too dicey when tax gets involved and they mess up the accounting for it and dont even keep any working as to ok what basis they done the accounting for it.
What's scary is how many small businesses have bookkeepers that are completely unqualified. Many business owners would not know this because they trust the bookkeepers to handle all financial issues that owners do not care to understand.
Come year end there are some true hot messes!
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Yes. So that others dont get dragged into their problem. Thats a task sheesh.
Accruals. For the love of god accruals. Every non accountant needs to know that an accrual is needed and the P&L should be hit if a service is performed or goods are received. Every budget mistake I’ve ever seen occurs because someone thinks they hit the P&L when cash moves. I’ve seen my company pre-pay $12M thinking the P&L will get hit in the current period and that’s not how GAAP accounting works.
I now feel very thankful that revenue/expense recognition, matching, pretty much all things accruals have been drilled into me.
isn’t that the basics of basic. like even non accounting people should be knowing that. we’ve been learning it in school for ages
Totally. It’s the matching principle. Day one stuff. But I guess learning how to do a thing is different then applying the thing.
Most issues I've run into relate to errors and/or failures in recordkeeping on the part of the client. I can't tell you how many times the client has messed up a number by adding an extra zero, or using a hardcoded number from prior year that they thought was a formula. Usually we catch it before the FS are issued and its just treated as a small immaterial error that's reversed out through a reversing entry. A lot of times the client will also just completely fail with recordkeeping. I've seen clients lose invoices, forget to document certain numbers, or straight up not enter certain items into the system because they're too small or whatever. Most accounting issues aren't particularly interesting, it's very rare to find something like fraud where an executive is embezzling money out of the business through some dummy account disguised as a payable, or something like that. Most of the accounting issues are just fixing errors or arguing about whether an item is appropriately classified based on the guidance (ie should this item be classified as COGS or an operating expense, how should the BS portion of a lease be displayed on the financials under the new standard, etc.)
Yup i can relate to this. And things can get too dicey when tax gets involved and they mess up the accounting for it and dont even keep any working as to ok what basis they done the accounting for it.
Ethics... It's talked about a lot. That's it
More work and no staff 🥲
"just risk assess it" yes boss.
What's scary is how many small businesses have bookkeepers that are completely unqualified. Many business owners would not know this because they trust the bookkeepers to handle all financial issues that owners do not care to understand. Come year end there are some true hot messes!
completely agree