Spring Clean Your Accounts

Auditing Tips for Credit Managers

The short, dark days of winter are well behind us.

As birds return with their early morning songs and rain brings fresh green grass and blooming flowers, spring offers the perfect time to refresh and reorganize. While many are tidying their homes, it’s also a great opportunity to spring clean your business accounts.

Benefits of Spring Cleaning

According to the American Cleaning Institute (ACI), 80% of U.S. households planned to spring clean in 2024 — a 10% increase from just three years ago. Spring cleaning isn’t just for your home; it can also bring clarity and organization to your business. Cleaning up your financials can reduce clutter and stress, boost productivity, and give you a sense of accomplishment — perhaps even more than completing your taxes! Spring is an ideal time for businesses, especially credit departments, to audit and fine-tune financial practices.

Why Do Audits Matter?

Internal audits help businesses prepare for external regulatory audits. (See sidebar, “External Auditing in a Nutshell.”) They allow institutions to review their compliance with financial regulations and identify areas for improvement. Credit managers, in particular, must consider whether:

External Auditing
in a Nutshell

There are five basic steps that external auditors typically follow when conducting an audit:

Define the audit’s scope by examining the company’s operations and evaluating the organizational structure and available financial records.
Examine internal controls to determine effectiveness and strength of a company’s operational procedures.
Validate the accuracy of financial transactions and account balances, ensuring there are no accounting anomalies.
Analyze the company’s financial statements and conclude with their findings.
Prepare a holistic audit report for the company’s board members, shareholders, investors, and lenders.

Source: High Radius

Accounts receivable records are accurate and complete
Credit policies and internal controls align with regulatory standards
Risk management practices are effective
Data privacy and security measures protect consumer information
Operational controls are robust

A proactive approach to auditing can prevent last-minute scrambles and ensure smoother audits down the road.

Accounts Receivable: Ensure Accuracy and Completeness

Before any audit, start by reviewing accounts receivable. Verify that all entries are recorded properly, balances are accurate, and there are no duplicates or omissions. Ensure that ageing reports are up to date and that collection efforts are underway where needed. Most importantly, reconcile all receivable balances with your general ledger to confirm consistency.

Credit Policies and Procedures

Spring is the perfect time to re-evaluate your credit policies. Confirm that credit decisions were made in accordance with company guidelines and that limits were appropriate for each customer’s ability to repay. Assess your credit risk management procedures to ensure they’re effective in reducing losses. Well-documented decisions are key — auditors will look for clear, compliant records.

Internal Controls: Identify and Address Weaknesses

Internal controls are a top priority for auditors. Take the time to assess potential risks—such as fraud, compliance gaps, or operational errors—and ensure your current systems are designed to prevent them. If weaknesses are found, act quickly to implement improvements. Think of it as sweeping away the dust before it becomes a problem.