identifying and fixing to ensure you always have the truest understanding of your cash status. Common Issues with Reconciliation and Cash Control If you have employees responsible for monthly reconciliations, you must check in with their processes to ensure they’re completing the task and doing so with attention to detail. You must also assess whether you can better support them with process and technology improvements. There are a few ways your reconciliations might be stunted: • Employees assume any discrepancies will work themselves out, as with pending payments and due to process in the following statement. • Employees aren’t adequately trained to recognize errors and inconsistencies. • There isn’t proper segregation of duties, so employees are less likely to catch their own mistakes. • Employees don’t have adequate tools and technology to reconcile errors, particularly in a timely fashion. • Employees can’t conduct bank reconciliations because they are too busy. • Owners and managers de-prioritize reconciliations because the business is doing well and other tasks demand attention. • Employees are participating in fraudulent activity or theft. To solve these issues, dealership owners and managers must emphasize the importance of reconciliations, ensure segregation of duties and involve themselves in the process to ensure procedures are followed. Outsourcing reconciliation to a third party can also help solve these issues. Using an outside party ensures an unbiased perspective, reduced risk of fraud and assurance that the reconciliation is performed timely and properly. Benefits of Regular Reconciliation When you conduct or outsource reconciliation regularly, it gives you greater control over your cash. You can catch problems timely and take care of them before they become costly and detrimental. Inconsistency could be as easy to fix as moving a comma, or it could be a sign of something significant happening in your dealership. Find Internal and External Errors All manner of errors could show up when you’re reconciling your cash. The fault may be with the banks themselves or errors made by your staff. It may even be that employees are consistently making mistakes you can fix with better training, processes or technology. Identify and Prevent Fraud Unfortunately, your reconciliations might turn up fraud or theft at your organization. These activities could be incremental and difficult to see, but they add up over time and cost your dealership money. Additionally, you don’t want untrustworthy employees to remain on your staff. Fix Costly Process Issues Your documenting, accounting and reconciliation processes could be inefficient and full of bottlenecks that cost you money. Performing monthly reconciliations and having control over your cash will help you better understand your processes and improve efficiency overall. Account for Cash More Accurately Reconciling your cash each month means you’ll have a truer idea of what you actually have available, which empowers you to make business decisions from a point of financial security and assurance. EIDE BAILLY CAN HELP Cash Management Tips for Dealerships To support effective cash control and reconciliation efforts, you must broaden the scope from just comparing documents each month. Good cash management requires: • Solid internal controls. Proper internal controls are essential to controlling cash and avoiding risks. They include documented procedures, segregation of duties, approval structures, and activities like reconciliation. • Process improvement activities. Look for process issues that create bottlenecks, cause delays and lead to errors with your reconciliation and cash management processes. • Measure of cash needed. How much cash you need onhand will fluctuate as your business and demands change. It’s important to know what you need, what would be dangerously low and suspiciously high. • Constant training. Keep employees vigilant and upto-date on good practices, particularly if you update processes or technology. • Supporting technology. Your technology and software may be limiting your capabilities and even costing you money. Consider introducing new technology for more harmonious processes, fewer errors and greater efficiency. You’ll want to align yourself with a team of advisors who have extensive backgrounds in accounting and consulting with dealerships industries. It’s imperative for dealer owners to consistently manage monthly reconciliations and stay alert in detecting discrepancies. 3 Paul Skeen, CPA and partner at Eide Bailly, LLP, can be reached at 801.456.5456 or pskeen@eidebailly.com. continued from page 25 26
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