Everyone is looking to turn a new page this year and start fresh. Can you blame us? Take this renewed energy and vitality to commit to practices that can make your accounting department strong, smart, efficient … and less stressed! In this article, the Aux accounting assistance team has gathered three main actions you can take to improve your accounting function today. Let’s dive in.
#1: Take your Daily Reconciliations VERY Seriously
Daily reconciliation is the heart and soul of keeping your credit union’s books in order. Failure to make this a daily habit allows for chronic issues to pile up, which can lead credit unions to write off thousands of dollars because they’re unable to find the money on their balance sheets. We always tell our credit union clients that communication is key within the department. If you see a problem, don’t be afraid to speak up.
When it comes to cash reconciliations, daily balancing to the general ledger is a must. Outstanding issues should be identified and resolved quickly to ensure the timeframe to return items is not missed.
Daily reconciliation can also combat internal fraud in your credit union. Though nobody likes to think about their employees taking advantage of a credit union, the reality is that it does happen — especially when there are weaknesses built into the accounting system. By having a clearly outlined and adhered to daily reconciliation process, your credit union can put a stop to internal fraud before it begins.
A credit union’s lack of daily attention to its general ledger reconciliations is often a result of too little training for new employees or inexperienced employees continuing to operate without guidance. It can be tricky to find the time to train staff, especially with the challenges the past year has brought. Now is a great time to visit with your team and get them back on track.
Alan Rowe, Chief Strategy Officer at Priority CU (PCU), a $60M organization in Orlando, knows the pain of poor daily accounting functions all too well. “I came into PCU last year to lead a turnaround, as the credit union has been severely troubled for a number of years. Among the many challenges new management encountered was a complete mess in its accounting area—from sloppy, incorrect entries going in all directions, to numerous unreconciled accounts going back a few years, and almost everything in between,” lamented Rowe. They partnered with Aux to assist with cleanup and getting the credit union back on track and squeaky clean.
In 2021, make an effort to focus on the daily functions of your accounting team – the foundation of your department. You’ll be glad you did.
#2: Itemize Postings
It is tempting to try to combine several different entries together for more efficient posting. While it seems like a good idea at the time, it could cause headaches down the road. When researching older items, it is significantly faster to search the general ledger for the amount that ties to your reports. If totals are added together when posting entries, research is much more difficult. In 2021, commit to training your team on the steps necessary to create a perfect audit trail — which means itemizing postings. Once your team gets in the habit of proper posting, everyone will feel better about how easy it will be to research if and when the time comes.
#3: Document Your Accounting Procedures and Processes
Promise yourself and your credit union that 2021 is going to be the year that you completely document your accounting procedures and processes. There is a very good reason that pilots who have thousands of flights under their belt still run through a takeoff checklist. It’s not that they don’t know how to do their job, it’s because the list of procedures and processes ensures that they’re not accidentally skipping a step or forgetting about anything.
We’re all only human, after all. In the same vein, documenting procedures and processes also means that if someone who regularly handles a job is out sick or has moved to another position, there is a written record to guide another employee through completing the work. Creating well documented procedures and processes is also a powerful way to combat single keyholder issues, which is common in small and even mid-sized credit unions.
Take Siskiyou FCU, for example, an $80M organization in northern CA, and a client of Aux’s accounting services. They lost two key accountants over a short period in early 2020. ““People don’t stay in jobs like they used to stay. There are more moving pieces and training that has to take place on a constant basis to cover aspects of accounting and daily balancing,” comments Becky Ives, CEO of Siskiyou. “With the limitations of the job pool, knowing that even if I could find a CPA or an accountant … that’s not credit union accounting. There’s still a big learning curve.” Thorough documentation of accounting procedures and processes can help with training, transitioning employees, prevent workflow disruption, and allow for consistency year-over-year.
Interested in reading more resources that can help improve your back office function? Check out Aux’s free credit union university!