...PRECISION ACCOUNTING!!!...
I believe that I have posted this event in my life before...but can't find it...so, here it is, again.
I laugh everytime I recall it...
...My Father worked as an Accountant for a large company, and, as a P.A. (Public Accountant) also had a side business of bookkeeping for small businesses, and a tax practice.
In Jr. H.S., I was curious about what he was doing, and, so, he taught me.
For you younger people, we didn't have computers or desktops, we wrote everything down on paper.
So, I learned how to post a journal, and then enter the totals into the ledger. The journal was a long piece of paper, 12 columns wide, and you would write down the check on the left side, and then write the same number down, somewhere to the right, to get it into the right expense category. My Father would doublecheck what I did on the journal, and make sure that it was correct, before I entered the numbers into the ledger. He was very precise, and, at first, I would have to completely redo the journal at times, because the numbers weren't in the right place. So, I developed a very strong sense of always getting the numbers right.
...A decade later, I was a C.P.A. (Certified Public Accountant) and would at times tease my Father, saying that I 'outranked' him. He would just laugh, and say, "I know what you are, CPA stands for 'Cleaning, Pressing, and Alterations'."
...In my late 20's, I was hired by a large construction company, and became their CFO. I actually 'went Panther' on a couple of the staff that were left...they were VERY sloppy. I was also bewildered by the books...each subsidiary had its own set...on the central computer...and each subsidiary did a LOT of work with each other...and the books were WAY out of balance!!!
I fired the idiots, and hired three accountants to replace them.
I told the new hires, "We HAVE to get the books back in balance, analyze the Inter Company Accounts, and see what the problem is." The three worked hard...day after day...for two months...and we looked over the results. I was FLABERGASTED!!!
But understood why the Treasurer and the Controller had quit...the books were OUT OF BALANCE BY $750,000!!!
My staff and I looked harder, and we were able to figure out the current years problem...but...it went into past years!!!
...I sat, for about 15 minutes, after we had it figured out, and pondered what to do...I could tell my staff to go back, and analyze the accounts every year, until we figured out where they got out of balance...but that, possibly, would have taken the rest of the YEAR!!!!
And...we had a business to account for!!! So, I chewed my lip, and said, "Give me a data entry sheet...I am going to PLUG THE BOOKS!!!"
They looked horrified...when I had hired them...I had told them that I would take disciplinary action if I caught them 'plugging'...(For all you nonaccountants...that is where you just make up an entry to balance the books) So, I wrote out the entry, gave it to the Controller...and she took it down to data entry. I looked around at the stacks of paper and binders they had created, and said, "Put them in the safe...I will have some explaining to do."
...I explained it to the President, and also explained how it created a $350,000 bottom line loss. He just nodded...the Company was healthy...and I suggested that we also clean up other accounts, and create a reserve for the future. He agreed, and I cleaned up 'Bad Debts', Inventory, and Work in Progress, and created about $100K of hidden income, that we could pull out in future years, if we needed it. And then...CAME THE AUDITORS!!!! I knew of them...I had once been one...and I did my best to use my 'natural charm' to get them to accept my journal entry. I STRONGLY suspect that they did so...because THEY HADN'T SPOTTED THE PROBLEM IN THE PAST!!! They approved the books, as I had them. And then...CAME THE IRS!!!! That loss for the year enabled us to get tax refunds for the past three years...(Tax Loss Carryback)...so they sicced Tamio K. on me!!! Tamio was a very brilliant IRS Agent, and understood accounting very well...he and I had tangled before, when I was an independent CPA.
...But, I was READY FOR HIM!!!
I had set up an office for him, and it had a coffeepot, a nice table, and a good view out the window...and the approximately SIX FEET STACK OF PAPERWORK WE HAD DONE TO ANALYZE THE ACCOUNTS...and a shelf full of the journals and ledgers. I was dressed very nice when he arrived, in the morning, and we drank some coffee in my office, and discussed the audit of my journal entry, and I smiled, and nodded...very friendly. I then led him to the office I had prepared, and spent about 20 minutes briefly explaining what I had done, and how to trace the worksheets to the journals...and then left.
He came to my office, early afternoon, and said that he was ACCEPTING the journal entry, and left.
…I had NO IDEA THAT HE COULD WORK SO FAST!!! But, I guess that is the IRS....
...I also told my staff, "I have been too strict on my rules against 'plugging'." I looked around at them, and said, "John, you can plug up to $159...Vince, you can plug up to $97...Pat, you can plug up to $43. But, when we need to plug over $750,000...I need to do that"...and walked out...
...One of my 'Finer Moments'....
