Whether you work as a bookkeeper for your company, manage tax-related matters or work in the auditing services department, you’ve likely heard about the importance of due diligence. All accountants are responsible for performing due diligence as part of their job to keep their company’s financial records as thorough and accurate as possible. Though the term sounds complex, due diligence essentially means doing everything you can to keep company finances correct and honest. If you’re wondering how you as an accountant can perform due diligence in your daily work, here are five steps you can take to help ensure your company’s finances are up-to-date, secure and stable.
1. Conduct Thorough Risk Management for Your Company’s Assets
One key role many accountants play is keeping tabs on a company’s assets and periodically conducting risk management assessments. These assessments help give the company a thorough idea of which assets are making or losing money, what their current degree of financial risk is and what moves they could make to foster greater company-wide stability. In this role, the accountant is at the center of helping the company maintain its fiscal security.
2. Review Human Resources Standards in Personnel Matters
In some cases, accountants may be tasked with reviewing current human resources standards and other matters relating to personnel and payroll. Many accountants have to check that payroll is accurate each month, and may have to perform tax-related functions in company-wide reviews at the end of the fiscal year.
3. Help Conduct a Top-Down Business Overview
Many accountants play a key role in conducting thorough financial reviews of their institutions. If your position includes this task, you’ll have to help put together an overview of the company’s current finances, and may have to detail aspects like liquidity, future projections and more. Assembling as many details as possible for these reviews is critical, and you may have to collaborate with professionals from other departments or even help put together a business plan.
4. Keep Accurate Books and Regularly Review Company Liabilities
One of the most important functions any accountant fills is making sure all books and other financial records are thorough and accurate. The more often you can review small details, the better – in fact, you may want to have a certain amount of time set aside at the end of every workday to go back over the day’s flow sheets and check that everything is accurate. If you review details bit by bit as you go, you won’t have to go through the pain of sorting through piles of information all at once later! Additionally, it can help ensure the accuracy of the records. Furthermore, if your job includes reviewing current expenses, keep tabs on the company’s liabilities. If you notice something that looks out of place or a debt that’s significantly larger this month than usual, make sure you report it right away to the appropriate higher-ups.
5. Check Up on Your Company’s Current Cash Flow
Finally, depending on your job description, checking on your company’s current liquidity and working capital may be part of your due diligence. Some accountants are tasked with reviewing current cash flow to ensure the company is able to cover all of its expenses without going into debt and while still maintaining adequate emergency cash reserves. If this falls under your current position, making sure your company has positive cash flow is essential to the survival of the business.
No matter which areas of accountancy you work in at your company, regularly performing due diligence is a professional imperative. If you’re new to accountancy or just want to brush up on your skills, make sure to take these five steps to perform due diligence in your line of work every day.