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Accounting Best Practices #371425

Course Overview

Credit

Amount

CPA

Course Author: Steven M. Bragg, CPA Field of Study (CPA): Accounting

Course Description

Course publication/revision date: This course was updated on 4/23/2025.

The accounting department contains a broad array of processes, all of which can be fine-tuned to improve their performance. In the Accounting Best Practices course, we cover hundreds of best practices and tips that can reduce costs, increase transaction speeds, and eliminate errors. The topics covered include billings, budgeting, cost accounting, payroll, and much more. This is an essential guide for the practicing accountant.

Table of Contents

Chapter 1 - Overview of Best Practices1

Introduction	1
What is a Best Practice?	1
Benefits of Best Practices	1
Types of Best Practices	1
When Best Practices Are Most Likely to Succeed	2
The Cost-Benefit Analysis	4
Rolling Out Best Practices	5
Best Practice Failures	5
Post-Implementation Reviews	6
Problems with Cost Reduction	7
The Contents of This Book	7
Summary	8
Review Questions	9

Chapter 2 - Credit Best Practices10

Introduction	10
Quality in the Credit Area	10
Organizational Best Practices	10
Centralize Credit Decisions	10
Keep Credit Away from Sales	11
Operational Best Practices	11
Use an On-Line Credit Application	11
Modify the Credit Application	11
Provide Credit Policy Training	12
Train New Customers	12
Subscribe to Credit Notifications	12
Watch for Red Flags	13
Identify Riskiest Customers	13
Customize a Credit Scoring System	14
Require Customer Credit Preapprovals	15
Use a Check Verification Service	15
Use Credit Insurance	16
Create a Financing Program	16
Policy and Procedure Best Practices	16
Create a Credit Policy	17
Adjust the Credit Policy Based on Margins	17
Adjust the Credit Policy as the Economy Changes	17
Bypass the Credit Policy for Obsolete Goods	18
Shorten the Terms of Sale	18
Require Cash in Advance	18
Send Nonqualifying Applicants to Distributors	18
Set a Threshold on Credit Reports	18
Require New Credit Applications	19
Reporting Best Practices	19
Summary	19
Review Questions	21

Chapter 3 - Billing Best Practices22

Introduction	22
Quality in the Billing Area	22
Organizational Best Practices	22
Operational Best Practices	23
Obtain Payment in Advance	23
Verify Contract Terms	23
Verify Funding	23
Update the Customer File	23
Clean Up the Invoice	24
Conduct Manual Invoice Reviews	24
Avoid Missed Billings	25
Bill Early	25
Bill by Email	25
Bill by Electronic Data Interchange	26
Bill at the Point of Delivery	26
Issue Summarized Bills	26
Issue Separate Invoices for Major Items	27
Bill Change Orders	27
Minimize Invoice Copies	27
Policy and Procedure Best Practices	28
Practices to Avoid	28
Reporting Best Practices	28
Summary	28
Review Questions	29

Chapter 4 - Collections Best Practices30

Introduction	30
Quality in the Collections Area	30
Organizational Best Practices	30
Hire the Best Collectors	31
Invest in Support Staff	31
Use a Skip Tracing Specialist	31
Invest in Facilities	31
Assign Salesperson Responsibility	32
Form a Collections-Sales Working Group	32
Operational Best Practices	32
Focus on Underlying Problems	32
Stratify Overdue Invoices	33
Call Early	33
Train Collectors	33
Train Customers	34
Assign Collectors to Customers	34
Automate Collections	34
Automate Notifications	35
Use Collections Management Software	35
Block Customer Orders	35
Minimize Bureaucracy	36
Pay Salesperson Bonuses	36
Structure the Department Around Key Calling Times	36
Policy and Procedure Best Practices	36
Ban Marketing Deductions	37
Enforce Simplified Pricing	37
Maintain a Customer Bankruptcy Checklist	37
Resolve Unapplied Payments at Once	37
Terminate Unprofitable Customers	38
Reporting Best Practices	38
Summary	38
Review Questions	39

Chapter 5 - Cash Best Practices40

Introduction	40
Quality in the Cash Area	40
Organizational Best Practices	40
Operational Best Practices	40
Bank Through the Internet	41
Use a Bank Lockbox	41
Automatically Apply Cash	42
Apply a Mailstop Number	42
Use Remote Deposit Capture	43
Enhance Check Posting	43
Replace Cash Receipts	44
Concentrate Cash	44
Implement Cash Sweeping	45
The Zero Balance Account	45
Multiple Sweep Arrangements	45
Manual Sweeping	46
Sweeping Rules	46
Sweep Problems	46
Summary	47
Implement Notional Pooling	47
Notional Pooling Problems	47
Notional Pooling Costs	48
Summary	48
Policy and Procedure Best Practices	48
Reporting Best Practices	48
Summary	49
Review Questions	50

Chapter 6 - Payables Best Practices51

Introduction	51
Quality in the Payables Area	51
Organizational Best Practices	51
Operational Best Practices	51
Minimize Approvals	52
Use Procurement Cards	52
Mandate Direct Invoice Delivery	53
Create a Payables Email Address	53
Return Incomplete Invoices	53
Install a Supplier Portal	54
Request an Aggregated Invoice	54
Reduce the Number of Suppliers	54
Accelerate Processing of Early Payment Discounts	55
Use an Invoice Numbering Convention	55
Maintain a Standard Account List	55
Automate Payables Matching	55
Analyze Matching Discrepancies	56
Monitor Invoice Disputes	56
Issue Standard Adjustment Letters	56
Search for Open Credits	56
Automate Expense Report Submissions	57
Prohibit Expenditures	57
Conduct Expense Report Audits	58
Restrict Cash Advances	59
Set Up a Payment Factory	60
Offer a Reverse Lockbox	60
Require Form W-9 Prior to Payment	61
Automate Recurring Payments	61
Restrict Manual Checks	61
Analyze Manual Checks	61
Restrict Manual Delivery of Checks	62
Schedule Frequent Check Runs	62
Use a Signature Stamp or Plate	62
Reduce the Need for Second Signatures	62
Encourage use of ACH	62
Policy and Procedure Best Practices	63
Reporting Best Practices	63
Summary	64
Review Questions	65

Chapter 7 - Payroll Best Practices66

Introduction	66
Extend the Payroll Cycle	66
Streamline Timekeeping	66
Install Computerized Time Clocks	67
Install Biometric Time Clocks	69
Install Web-Based Time Tracking	69
Install Smart Phone Time Tracking	70
Automated Time Tracking Reminders	71
Minimize Data Collection	71
Institute Employee Exclusions	72
Avoid Manual Interventions	72
Use Electronic Payments	73
Pay by Direct Deposit	73
Pay by Pay Card	74
Install Employee Self-Service	75
Install Manager Self-Service	75
Conduct Transaction Error Analysis	75
Conduct Staff Training	76
Implement a Payroll Calendar	77
Issue a Payroll Brochure	78
Outsource Payroll	79
Summary	80
Review Questions	82

Chapter 8 - Commission Best Practices83

Introduction	83
Organizational Best Practices	83
Operational Best Practices	83
Simplify Commission Calculations	83
Install an Incentive Compensation Management System	84
Schedule Commission Audits	84
Policy and Procedure Best Practices	84
Reporting Best Practices	85
Summary	85
Review Questions	86

Chapter 9 - Cost Accounting Best Practices87

Introduction	87
Quality in the Cost Accounting Area	87
Organizational Best Practices	87
Operational Best Practices	87
Audit the Bills of Material	87
Audit Labor Routings	88
Audit Inventory Transactions	88
Conduct Cycle Counts	88
Idiot-Proof Inventory Data Entry	89
Lock Down Item Master Access	89
Terminate High-Leverage Allocations	89
Report Material Variances with Zero Assumed Scrap	90
Stop Reporting Labor Variances	90
Be Aware of Activity-Based Costing Failure Points	90
Minimize Work-in-Process Inventory	91
Implement Target Costing	92
Policy and Procedure Best Practices	92
Reporting Best Practices	93
Summary	94
Review Questions	95

Chapter 10 - General Ledger Best Practices96

Introduction	96
Quality in the General Ledger Area	96
Operational Best Practices	96
Use Alphanumeric Account Codes	96
Stop Using Small-Balance Accounts	96
Shrink the Total Number of Accounts	97
Control Subsidiary Accounts	97
Add Accounts to Accommodate Activity-Based Costing	98
Store Non-Financial Data in the General Ledger	98
Import Data Through Bank Feeds	98
Lock Down Journal Entry Access	99
Use Journal Entry Templates	99
Policy and Procedure Best Practices	99
Summary	99
Review Questions	100

Chapter 11 - Budgeting Best Practices101

Introduction	101
Increase the Efficiency of the Budget Model	101
Check for Spreadsheet Errors	101
Verify the Budget	103
Simplify the Model	104
Simplify the Model Over Time	105
Improve the Budgeting Process	105
Use Participative Budgeting	106
Operate Without a Budget	107
Enact a Rolling Forecast	108
Summary	109
Review Questions	110

Chapter 12 - Financial Statements Best Practices111

Introduction	111
Quality in the Financial Statements	111
Soft Close	111
Organizational Best Practices	113
Operational Best Practices	113
Construct a Gantt Chart for the Closing Process	113
Base Training on Error Rates	114
Conduct Ongoing Bank Reconciliations	114
Reconcile Accounts Early	114
Adjust Reserves Early	114
Review Billable Hours Early	115
Accrue Early	115
Accelerate Depreciation Calculations	116
Conduct an Early Financial Statement Review	116
Set Up Allocations Early	116
Adjust Billing Practices	117
Mandate Cycle Counting	117
Report on Unsupported Receipts	117
Use Journal Entry Templates	118
Write Footnotes in Advance	118
Minimize Closing Approvals	118
Set Variance Investigation Thresholds	119
Policies and Procedures Best Practices	119
Automation Best Practices	120
Flag Intercompany Transactions	120
Install Consolidation Software	120
Install an Enterprise Resources Planning System	120
Install a Workflow Management System	121
Automation Summary	121
Reporting Best Practices	122
Strip Out Nonessential Data	122
Only Issue Summary-Level Reports	122
Deliver Financials Electronically	122
Closing Checklist	122
Summary	126
Review Questions	127

Chapter 13 – Error-Proofing Excel Spreadsheets128

Introduction	128
Data Entry Error-Proofing	128
Use Data Validation	128
Avoid Merging Cells	133
Avoid Spaces in Cell Entries	134
Do Not Store Numbers as Text	134
Formula and Function Accuracy	135
Use Named Ranges	135
Avoid Hardcoding Values in Formulas	136
Break Down Complex Formulas	137
Check for Circular References	137
Test Formulas on Sample Data	138
Be Careful with Rounding Functions	139
Auditing and Error Checking	140
Use the Error Checking Tool	140
Use Trace Dependents/Precedents	141
Use Evaluate Formula	141
Compare Results with Manual Calculations	142
Spreadsheet Organization	143
Use Grouping Instead of Hiding Data	143
Use Consistent Header Names	144
Reviewing and Testing	145
Use a Peer Review	145
Perform Sensitivity Analysis	145
Test Formulas with Edge Cases	146
Security and Permissions	147
Lock Important Cells	147
Disable Macros in Unknown Files	148
Summary	148
Review Questions	149

Chapter 14 - Records Management Best Practices150

Introduction	150
Operational Best Practices	150
Purge Reports	150
Eliminate Copies	150
Pre-Sort Documents	151
Improve Filing Cabinet Locations	151
Use Filing Carts	151
Use Longer Storage Intervals	151
Improve Storage	152
Use Document Imaging	152
Consolidate and Clarify Documents	153
Set Up a Tickler File	153
Enact Mis-Filing Solutions	153
Practices to Avoid	154
Policy and Procedure Best Practices	154
Summary	155
Review Questions	156

Chapter 15 - Accounting Management Best Practices157

Introduction	157
Operational Best Practices	157
Create a Schedule of Activities	157
Create an Error Tracking System	157
Conduct Process Reviews	159
Live Among the Staff	160
Manage Work Queues	160
Focus Attention on a Few Changes	161
Develop Employees	161
Cross-Train Staff on Key Activities	161
Install a Best Practices Center	162
Enhance the Department Layout	162
Policies and Procedures Best Practices	163
Summary	163
Review Questions	164

Answers to Chapter Questions165

Glossary177

Index179

Course Details

Author: Steven M. Bragg, CPA

Steven Bragg, CPA, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young. He received a master’s degree in finance from Bentley College, an MBA from Babson College, and a Bachelor’s degree in Economics from the University of Maine. He has been a two-time president of the Colorado Mountain Club, and is an avid alpine skier, mountain biker, and certified master diver. Mr. Bragg resides in Centennial, Colorado. He has written more than 300 books and courses, including New Controller Guidebook, GAAP Guidebook, and Payroll Management.

Publication/Revision Date: 4/23/2025

Course Exam Questions (online): 60 (multiple-choice)

Program Delivery Method: NASBA QAS Self-Study

Available Formats of Course Text: PDF or PDF plus printed copy sent in the mail

Course Level, Prerequisites, and Advance Preparation Requirements

License	Course Level	Prerequisites	Advance Preparation Requirements
CPA	Overview	None	None

* This program is appropriate for professionals at all organizational levels.

Sponsor ID Numbers

National Registry of CPE Sponsors ID: 107615

State CPA Board Sponsor ID Numbers (where applicable)

Florida Division of Certified Public Accounting: 0004761

Hawaii Board of Public Accountancy: 14003

New York State Board for Public Accountancy: 002146

Ohio Accountancy Board: CPE .51 PSR

Pennsylvania State Board of Accountancy: PX178025

Texas State Board of Public Accountancy: 009349

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

Identify the benefits of using best practices.
Specify how to improve upon a best practice.
Describe the dangers of using best practices too much.
Identify the quality considerations associated with credit activities.
Specify how customers should be informed about a firm's credit policy.
Identify the red flags indicating customer financial trouble.
Recall when a customized credit scoring system is most useful.
Specify the indicators of creditworthiness.
Describe how a check verification service works.
Specify how to enhance billing quality.
Specify how to avoid missed billings.
Recall how an electronic data interchange system works.
Recall how collector productivity can be improved.
Specify how a collections-sales working group can be used.
Identify the impact of stratifying invoices for collection purposes.
Recall the features of collection management software.
Recall the different types of collection policies and procedures.
Specify how cash application should be positioned within a business.
Identify when remote deposit capture should be used.
Recall when fewer bank accounts should be used, and the effects of doing so.
Specify the quality issues pertaining to accounts payable.
Identify how procurement cards should be used.
Recall how a supplier portal is used.
Specify how an automated payables matching system works.
Identify the advantages and disadvantages of an automated expense report submission system.
Recall the benefits of operating a payment factory.
Specify the different types of timekeeping solutions and when they should be used.
Identify how direct deposit functions.
Recall the different types of functions that can be added to a payroll system.
Specify how work is split with a payroll supplier when this function is outsourced.
Identify the organizational concerns associated with commission calculations.
Recall how the value of ending inventory can be made more accurate.
Specify how cycle counting works, and its impact on inventory record accuracy.
Identify why high-leverage allocations should be terminated.
State which variances should be reported to management, and which ones should not.
Recall why alphanumeric accounts should be used in the general ledger.
Specify the process used to consolidate financial statements.
Identify the spots in which budgets tend to contain calculation errors.
Recall the nature of block budgeting and line item budgeting.
Specify when a rolling forecast should be used, and what it should contain.
Identify the problems with a soft close.
Recall which closing activities should be conducted before month-end.
Specify how a workflow management system can improve the closing process.
Identify how the accounting organization can be optimized to improve the closing process.
Identify the activities that can be used to error-proof Excel spreadsheets.
Recall the filing solutions that can enhance file storage within the accounting department.
Specify the options for improving the layout of the accounting department.

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