TAKE THE 2-MINUTE TEST

[ REVENUE ] If you receive customer deposits, do you include them in your revenues at the time the revenue is earned (i.e. when products/services are delivered) as opposed to including them in revenue when you receive the deposit?

[ REVENUE ] If your business involves delivering projects or jobs (e.g. custom manufacturing, project delivery), do you adjust for work in progress valuation at the end of each reporting period?

[ REVENUE ] Do you separately report revenue earned between major product/service categories, and/or between sales channels (e.g. retail, wholesale, distributors)?

[ COST OF SALE ] Do you separate the cost of staff/contractors who work on production of your goods, or delivery of your services, from other labour costs (e.g. sales and administration)?

[ COST OF SALE ] If you have multiple product or service lines that you deliver, do you capture the related costs of sale in those categories to enable you to measure gross profit by product or service line?

[ COST OF SALE ] If your business holds stock, do you ensure that you have accurate stock records at the end of each reporting period?

[ COST OF SALE ] If you are a manufacturer or deliver projects/jobs over more than one reporting period, do you objectively estimate work in process values and adjust your recorded cost of sales to match the estimates?

[ OVERHEADS ] Where your pay cycle differs from your reporting period, do you accrue remuneration costs to ensure accurate labour costs are recorded (e.g. there will be 5 weekly pays once every 3 months or 3 fortnightly pays once every 6 months)?

[ OVERHEADS ] Do you account for the changes in employee entitlements (e.g. annual leave) at the end of each reporting period?

[ OVERHEADS ] Most businesses receive bills for costs that relate to multiple periods (e.g. annual insurance cost, workers’ compensation, maintenance contracts, annual subscriptions, etc.). Where these costs are significant, do you allocate them to prepayments and amortise them over the period they apply to?

[ OVERHEADS ] When your business has incurred costs, but the related invoices have either not been received or are dated in a later period, do you accrue the costs which have been incurred in the relevant period?

[ OVERHEADS ] Do you separate your interest and principal components of loan repayments each reporting period?

[ OVERHEADS ] Do you group your overhead accounts into categories to enable a better understanding of different elements of the business (e.g. remuneration costs, sales & marketing costs, etc.)?

[ BUSINESS SEGMENT REPORTING ] Do you report on the gross profit of each business segment? And, if you do, are you complying with the revenue and cost of sales issues mentioned earlier?

[ PLANNING & REVIEW ] Do you prepare annual forecasts and, If you do, are these forecasts generated from your strategic goals for the year?

[ PLANNING & REVIEW ] Have you done the analysis on how your forecast plan will impact on cash reserves and on capacity levels (i.e. can you deliver)?

[ PLANNING & REVIEW ] Do you compare your actual performance to your forecast performance at the end of each reporting period?

[ PLANNING & REVIEW ] When you have completed your financial reports, do you understand what has caused the results to vary to either forecast or previous periods (e.g. sales volume, margin, overheads)?

[ PLANNING & REVIEW ] When you have completed your financial reports, do you understand precisely where cash was generated from and where cash was used by the business (e.g. working capital, wages, equipment purchases, shareholder loans, etc.)?

[ CONTROL SYSTEMS ] Do you reconcile your balance sheet asset and liability accounts on a regular basis to ensure they represent the true levels of assets and liabilities in your business?