Finances can rear an ugly head if not guarded

Transitioning from the corporate world to that of the entrepreneur has been an eye-opener.

Up to that point by trade and education my expertise was in accounting. These skills have been vital during the start-up years of the company yet I now realize how easy it is to lose the pulse on finances when company operations get hectic.

Several years ago we suddenly ran out of cash, unable to make payroll and unable to increase our line of credit. As an accountant I should have seen this coming, but was busy on other things.

My business operations manager and I huddled and calculated we needed six weeks based on receivables and business on the books to pay our payroll obligations. I had no choice but to go to the staff with the news. Fortunately all but one of the employees stayed and ultimately we got payroll caught up.

We gave every staff member a very nice Quill red pen to commemorate the crisis. A few years later when the balance sheet tilted to positive net worth we gave all staff a black pen to celebrate the new milestone.

Okay, we were able to turn the lemon into lemonade that time but the point is the crisis could have been avoided had there been a proactive office manager watching the numbers.

At Edoc Office we have eight specific areas of focus for ourselves and our clients for our office manager custodians. The first is Proper Financial Controls.

Once our company reached the business level that allowed me to pass the finance and administrative duties to a trusted associate “separation of duties” was foremost in mind. Having a trustworthy business manager is paramount here and yet the trust has to go both ways. I have to trust my office manager and the office manager must trust me. However, allowing the trust factor to over shadow common sense separation of duties is placing the trusted office manager in a position of vulnerability and suspicion should a misstep occur.

At first I held on to all deposits, bank & credit card plus A&L reconciliations. My time is now too cluttered for all that so now the only duty I maintain is the actual bank deposits. All other routine accounting duties are performed by the office manager. We both have access to critical documents, bank and credit card accounts as well as financial reports. We review the financial reports together at least once each month.

Far too many business owners failed to implement reasonable financial controls to their company’s peril. Your office manager can be among your highest staff assets. Protect them and protect your company with reasonable controls. It also helps you to sleep better.