JD Chazan CPA,CA
Your In House Accountant Should Provide You With Management Tools
Your books are part of your management reporting system. It's not just about tax reporting. It's about extracting information that helps youmanage your family assets better.
Investment Reports
The Importance of the Investment Report
Any investment report is a critical tool for managing your investments.
What is an investment report?
An investment report groups all your investments into categories.
The categories are for example:
-
Portfolio investments
-
Commercial mortgages
-
Real estate
-
Venture capital
Each of these accounts should reconcile to the investments account in the general ledger. It is really a way of making sure that all investments are recorded. The portfolio investments, for example, will also have a subledger detailing each individual investment. The total of these should be equal to your total portfolio investments.
This report is not intended as a report on financial performance. That will be provided to you by your asset managers (family office).
Why is the report useful?
It gives you a clear understanding of your assets and can provide considerable detail on an "as needed basis."
What is the purpose of a bank reconciliation?
A bank reconciliation is used to compare your records to those of your bank, to see if there are any differences between these two sets of records for your cash transactions. The ending balance of your version of the cash records is known as the book balance, while the bank's version is called the bank balance. It is extremely common for there to be differences between the two balances, which you should track down and adjust in your own records. If you were to ignore these differences, there would eventually be substantial variances between the amount of cash that you think you have and the amount the bank says you actually have in an account. The result could be an overdrawn bank account, bounced checks, and overdraft fees.
It is also useful to complete a bank reconciliation to see if any checks have bounced, or if any checks you issued were altered or even stolen and cashed without your knowledge. Thus, fraud detection is a key reason for completing a bank reconciliation. When there is an ongoing search for fraudulent transactions, it may be necessary to reconcile a bank account on a daily basis, in order to obtain early warning of a problem.
Here are some of the areas in which your records could vary from the bank records:
-
Fees. The bank has charged fees for its services, such as a monthly account fee.
-
NSF checks. The bank may have rejected some of your deposited checks, because the person or business issuing the checks did not have sufficient funds in their account(s) to remit to your bank. These are known as NSF (not sufficient funds) checks.
-
Recording errors. Either you or the bank may have recorded a check or a deposit incorrectly.
Some organizations consider the bank reconciliation to be so important that they conduct one every day, which they accomplish by accessing the latest updates to the bank's records on the bank's secure website. This is of particular importance if a company is operating with minimal cash reserves, and needs to ensure that its recorded cash balance is correct. A daily reconciliation may also be necessary if you suspect that someone is fraudulently withdrawing cash from the bank account.
The family member responsible for safreguarding family assets should review the bank reconciliation on a regular basis and enquire about any unusual items.
Expense Accounts
You know you're business. You probably have a good idea of what your spending and where you're spending it. As part of the overall review of your business, most bookkeeping software packages allow you to run a list of your expense accounts. The list can be made available with comparative for prior years. Check to see that the account balances are reasonable. If one acount seems to high and the other account seems to low then perhaps so of the expenses were recorded in the wrong expense account or catagory. It happens.
Have a look at the year of year comparatives to make sure that they are reasonable. For example, a jump in maintenance may be what happened, but perhaps not. Some of the costs may belong in an account capital expenditures. We need to separate the costs to see what was happening in our business. Ask questions when you bump into something that you feel is not quite right or unclear. The information you have at hand may be more uptodate or more accurate for a number of reasons.