Glossary – Executive Financial Partners

Bookkeeping 101

Balance Sheet

Balance sheets, along with income statements, are the most basic elements in providing financial reporting to potential lenders such as banks, investors, and vendors who are considering how much credit to grant you.

A balance sheet gives you a snapshot of your business’s financial condition at a specific moment in time, and helps you to:

Quickly get a handle on the financial strength and capabilities of your business.
Identify and analyze trends, particularly in the area of receivables and payables. For example, if your receivables cycle is lengthening, maybe you can collect your receivables more aggressively.
Determine if your business is in a position to expand.
See if your business can easily handle the normal financial ebbs and flows of revenues and expenses.
Prepare you to take immediate steps to bolster cash reserves when needed
Discover if your business has been slowing down payables to forestall an inevitable cash shortage.

Bank Reconciliation

Accurately reconciling your business checking account each month gives you insight on exactly how your business is performing and is necessary to keep your bank account, accounting, and taxes up-to-date. Accurate reconciliation enables you to:

Identify lost checks, lost deposits, and unauthorized wire transactions.
Detect and prevent excess or unjustified bank charges, and make sure your bank posts all transactions correctly.
Detect and prevent embezzlement of funds from within your company.
Manage cash more effectively. Proper management of funds not only saves money, it makes money for you.
Protect yourself. By timely reconciling and promptly objecting to your bank about any unauthorized, fraudulent, or forged checks presented to your bank and paid by that bank, you can relieve your agency of responsibility for the shortfall and transfer the risk to the bank.
Increase your confidence. Knowledge is power, and knowing that your bank accounts are reconciled, in balance, and that all escrow funds, accounts, checks and disbursed funds are properly accounted for enables you to move forward with certainty.

Income Statement

An income statement, also called a profit and loss statement or P&L, adds an itemized list of all your revenues and subtracts an itemized list of all your expenses to come up with a profit or loss for the period. An income statement allows you to:

Track revenues and expenses so that you can determine the operating performance of your business.
Determine what areas of your business are over-budget or under-budget.
Identify specific items that impact expenditures, such as phone, fax, mail, or supply expenses.
Track dramatic increases in product returns or cost of goods sold as a percentage of sales.
Determine income tax liability.

General Ledger Review and Maintenance

The general ledger is the core of your company’s financial records. These records constitute the central “books” of your system. Since every transaction flows through the general ledger, a problem with your general ledger throws off all your books.

Monthly reviews of your general ledger system enable you to identify and fix discrepancies such as double billings or unrecorded payments.

Advisory Services 101

Audit Readiness

Preparing for an audit requires exceptional attention to detail and an understanding of how auditors approach and analyze the financial records of your business. It can be an intimidating process, but high-quality advance prep gives you a clear picture of your financial strengths and weaknesses and identifies any concerns that an outside auditor may have.

Internal audits are used to take an accurate financial pulse of a business and can provide a roadmap for process improvements and quality management. Internal audits may also include a close examination of a business’s internal controls to ensure they are being appropriately followed.
External audits are third-party reviews of a company’s financial statements and internal controls that generate a report containing the auditor’s opinion of the veracity of the financial records provided to them. A “clean” audit report indicates that there are no intentional or material misstatements in the examined financials or internal controls. An IRS audit is the most common example of an external audit.

Cash Flow Forecasting and Analysis

Determining if a business has sufficient cash flow to cover operating expenses may require a deep dive into its financials. Cash flow forecasting and analysis is a predictive approach to understanding where a business is headed and examines its liquidity and financial health.

Fractional CFO and Controller Services

There comes a time in every young business when financial management requires more attention and time, and that often occurs when there’s not enough money to cover the salary of a full-time CFO or controller. Fractional CFOs bring C-suite-level expertise to a business without the expense of a full-time hire.

A part-time CFO or controller may work onsite or remotely, depending on the needs and type of business.

Payroll and Related HR Services

Outsourcing payroll and human resources functions can be a cost-effective option for a small or early-stage business and can help to keep overhead low. These services manage a company’s administrative issues pertaining to its employees and can include the payroll process, benefits management, general support, and hiring.

Process Improvement and Documentation

Process improvement is the effort a business makes to ensure that every step in a task is executed correctly. Process improvement touches every part of a business, necessary for advancing efficiency, ensuring compliance, and managing workflows.

Process documentation is an outline of the steps necessary to complete a task. In general, process documentation should: