To address the issue first, look at the existing balance sheet in two days to see how it relates to cash requirements. By looking at the bank statement, the balance available at the bank can be determined. In general, a bank statement is a record sent monthly to the account holder, and summarizes all transactions which took place on the account from the date of issuance of the previous declaration. In order to reach the final balance, the balances from the previous month are added to the transactions this month.The bank statement reveals the uses of cash and incomes that were directly deposited in the bank without the organization’s knowledge. The bank statement will also show the evasion of money from the companies’ system and the purchases that are not routed through overdraft account (Mintz, 2006).
The bank statement is a crucial document as it aids the account holder to keep track of the money that is both in hand and at the bank. The bank statement lists penalties incurred on the account, interest’s earned, total deposits, total withdrawals, and checks. By finding this document, it will help me to recognize the firms spending habits, keep track of finances that were not recorded in the company’s books. Any discrepancy that will be noticed in the process, for example, different items appearing in account payable checks and bank statement balances will have to be investigated. This investigation will help in identifying the correct amount of money that company has in cash to facilitate the payment of salaries and wages. The bank’s statement should be reconciled with the account payable checks (Knechel, 2017).
Determine the Checks in the Register Are In the Drawer
Whether it is a lemonade stand or a multinational dollar institution with subsidiaries all over the globe, every business that handles cash must prepare a cash register that records business financial transactions. In this case, this document will be crucial because it will help identify the checks that have already been paid so that the remaining balance can be calculated to facilitate of employees’ salaries.
It is important to check if the checks sitting in the drawer have already been cleared. The availability of checks in the drawer does not imply that it has already been cleared. The clearance of the check indicates that the money has already been moved to complete the payments of which the money was intended. The recipients present the checks to their respective banks. That implies that the checks draw might have been presented to the banks for payment or not. In case they are presented then they have to be subtracted from the cash balance that was available in the previous month. But if they are not submitted to the bank there is no need to worry because the money is still intact. The identification of the already cleared checks can be done by checking the bank statement. A careful examination of these figures can reveal the presence of any accommodating transactions that might be useful in determining the exact amount that is available in the bank to facilitate payment of employees.
The checks are listed in the cash register and compared with the checks available in the register. This will enable me to identify the checks that have not been presented for payment. A check register records all cash outlays at any given period, cash payments, and checks. This register has different columns that include the credit and debits associated with the transaction, account names, payee, check number, and date. The available checks in the drawer ought to be checked to make sure the details of those checks in the drawer match the details available in the cash register. If not, then an investigation should be made to determine whether those checks were cashed or not. The investigations can be done by going through the ledger; this is because a bookkeeper first records different business transactions in the check register before the amounts are transferred to the ledger account. Since these cash registers are used to calculate the running balance that in the checking account, it is, therefore, similar to the bank account. I will use the cash register to confirm the total balance that is available on the account as well as disbursement and checks.
Make Calculation Based on the Findings
The final step will be to take the bank balance that is available in the bank’s statement and subtract those checks in the float later. The amount that is arrived at is the current cash balance. The payment I am going to make will determine the minimum amount that is available. In that case, it implies that if I had more than $100000 in one’s account, then I would manage to prepare the payroll and even pay all the employees. If the minimum amount of money that is available in the bank’s account were less than $100000, then it implies that I would have to wait for 2 to 3 business days to see if the organization will receive any more money to facilitate the payment of salaries. If not so then the management can approach their bank and request for an overdraft. An overdraft is an arranged loan which the financial institution extends credit beyond the amount that is available in the bank account. This is a short term loan, and I will make a thorough analysis to ensure that the amount can be repaid by the company as soon as possible. An overdraft, however, comes at a cost, which is in many cases heavier than other loans the company offers. The overdrafts can also be secured against the organization’s assets as collateral, implying that the assets of the hospital will be at risk of being seized when the overdraft is not paid in time (Campling, 2008).
Check the Books of Account
First, I will audit the books of account to make sure that the amount was indeed stolen. I have to confirm with the relevant employees to provide an explanation on the matter at hand. The copies of the receipts might be misplaced, and it is, therefore, not appropriate to make conclusions without thinking about the consequences. It is important to confirm with the banking institutions if they are any company’s checks that have not been debited. If the audit reveals that the amount is stolen, then I will convene a meeting with the relevant parties to deliberate on the issue.
Call for a Meeting
The first step I am likely to convene a meeting to deliberate on the matter. This is due to the fact that all employees have a responsibility of making sure that business assets either financial or non-financial are safeguarded, all financial information and the operating data is accurate, securing and making sure that organizational policies are safeguarded. Internal control is essential in any organization. In this situation, the people have breached the duty of care since company’s resources have gone missing.
Since the administration is the one responsible for maintaining the internal control, the meeting will be appropriate to establish what exactly happened. The internal factors include integrity and ethical values, operating factors and leadership, and leadership philosophy.
As the meeting proceeds, I will give all employees a chance to confess with a promise that no criminal charge will be imposed against them if they refund the money. I will take this opportunity to remind the employees of the company’s ethics and the policies they signed when being incorporated as new employees in the organization. All employees must represent the company in the best possible way; their actions should be consistent with the company’s mission and vision statement. The acts such as embezzlement of funds go against the company’s ethics, and those liable will have to face criminal charges.
I will remind these employees that embezzlement of funds has a negative impact on the business. The embezzlement of funds will affect the business operations and existence, and they stand a chance of becoming unemployed if this amount is not refunded. The embezzlement could be detrimental to any organization as it stops it from growing and competing favorably with other firms in that industry. The misuse of this $10,000 will disrupt the regular activities of this organization. If the embezzlement case goes viral, the reputation of the organization will be ruined implying that shareholder will be forced to leave because of the fear of incurring losses. The employees have no option but to refund the money before the matter goes out hand.
Employees must be reminded that the misuse of company’s funds tends to poison the spirit of any working environment even after such a case is already handled. The company management might never trust the employees after such an act. I will give them a chance to reflect on the issue before the matter is presented for further action. A favorable working environment demands a high level of trust, and it is up to the employees to prove that they can be trusted with company’s resources (Gunz, & Thorne, 2016).
This will be the best time to inform these employees that embezzlement of funds damages accounting. Such behavior skews the organization’s financial position. The situation can be even worse in the smaller organizations where accounting is more informal and is the responsibility of one or two people. The embezzlement of $10000 will make the organization to make decisions that are irrational. For example, the management might be deceived that the organization has enough funds to cater for its daily operations when in real sense the money has already been embezzled. Such situation might throw the company into turmoil forcing it to cut costs, so the operations are sustainable.
The staff should also know during the meeting that this behavior will arouse public attention. If this information goes viral, it will trigger a public reaction forcing the third parties to want to double check the organization’s operations (Sebastian, 2006). All employees that will be found liable might face criminal charges and be banned from working in their professional capacities forever. The customer’s confidence in the business will also decline. The integrity of the organization can be questioned when the employees involved in this crime are finally fired and prosecuted.
If the meeting with the employee does not yield any results, I will inform the police about the issue. I will call the police and let them carry on an investigation from the start to finish. The police will have the option of filing a criminal charge against the employees if evidence is found that they embezzled the funds. After all, there is no wrong or right way of dealing with any form of embezzlement. Any employee that is found to be guilty will automatically be fired (Campling, 2008).
Even those companies that have multimillion assets each year, the purchase of assets is a decision that requires outright thinking and thorough calculation. Some of the machinery cost millions of dollars and can have a drastic impact on the organization finances. The company management also makes other considerations such as the extra capacity that the machine will create, how much the machine will be used and the department that urgently needs the machine.
The hospital will have to evaluate requisition to determine that the machines are needed. This can be done by checking the current machines are being put to good use. It is also important to consider that cost of ownership of the machines. The ownership of certain machines can come with insurance, operating, and other fees. Before any decision is made an assessment will be conducted to determine whether the firm is in a position to serve the machines. The financial advisers should also be consulted on any possible tax implication of the purchases so that the hospital is not caught off guard and forced to incur future penalties.
Secondly, I will consider the durability of the machines selected. Durability is the assurance that the machines will have a longer continues lifetime to perform the task that it was intended to do without requiring too much maintenance. The durability can be investigated by consulting the experts and other firms that also have the same machine. Durable products will save the organization large sums of money on maintenance. The cost of future maintenance of machinery should not be too much that the company will be unable to bear. The running costs add up to firms general costs, a comparison should be made between the current running costs of the available machine and those that are available in the market. The aspect that has to be taken into consideration includes any increased output.
Time is also another factor that needs consideration. Time directly implies how long one is going to keep the asset. In the current market, those institutions that do not keep the machines for more than three years before they replace it do not need to own it. In this case, the option of leasing the machine is more readable. Hire purchase is also another option that is available that the company can utilize; with hire purchase, the organization can make regular payments before taking over ownership of the asset after payment of the final installment.
Another consideration that must be taken into account is how the machine will fit into the business growth. The current work capacity should be adequate to make sure that the machine is put to good use. The two departments have to be evaluated to make sure that they need the machines. It is also important that the machine will not be over utilized. On the other hand, if the number of patients shortly can be estimated to rise, then the machine output must be estimated to prevent instance of overutilization.
Department That Needs and the Equipment
Both the pediatrics and radiation therapy departments play a major role in this hospital, and both of them need necessary machinery to serve customers better. The organization, however, has limited capital, and it might not be possible to buy all needed equipment at once. This will, therefore, make me carry out an evaluation of which organization urgently needs the equipment. There are various factors I will consider in making such a decision;
First, I will use the previous statistics to determine the previous records of patients who use pediatrics and radiation therapy facilities. This will give me a clear picture of the organization the urgently needs the facility. For instance, if the pediatrics department received 500 patients last year while the radiation therapy only received 30 patients in the previous year then the pediatrics department will be given higher priority. However, in the situations where the there is equal number of patients who utilized the facilities of the two departments then I will consider other means will be utilized to make the correct decision.
Secondly, I will consider the state of facilities that are available in the two departments. This can be done by estimating the facilities available. Depreciation is an accounting method that is used to allocate the cost of a tangible asset over the period of time. By estimating the amount of depreciation, it will be easier to determine the asset that needs quicker replacement. I will assess the level of equipment breakdown in the two departments in the past three months. The department that has the highest rate of machine failure needs quicker replacements.
Lastly, the financial aspect is also crucial. The cost of the facilities that the two departments will be estimated. The current financial status will be evaluated and also the possibility of finding funds from the outside sources such as banks. The firm will settle for the equipment that is needed urgently and whose cost is within the firm’s means.
Other possibilities such as renting should also be taken into consideration. Renting a property can help an organization cut on unnecessary costs.
In order to prepare the organization’s budget, it will be crucial that one identifies the different cost centers that are available. The cost centers are the different departments that do not directly add up to the organizational costs but still incur costs. Cost center indirectly contributes to business revenues. When preparing the budget it is important that these cost centers are determined. Such costs include maintenance and equipment, medical and surgical costs, salaries, and expenses. Many institutions use the budget as a means of evaluation of the actual results in the next financial year, thus, accuracy should be taken when preparing it.
I will also determine the amount of money that will be available during the budget plan which is capable of limiting the growth plan. I will also review the obstacles that hinder the hospital’s capacity to expand in size. This will be critical in estimating the future expenditures. I will also go through the current budget assumptions, this entails the current business environment that can play a significant role in estimating the future costs.
The cost centers indirectly contribute to the overall firm’s revenue through increasing commodity value and operational efficiency. The cost centers can be quite effective in cost tracking. This is because the staff that exists in the cost centers does not bear any form of responsibility when it comes to investment or revenue. Since the costs are segmented into centers, preparing a cash budget is made simpler. The accounting of resources is efficiently made in such a manner that it provides accurate calculation and forecasts based on the future changes.
The second step will be to determine some of the assumptions in statistical terms, about the services the organization anticipates to provide shortly. At this moment, I will prepare a quantitative expression of the hospital’s plan, for instance, the number of procedures by each department such as physiotherapy, radiology, and pathology and the number of specialists required. I will distribute the information among the different cost centers so that each department gives me a breakdown.
The third step will be to come up with an economic forecast on the newest developments that are likely to impact on the hospital’s level of income such as super specialists, services by the neighboring hospitals and government regulations. The budget estimates will be critical in determining whether the future estimates are out of reach or affordable. The future forecast can be determined based on the current information available in the books of account. The financial information available to estimate the amount of money that has already been disbursed can help to determine the amount of cash being used. Through these financial records, I will also determine the ratio of cash allocated to salaries and wages and the money which is used to pay other bills. The information will be of great use in determining the future costs.
The fourth step for the hospital will be to outline the goals and policies as per the government’s directives. This information is important when it comes to approximating the long-term expenditures, for instance, if the hospital’s goals are to have a capacity of 50 beds then that information should be captured in the budget. This will give the firm the flexibility it needs to plan for the future sources of funds.
The fifth step will be to prepare the general budget package taking into account written instruction pertaining framework for the budget procedures, illustration goals, and calculations, policies, and goals. The budget will then be passed to the heads of departments to evaluate if their recommendation has been taken into account.
The sixth step will be to prepare the preliminary budget putting into consideration the recommendations of the heads of departments. All the expected revenues will be summed up and expenses deducted. If the revenues exceed expenses, then it is a surplus budget, but if the expenses exceed revenues then it will be a deficit budget. In case it is a deficit, the hospital will be forced to engage the funds from other sources, for instance, loans.
The final step will be to present the budget to the finance officer for approval by the governing board. If the budget is approved, the information will be communicated to all the departments, but if rejected, the procedure will start once again. The budget committee might also pass the budget with minimal amendments that have to be taken into consideration in the amendment process. The time that is required to prepare such a budget varies depending on the size of the organization.
In order to facilitate a smooth budget preparation then the organization must come up with proper timeline setups. If the cost centers are many similarly to the big organizations, then different individuals should be given the tasks of collecting the information from these cost centers. The budget timetable should become a plan for the completion of the set deadlines.
Campling, J. (2008). Management (1st ed.). Milton, Qld.: John Wiley & Sons Australia.
Gunz, S., & Thorne, L. (2016). Introduction to Thematic Symposium on Accounting Professionalism. Journal Of Business Ethics. http://dx.doi.org/10.1007/s10551-016-3147-1
Knechel, W. (2017). Auditing (1st ed.). New York: Routledge
Mintz, S. (2006). Accounting ethics education: Integrating reflective learning and virtue ethics. Journal Of Accounting Education, 24(2-3), 97-117. http://dx.doi.org/10.1016/j.jaccedu.2006.07.004
Sebastian, S. (2006). Management report (1st ed.). Washington, DC: U.S. Government Accountability Office.