Year end is fast approaching. Calendar-year entities that issue audited financial statements may be gearing up for the start of audit fieldwork — closing their books, preparing schedules and coordinating with external auditors. But there’s one valuable audit deliverable that often gets overlooked: the management letter (sometimes called the “internal control letter” or “letter of recommendations”).

For many privately held companies, the management letter becomes an “I’ll get to it later” document. But in today’s volatile business climate, treating the management letter as a strategic resource can help finance and accounting teams strengthen controls, improve operations and reduce risk heading into the new year. Here’s how to get more value from this often-underutilized tool.

What to expect

Under Generally Accepted Auditing Standards, external auditors must communicate in writing any material weaknesses or significant deficiencies in internal controls identified during the audit. A material weakness means there’s a reasonable possibility a material misstatement won’t be prevented or detected in time. A significant deficiency is less severe but still important enough to warrant management’s attention.

Auditors may also identify other control gaps, process inefficiencies or improvement opportunities that don’t rise to the level of required communication — and these frequently appear in the management letter. The write-up for each item typically includes an observation (including a cause, if known), financial and qualitative impacts, and recommended corrective actions. For many companies, this is where the real value lies.

How audit insights can drive business improvements

A detailed management letter is essentially a consulting report drawn from weeks of independent observation. Auditors work with many businesses each year, giving them a unique perspective on what’s working (and what isn’t) across industries. These insights can spark new ideas or validate improvements already underway.

For example, a management letter might report a significant increase in the average accounts receivable collection period from the prior year. It may also provide cost-effective suggestions to expedite collections, such as implementing early-payment discounts or using electronic payment systems that support real-time invoicing. Finally, the letter might explain how improved collections could boost cash flow and reduce bad debt write-offs.

A collaborative tool, not a performance review

Some finance and accounting teams view management letter comments as criticism. They’re not. Management letters are designed to:

• Identify risks before they become bigger problems,
• Help your team adopt best practices,
• Strengthen the effectiveness of your control environment, and
• Improve audit efficiency over time.

Once your audit is complete, it’s important to follow up on your auditor’s recommendations. When the same issues repeat year after year, it may signal resource constraints, training gaps or outdated systems. Now may be a good time to pull out last year’s management letter and review your progress. Improvements made during the year may simplify audit procedures and reduce risk in future years.

Elevate your audit

An external audit is about more than compliance — it provides an opportunity to strengthen your business. The management letter is one of the most actionable and strategic outputs of the audit process. Contact us to learn more. We can help you prioritize management letter recommendations, identify root causes of deficiencies and implement practical, sustainable solutions.

Choosing the right bookkeeper is one of the most important staffing decisions your business will make. A skilled bookkeeper maintains accurate financial records, manages cash flow, and ensures compliance with accounting and tax requirements. But finding the right person can be challenging, especially in today’s competitive job market. Whether you’re replacing a long-time team member or hiring for the first time, here are some key factors to consider when interviewing candidates.

Education and experience

A good starting point is evaluating each candidate’s educational background. Some bookkeepers have degrees in accounting, finance or business, while others have completed bookkeeping training programs or earned software certifications. Advanced training isn’t required, but it can demonstrate professionalism and a commitment to maintaining current skills.

Experience and up-to-date accounting knowledge also matter. Most small businesses benefit from hiring someone with several years of bookkeeping experience, ideally in a similar industry or in a business of comparable complexity. Familiarity with U.S. Generally Accepted Accounting Principles and applicable tax laws is valuable, even if a candidate isn’t a formally trained accountant. Because accounting and tax rules change frequently, you’ll want someone who stays current on the latest developments.

Technical skills

Modern bookkeepers rely heavily on technology. Ask candidates about their experience with your specific accounting program and related tools, such as payroll systems, tax software, budgeting applications, artificial intelligence tools and spreadsheet programs.

If you’re open to changing systems, experienced bookkeepers can often recommend software solutions that improve efficiency and visibility. A bookkeeper’s ability to adapt to new technology or automate manual processes is often just as valuable as his or her ability to keep the books balanced.

Compliance awareness is another important factor. Many bookkeepers manage or assist with payroll filings, sales tax reporting, Form 1099 preparation and other compliance tasks. Even if you rely on a CPA firm for final tax returns, your bookkeeper’s understanding of the underlying rules drives the work’s accuracy and timeliness. Someone who’s handled these responsibilities in previous roles will likely require significantly less training and supervision.

Oversight and planning abilities

Strong bookkeepers do more than record transactions — they can also help streamline daily operations. Ask candidates about their experience closing the books each month, preparing timely financial statements, reconciling accounts, minimizing workflow bottlenecks and supporting audit requests.

Some bookkeepers also take on higher-level financial responsibilities. For instance, they may prepare budgets, forecasts or weekly management summaries. These skills can be particularly valuable because they may help relieve you of some strategic planning tasks and provide a sounding board for major business decisions. Some candidates may even have training in forensic accounting, which you can leverage to tighten internal controls and reduce fraud risks.

Soft skills

Technical skills are only part of the hiring equation. A bookkeeper works with sensitive financial data, so trustworthiness, confidentiality and sound judgment are essential.

A bookkeeper also interacts with vendors, employees, customers and your outside accounting firm, so strong communication and collaboration skills matter. Consider whether candidates can explain financial concepts clearly, are organized and proactive, and maintain professionalism. Discuss how they’ve handled reporting discrepancies or audit adjustments in previous roles. You might even present a recent accounting challenge from your business and ask how they’d address it. When assessing competency, you may find that a candidate’s problem-solving approach often reveals as much as his or her resumé.

Long-term potential

Even the most experienced bookkeeper may struggle if their working style doesn’t align with your business or mesh well with your existing staff. The ideal candidate will demonstrate leadership qualities, a willingness to take initiative and a desire to grow with your company.

When searching for the right candidate for this critical position, a thoughtful hiring process can prevent costly turnover, reporting errors and frustration down the road. In addition to helping brainstorm questions and referring qualified candidates, we can temporarily handle your bookkeeping tasks. Contact us for guidance during your search.

When buying new accounting software or upgrading your existing solution, it’s critical to evaluate your options carefully. The right platform can streamline operations and improve financial reporting accuracy. However, the wrong one can result in reporting delays, compliance risks, security breaches and strategic missteps. Here are some common pitfalls to avoid.

Relying on a generic solution

You might be tempted to choose a familiar, off-the-shelf software product. While this may seem like a practical solution, if the software isn’t tailored to your company and industry, you may be setting yourself up for inefficiencies and frustration later.

For example, construction firms often need job costing, progress billing and retainage tracking features. Not-for-profits need fund accounting and donor reporting features. Retailers may benefit from real-time inventory management and multi-channel sales integrations. Choosing a one-size-fits-all tool may result in a patchwork of manual fixes and workarounds that undermine efficiency and add risk.

Overspending or underspending

Accounting systems vary significantly in their features and costs. It’s easy to overspend on software with flashy dashboards and advanced add-ons — or to settle on a no-frills option that doesn’t meet the organization’s needs. Both extremes carry risk.

The ideal approach lies somewhere in the middle. Start by benchmarking your transaction volume, reporting complexity, staff skill levels and support infrastructure. Then build a prioritized feature “wish list” and set a realistic budget. Avoid paying for functions you’ll never use, but don’t underinvest in critical capabilities, such as automation, scalability or integration. Think strategically about where your business will be a year or two from now — not just today.

Clinging to legacy tools

Upgrading or moving to a new accounting platform is a major undertaking, so it’s easy to put these projects on the back burner. But waiting too long can lead to inefficiencies, data inaccuracies and missed opportunities. Modern platforms offer cloud-based access, AI-driven automation and mobile functionality — features that older systems can’t match. As more businesses shift to hybrid work and remote collaboration, staying current is essential for accuracy and speed.

If your financial closes take too long, if reports don’t reconcile easily or if you can’t view your numbers in real time, it may be time to modernize. Treat accounting software upgrades as part of ongoing business improvement — not an occasional “big project.”

Test your system periodically to ensure efficient data flows, accurate reconciliations and useful management reports. This exercise moves you from merely “keeping books” to driving financial insight.

Ignoring integration, mobility and security

In the past, accounting software was a standalone application, and data from across the company had to be manually entered into the system. But integration is the name of the game these days. Your accounting system should integrate with the rest of your tech suite — including customer resource management (CRM), inventory and project management platforms — so data can be shared seamlessly and securely. If you’re manually entering data into multiple systems, you’re wasting valuable resources.

Also consider the availability and functionality of mobile access to your accounting system. Many solutions now include apps that allow users to access real-time data, approve transactions and record expenses from their smartphones or tablets.

Equally important is cybersecurity. With financial information increasingly stored online, prioritize systems with data encryption, secure cloud storage and multi-factor authentication. Protecting your data means protecting your business reputation.

Leaving your CPA out of the loop

Choosing the right accounting software isn’t just an IT project — it’s a strategic investment decision for your business. Our team has helped hundreds of companies select accounting technology tools that fit their needs. Let’s get started on defining your requirements, evaluating software features and rolling out a seamless implementation plan. Contact us to discuss your pain points, training needs and budget. We can help you find a solution that works for your business.

Financial statements report historical financial performance. But sometimes management or external stakeholders want to evaluate how a business will perform in the future. Forward-looking estimates are critical when evaluating strategic decisions, such as debt and equity financing, capital improvement projects, shareholder buyouts, mergers, and reorganization plans. While company insiders may see the business through rose-colored glasses, external accountants can prepare prospective financial reports that are grounded in realistic, market-based assumptions.

3 reporting options

There are three types of reports to choose from when predicting future performance:

1. Forecasts. These prospective statements present an entity’s expected financial position, results of operations and cash flows. They’re based on assumptions about expected conditions and courses of action.

2. Projections. These statements are based on assumptions about conditions expected to exist and the course of action expected to be taken, given one or more hypothetical assumptions. Financial projections may test investment proposals or demonstrate a best-case scenario.

3. Budgets. Operating budgets are prepared in-house for internal purposes. They allocate money — usually revenue and expenses — for particular purposes over specified periods.

Although the terms “forecast” and “projection” are sometimes used interchangeably, there are important distinctions under the attestation standards set forth by the American Institute of Certified Public Accountants (AICPA).

Leverage your financials

Historical financial statements are often used to generate forecasts, projections and budgets. But accurate predictions usually require more work than simply multiplying last year’s operating results by a projected growth rate — especially over the long term.

For example, a start-up business may be growing 30% annually, but that rate is likely unsustainable over time. Plus, the business’s facilities and fixed assets may lack sufficient capacity to handle growth expectations. If so, management may need to add assets or fixed expenses to take the company to the next level.

Similarly, it may not make sense to assume that annual depreciation expense will reasonably approximate the need for future capital expenditures. Consider a tax-basis entity that has taken advantage of the expanded Section 179 and bonus depreciation deductions, which permit immediate expensing in the year qualifying fixed assets are purchased and placed in service. Because depreciation is so boosted by these tax incentives, this assumption may overstate depreciation and capital expenditures going forward.

Various external factors, such as changes in competition, product obsolescence and economic conditions, can affect future operations. So can events within a company. For example, new or divested product lines, recent asset purchases, in-process research and development, and outstanding litigation could all materially affect future financial results.

We can help

When preparing prospective financial statements, the underlying assumptions must be realistic and well thought out. Contact us for objective insights based on industry and market trends, rather than simplistic formulas, gut instinct and wishful thinking.

Whether you operate a for-profit business or a not-for-profit organization, strong accounting practices are essential for maintaining financial health and making informed decisions. These include creating budgets, monitoring results, preparing accurate financial statements, and complying with tax and payroll requirements. Over time, even efficient systems can become outdated or inconsistent. Here are three simple ways to enhance your accounting function and keep operations running smoothly.

1. Review and reconcile

Management oversight is a critical component of internal controls over financial reporting. Start by ensuring that whoever oversees your finances — such as your CFO, controller or bookkeeper — regularly reviews monthly bank statements and financial reports for errors and unusual activity. Quick reviews can prevent minor discrepancies from turning into major issues later.

It’s also smart to establish clear policies for month-end cutoffs. Require all vendor invoices and expense reports to be submitted within a set period (for example, one week after month end). Delayed submissions and repeated adjustments can waste time and postpone financial reporting.

Don’t wait to reconcile balance sheet accounts until year end. Doing it monthly can save time and reduce stress. It’s much easier to fix mistakes when you catch them early. Be sure to reconcile accounts payable and accounts receivable subsidiary ledgers to your balance sheet to maintain accuracy and visibility.

2. Standardize workflows

Designing a standardized invoice coding sheet or digital approval process can improve accuracy and speed. Accounting staff often need key details, such as general ledger codes, cost centers and approval signatures, to process payments efficiently. A simple cover sheet, approval stamp or electronic workflow helps capture all this information in one place.

Include a section for the appropriate manager’s approval and multiple-choice boxes for expense allocation to departments, projects or programs. Always document payment details for reference and audit purposes.

Another tip: Batch your work. Instead of entering or paying each invoice as it comes in, set aside dedicated blocks to process multiple items at once. This saves time and reduces task-switching inefficiency.

3. Leverage accounting software

Many organizations underuse their accounting software because they haven’t explored its full capabilities. Consider bringing in a trainer or consultant to help your team unlock automation features, shortcuts and reporting tools that can save time and reduce errors.

Standardize the financial reports generated by your system so they meet your needs without manual modification. This improves data consistency and provides real-time insight, not just end-of-month visibility.

Also, automate recurring journal entries and payroll allocations when possible. Most accounting systems allow you to set up automatic postings for regular expenses, payroll distributions and accruals. Just remember to review estimates against actual figures periodically and make any necessary adjustments before closing your books.

Small improvements can make a big difference

Accounting practices are continuously changing due to advances in automation, cloud-based systems and AI-driven analytics. Review your workflows regularly to identify steps that could be automated or eliminated if they don’t add real value. Not sure where to start? Contact us to review your systems and brainstorm practical ideas to modernize your accounting function, enhance efficiency and improve financial oversight.