Checks and Balances are Required
It might seem like common sense, but the accounting in your business needs to be checked by a second set of eyes on a regular basis. Whether it is a mistake or intentional, the math doesn’t always add up. You may have a bookkeeper that does the daily accounting, but having an external accounting firm or accounting professional review the information is important. We recommend quarterly to semi-annually. You want to catch a problem and be able to fix it before getting into the next tax year.
There are quite a few stories to tell to illustrate what can happen, but here is one that stands out because it happened recently:
In the process of doing our due diligence on a business and asking for financial statements and tax returns, the seller’s CFO was not forthcoming with the information we need. He was not responding to our questions about the financials. It was finally discovered that he had embezzled almost $2,000,000 over many years. This obviously held up the process of selling the business. The seller had to get his books in order and the CFO was going to have to spend time in jail. The weird twist to this story is that the CFO ended up turning in the seller for insurance fraud to receive a lighter sentence. Now the seller and the CFO are in jail. No deal. This may be tongue in cheek, but you would be surprised what we run into.
We are all busy running our businesses, but this is one thing that can’t get pushed into the “for later” pile. Get an audit done regularly on your books. If you have any questions, want to hear more stories, or want an introduction to a firm that can help, give your broker a call.
