Small business owners don’t lack for things to do. There is the endless work of creating new products and improving existing ones. Meeting with new customers and existing ones – local and abroad. Hiring employees and freeing up non-performing ones to “pursue other opportunities.” You get the thrilling task of managing payroll and cash flow. You get to deal with all of the wonderful governmental entities – federal, state, and local – regarding licensing, codes, rules, laws, and endless regulations. Then, of course, there are the meetings with your CPA around tax time.

The LAST thing you need is to wonder if your financial books are correct and accurate.

Unfortunately, we hear of cases of a modern-day Judas, where a rogue employee who has been entrusted with the money decides to help themselves to it and embezzle money. It can literally bankrupt a business.

This is why it is important to conduct financial reviews and perhaps even complete third-party audits. Annual financial reviews are instances where internal members of your organization are tasked with performing random “tests” of financial records and require those in charge of the finances to provide objective evidence that records are retrievable and accurate.

Third party audits take this process to an entirely different level. An outside organization is hired to put the financial team through a rigorous test of all critical financial systems – accounts payable and receivable, payroll, record-keeping, financial reporting (balance sheet, cash flow statement, and income statement), and separation of authorities (i.e. separating rights of who can print checks from check signers).

While no review and audit can completely eliminate the chance for fraud, it can reduce it tremendously. And it will allow you to make business decisions with full confidence in your finances and the financial team.

Here’s the statement I use: “Trust, but verify.”

This post is part of a Small Business Series here at the wildly popular JosephSangl.com. Click HERE to read more of the posts in the series.

Every single month, I sit down with Matt. Most of you don’t know him, but he is a key reason IWBNIN has continued to grow and expand. You see, Matt is our Financial Administrator. He manages all of the finances for our businesses. He and his team manage the regular financial management dealings of a business: payroll, accounts payable, accounts receivables, bank account reconciliation, credit card reconciliation, and governmental filings. However, Matt helps with a monthly task which we’ve found to be vital to our success – monthly cash flow planning.

For our two businesses with employees, we sit down at the beginning of each and every month to plan our financial decisions.

Here is the process we utilize:

1. 12 month rolling plan  We have a rolling 12 month plan. This means at the end of each month, we add a new month at the end of the plan to ensure we are always looking forward for an entire year.
2. Evaluate last month  We review last month’s plan to identify any major deviations – both positive and negative. This intelligence is utilized to continually improve our planning.
3. Plan next month  We make changes to this month based upon known information.
4. Review the next 12 months  We make changes to future months based upon known information.
5. Make business critical decisions  We utilize the cash flow plan to determine when we can spend money for larger initiatives.
6. Live by the plan throughout the month  Once the plan is finalized, the financial team follows it. If an unusual opportunity presents itself or major expense crops up, it generates a conversation amongst company leadership to determine an appropriate course of action.

Here’s how we’ve found the 12 month cash flow planning process to be helpful:

1. Prepare for major financial challenges  As with any business, there are cycles. Some months are higher revenue while other months cause business owners to wonder if their business is going to fail. These cycles can create cash flow crunches if not carefully planned for. Viewing 12 months out allows our leadership to make better decisions.
2. Prepare for known, upcoming non-monthly expenses  This type of planning forces a leader to think longer-term. As a result, known upcoming non-monthly expenses can be accommodated with ease by ensuring appropriate accrual accounts are established. Nothing makes me happier than to know the money is stored up for estimated quarterly tax payments, car repairs & replacement, annual software licenses, etc.
3. Communication  Monthly reviews create a “trip point” that forces communication to happen regarding the financial and general affairs of the organization.

Want to get rid of a bunch of financial headaches? I highly recommending instituting a monthly cash flow planning meeting!

This post is part of a Small Business Series here at the wildly popular JosephSangl.com. Click HERE to read more of the posts in the series.