Question

Describe with examples 6 (SIX) controls that an organizations can utilize to fortify their accounting systems during a crisis such as Covid-19

Answer 1

Following can be the controls that an Organization may adopt in these pandemic time-

Strict Track of Receivable Ageing

Unlocking cash is the key during a pandemic time when the revenues are slowing and business activity is almost at hault.Energies have to be devoted in collecting the receivables specially those in hihgher buckets.

This way not only cash gets unlocked but also loss fron non recoveries too are avoided.Every penny dropping in makes a huge difference.

Unadjusted advances in Vendors

There are always advances and unadjusted credits in Vendor accounts.In these times it is imperetive that these are adjusted so that excess cash outflow gets avoided and cash remains secured within the Organization.

Say there might be an Inoice of $ 10000 that has become due to a Vendor.At the same time there is unadjusted old advance of $ 3000.Here if adjusted the net settlement can happen at $ 7000 or else organization might end up paying $ 10000 and loose on opportunity of encashing the advance.This cannot be afforded in these times.

Due Plan on Statutory payments

A proper schedule and plan has to be in place for the forthcoming statutory dues.A solid planning for resources to ensure payments must be in place,This might need some realignment or terms with Creditors to defer their payments , in case nmeed be, so as to use that cash for Statutory liability payments.

Analysis to identify cost reduction opportunities

Financial numbers have to be deligently analysed head wise and opportunities for savings to be targeted.For instance it may be a regular practice of paying Vendors with drafts hence incurring charges in the process.If the Vendors are negotiated to move to accept online payments these charges can be saved this adding to cash preservation.

Strict LoA compliance

LoA might need to be relooked in these exceptional times.Limits might have to be rationalized in keeping up with the pandemic times.For instance in normal times LoA might empower the Function head to approve expenses upto,say, $ 10000.It is a good idea to reduce this absolute approval power by reducing the limit to say $ 1000.This way stricter control over spends can be implemented and cash can be more judiciously utilized.

Deferred Tax Assessments:

With future profits becoming uncertain deferred tax assets recognized might become questionable.Hence proper track of same required.