Erroneous Accounting Data is worse than No Data

The introduction of Quick- Books and other accounting software has greatly expanded, and in some cases enhanced the availability of accounting information.  However, the programs will post exactly what is entered, whether the information is correct or not.  So what would happen if you had to make decisions about your company using erroneous accounting information? It    has happened.  We often experience the client’s shock when accounting information provided by them is corrected by our company and their year-end income or loss is significantly different from the information provided by them.  Historical information is necessary as the benchmark for all future predictions.  If the information in the books of original entry is incorrect, error begets error.
We have discovered erroneous accounting entries such as posting to the wrong accounts; or switching the debit entry for a credit entry; failure to use Accounts Receivable and Accounts Payable properly (the most prevalent errors occur when a sale is properly recorded as receivable and when the payment is received, it is posted as a “new sale” thereby failing to reduce the Accounts Receivable by that payment. If the error goes undiscovered, that will cause an over-statement of income); if Accounts Payable is recorded when an invoice is received from a supplier and subsequently paid, the payment should reduce Accounts Payable.  If the subsequent payment is recorded as an expense at the time of payment, that will double the expense and cause an understatement of income.
The planning of proper taxable income and cash flow would be impaired. Planning without correct information could potentially put the company at a competitive disadvantage and expose the it to greater risk. Business is affected by   the total business environment and governmental rules, including taxation. Failure to recognize errors and extraneous forces can create an undue burden and often over-power the entity.
In a prior article, I discussed the concept of “sustainability.” Sustainability is just a comprehensive concept for good      management and financial strength. Sustainability considerations can strengthen a company’s overall strategy and risk management practices.  The mythology can help to proactively address risks and provide potential value within a company through cost savings, efficiency improvements and product innovation, among others. Below are three ways that CFOs and other finance professionals can get started.
In an article written by Kristen Sullivan, Partner, Deloitte & Touche LLP, she suggests the following targets and methods to support company sustainability.
1. Establish Effective Gover-nance – Consider the operating environment  of the company and invite the managers and others to participate in “brain storming” for better control of all phases of the business.
2. Focus on Material Matters – Tackle the larger problems and first. Set priorities and share the philosophy of the company with its workers.  Make each worker feel that he or she is an integral part of the success and or failure of the company.
3. Tell Your Story – Share your zeal for the company’s success.  Make your comprehensive plan well known to all company personnel and in- vestors.  Advertise your strengths.
Management can use in- sights gained from monitoring and tracking their sustainability metrics, and companies      can examine and manage sustainability performance and reporting. If you are interested in our services for assisting your company, please contact us.  We will analyze your company’s financial data, suggest adjustments and assist you with sustainability. It is the “wave of the future” because it can insure your company that it has a future.
For more information, call Wilson & Wilson, PC, CPA, CFE at 615-673-1330   or  email  jim@ wilsonandwilsoncpa.com