“I happened to look through a printout of last year’s general ledger, and it’s full of transfers from one account to another, refunds from double payments, and other evidence of careless mistakes. My controller insists that mistakes like these are normal and don’t affect our final numbers. Your opinion?”
Mike: Everyone makes mistakes when they write checks, but it’s easy to tear up a personal check for the wrong amount. Accounting systems are less forgiving: They keep a permanent record of every adjustment and transfer. Although this is an important security feature, mistakes really stand out. You need to decide how often your controller is really making mistakes. If he’s hopelessly sloppy, you should look for a replacement. Also, be sure to analyze the transfers into, out of, and between your cash accounts. The amounts are often very large, and you want to be sure there are no irregularities.
I’ve also seen situations where bookkeepers or controllers are simply confused about how the business works, and so they post entries to the wrong accounts or projects. If you suspect that’s the reason for mistakes, you might want to spend a little time explaining what’s behind the numbers your controller is managing.
The ASK MIKE is a weekly column providing answers from finance and small business expert Michael Gonnerman. Mike has served as a trusted advisor to hundreds of technology CEO’s and investors as well as served on more than two dozen corporate boards.
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