Monthly Archives: March 2018

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Corporate culture: Rotten apples could spoil your financials

Category : Blog , sccm

Auditors often say that the tone at the top of an organization trickles down to every level of the business. Is your company’s work environment ethical and open? If not, corporate culture assessments can help prevent and detect unethical and criminal behaviors. But, to cover all the bases, your external auditors generally must work closely with people inside your organization. Here’s how you can facilitate this critical part of the audit process.

1. Identify a senior executive to act as liaison

Corporate culture is a key element of an auditor’s overall risk assessment — but auditing corporate culture is a new concept for most organizations. Assign a senior executive to act as liaison with the audit team to ensure that company insiders cooperate. This executive should understand how the audit process works and have the authority to resolve any issues that employees or executives may cause during audit fieldwork.

2. Verify the audit team’s expertise

Do audit team members have prior experience auditing corporate culture? Ask the engagement partner to provide biographies for audit team members, detailing their experience performing corporate culture audits and conducting investigative interviews of company insiders.
Interviews can help identify potential weak spots that require extra attention during audit fieldwork. For example, if management downplays the need to comply with government rules and regulations, the audit team is likely to dedicate extra resources toward the company’s compliance efforts.

3. Allow auditors to survey all employees and executives

Auditing corporate culture requires a companywide assessment of the prevailing mindset. Auditors must survey a broad sample of employees — not just people conveniently located at corporate headquarters or executives in the C-suite.

Before the auditor sends out surveys, it’s OK for your executive liaison to review the questions to minimize ambiguity, leading questions or offensive inquiries. He or she also can help the audit team identify key employees and executives to interview.

4. Provide access to human resource data

The audit team should have full access to personnel records. Examples of relevant data include:

  • Employee turnover rates,
  • Discipline records,
  • Annual performance reviews,
  • Merit-based bonus schedules, and
  • Exit interview findings.

In addition, if your organization has established a whistleblower hotline, the audit team should have access to data on the number, type and severity of tips the hotline has received over the last year.

5. Make improvement efforts based on previous findings

Previous internal and external audit reports can help identify cultural risks. In addition to reviewing prior reports for control failures, auditors will evaluate how your management team responded to prior findings. If no cultural improvements were made based on last year’s recommendations, it doesn’t bode well for the current year’s corporate culture assessment.

Healthy cultures promote honest reporting

Corporate culture audits are an emerging area of expertise, and reported findings come in a variety of lengths and formats. Our auditors understand how to help you use these findings to minimize cultural risks and enhance the reliability of your financial reporting.

© 2018

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Check the Status

Category : Blog , sccm

Check the status of your federal tax account with an IRS online tool. Individual taxpayers can use the tool to obtain basic information or to file, pay or monitor tax payments. The tool can be used to: 1) access tax records, 2) review the past 10 months of payment history, 3) view the amount due, 4) make online payments, 5) set up payment agreements, and 6) view key tax return information for the most recent return filed. To access the tool, taxpayers register through a rigorous two-factor authentication identity proofing process. Go to:

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Short Sale of Rental Property

Category : Blog , sccm

A court rules that a short sale of rental property and forgiven debt was one transaction. The U.S. Tax Court ruled that the short sale of a married couple’s principal residence that had been converted into rental property, followed by the mortgagee’s forgiveness of their debt on the residence, was part of one sale or exchange. The taxpayer argued they were two separate transactions. As a result, the amount realized in that single transaction included the discharged nonrecourse debt. (Simonsen, 150 TC 8)

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Feeling lucky? How to find a pot of gold in your financials

Category : Blog , sccm

Every business experiences occasional cash shortages. When this happens, owners often assume they should go out and sell more. But this strategy can sometimes compound money troubles over the short run. Why? The answer lies in a concept known as the “cash gap.” Understanding this concept can help your business generate extra cash to meet working capital needs. Here’s how.

Focus on the balance sheet

The cash gap is a function of the timing difference between 1) when companies order materials and pay suppliers, and 2) when they receive payment from their customers. This difference can lead to cash shortages if the company doesn’t have extra savings, doesn’t qualify for additional bank financing or doesn’t want to draw on a line of credit. It’s also important to keep in mind that cash gaps funded by bank financing incur interest costs.

Boosting sales generally isn’t the solution, because, when cash is tight, selling more will often widen the cash gap. That’s because the company will need to front the incremental cost of sales while new orders are fulfilled, invoices are sent and customers remit payment. This concept explains why start-ups and high growth companies tend to experience cash shortages.

Finding hidden treasures

If the company finances its cash gap, shaving a day or two off the gap could save thousands of dollars in interest expense over the course of a year. Minimizing the cash gap requires you to focus on its underlying variables:

Inventory. There are numerous ways to minimize your investment in inventory. For instance, you might search the warehouse for slow-moving items and then either return stale items for credit, trade them with another supplier or competitor, or sell the items for scrap.

You can also revise your company’s purchasing policies. For example, some materials and parts suppliers may agree to discounted bill-and-ship or consignment arrangements in exchange for exclusive or long-term contracts.

Receivables. The faster a company can get money in the door, the smaller its cash gap will be. Your business can encourage faster payments from customers by sending out past-due reminder letters and following up with phone calls. Also evaluate invoicing procedures to minimize the days in receivables. Poor communication among billing, sales and production staff can cause invoicing delays.

Payables. Think of trade payables as a form of interest-free financing. But, beware, there are limits to how far a company can extend its payables. Slow-paying businesses may forgo early-bird discounts or receive less favorable treatment from suppliers, such as slower delivery, higher rates or cash-on-delivery terms. Delayed payments can also harm a company’s credit rating, as well as its reputation among its pool of eligible suppliers.

Put it to work for you

The cash gap can be a helpful management tool, because it pinpoints hidden treasures in your balance sheet. Put simply, companies with shorter cash gaps tend to experience fewer cash shortages and rely less on bank financing. Contact us for help measuring your cash gap and using it to manage working capital more efficiently.

© 2018

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Unlock hidden cash from your balance sheet

Category : Blog , sccm

Need cash in a hurry? Here’s how business owners can look to their financial statements to improve cash flow.


Many businesses turn first to their receivables when trying to drum up extra cash. For example, you could take a carrot-and-stick approach to your accounts receivable — offering early bird discounts to new or trustworthy customers while tightening credit policies or employing in-house collections staff to “talk money in the door.”

But be careful: Using too much stick could result in a loss of customers, which would obviously do more harm than good. So don’t rely on amped up collections alone for help. Also consider refining your collection process through measures such as electronic invoicing, requesting upfront payments from customers with questionable credit and using a bank lockbox to speed up cash deposits.


The next place to find extra cash is inventory. Keep this account to a minimum to reduce storage, pilferage and security costs. This also helps you keep a closer, more analytical eye on what’s in stock.

Have you upgraded your inventory tracking and ordering systems recently? Newer ones can enable you to forecast demand and keep overstocking to a minimum. In appropriate cases, you can even share data with customers and suppliers to make supply and demand estimates more accurate.


With payables, the approach is generally the opposite of how to get cash from receivables. That is, you want to delay the payment process to keep yourself in the best possible cash position.

But there’s a possible downside to this strategy: Establishing a reputation as a slow payer can lead to unfavorable payment terms and a compromised credit standing. If this sounds familiar, see whether you need to rebuild your vendors’ trust. The goal is to, indeed, take advantage of deferred payments as a form of interest-free financing while still making those payments within an acceptable period.

Is your balance sheet lean?

Smooth day-to-day operations require a steady influx of cash. By cutting the “fat” from your working capital accounts, you can generate and deploy liquid cash to maintain your company’s competitive edge and keep it in good standing with stakeholders. For more ideas on how to manage balance sheet items more efficiently, contact us.

© 2018