As a business owner it is critical that you know where you stand financially and that your financial statements are correct. Reviewing banks statements and financial reports should be a routine you strictly follow every week. - Jim
Published by RestaurantOwner.com, Profit Tip of the Week, April 3, 2012
Over the years we've seen more than just a few independent restaurant owners get stung, sometimes very badly, by inept bookkeeping practices.
Having an incompetent, careless or unorganized bookkeeper exposes you to all sorts of risks. It puts the accuracy of your financial information in serious question, it can make you an easy target for fines and penalties when you're audited by any number of possible federal and state agencies and it makes your business more susceptible to theft and fraud.
One way to get a quick read on what kind of bookkeeper you have is to ask to see your latest bank reconciliation. You may not have a clue what to look for but stick with us here. This is VERY important.
As the owner of a low margin business that deals with a large number of small (often cash) transactions, you MUST have assurance that your bookkeeper or accountant is preparing accurate and timely bank reconciliations.
First, when you ask for your bank reconciliation, do you get that deer in the headlights look? Do you notice some hesitancy or the "why" question? Do they appear to be a little overly protective of "their" work? (NOTE: The bank reconciliations are YOURS, NOT theirs.)
If you notice any of the above red flags, contact your outside CPA immediately and have them investigate and determine what kind of shape your books are in and the liklihood of fraud.
Next, when was your last bank reconciliation completed? If it has been longer than 30 days, you "may" have a problem. If it has been longer than 90 days, you DEFINITELY have a problem. Again, call your CPA on how to best proceed.
Finally, review a few of the latest bank reconciliations. Ask questions about any adjusting entries, transfers and other reconciling items. Just ask what they are and see what kind of response you get.
Can your bookkeeper explain them to you? Does the response you get make sense? If not, you guessed it, ask your CPA to review the situation. Bookkeepers "should" be able to explain every single number on the bank rec in simple, plain language. It's not rocket science.
Don't get burned by an incompetent or lazy (or dishonest) bookkeeper when you can get a pretty good sense of what's going on with your books, often, in less than a minute.