We got the monthly
accounts from Quickbooks and it showed a much larger profit than we had
expected. We estimates profit and cash
weekly, so this was a real surprise - a pleasant one I had to admit. I didn’t
really give the matter much more thought because the variance was positive. If
it has been negative, I would have been all over it.
Then, driving home I began
to wonder how we could have made so much profit. The next morning I went in
early and started looking at the reports. Sales looked right, but the margins were
way too high. We normally have around 40% gross margin but these accounts showed
it a 56%. I kept looking. Most of the expenses seemed to be normal with the
exception of the sales discounts, which looked really low. They were below the
normal 15% level. Suddenly it dawned on me: somehow the discount had been added
the to gross margin.
I called in the accountant
and asked what was going on. He looked at the accounts and said they were
wrong. I was right there was a misposting. I asked why he hadn’t checked the
accounts and he said he didn’t feel well and had gone home. When I asked who he
sent them to, he answered the bank, board, and all our investors. I told him we
needed to recall them ASAP and make sure this never happens again. I told him
next time he goes home without signing off on the accounts at the end of the
month, he needs to tell me.