What can accounting firm owners and partners do to avoid and minimise risks they may encounter throughout their working lives?
From managing bookkeeping errors to being faced with a lawsuit, there are a variety of risks that firms can come up against. Fortunately, with the right processes and planning in place, accounting firms can ensure every employee is aware of the possible risks and stays vigilant.
What are the main risks?
Incorrect investment advice and general bookkeeping errors can lead to professional liability lawsuits for accounting firms, resulting in a loss of money, clients and firm reputation. The more firms grow in size and promote staff to new roles with increased responsibilities, the higher the chance of inaccuracies and miscommunication with clients.
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Managing staff risks
There are a number of processes firms can implement to alleviate employee risks.
Firstly, staff training for both new hires and those receiving promotions is a top priority for firms to make sure employees understand their roles and responsibilities. Firms should have company policies and procedures in writing, and ensure they’re accessible to all staff. This gives each employee a framework to carry out his or her responsibilities correctly.
Secondly, look at introducing a multi-tiered approval process into your firm, which will standardise the company’s approval processes and reduce the risk of mistakes slipping through. Employing a practice management solution with workflow processes will also help avoid any financial or administration hiccups popping up in your firm.
Lastly, costly legal and medical bills for employee slip-and-fall and repetitive-motion injuries can set your firm back. Make sure your company is up to date with its workers’ compensation insurance and that employees receive regular training in OH&S procedures.
Mitigating client risk
When it comes to minimising client disputes and the possibility of lawsuits, avoid contracts that are not within your firm’s expertise. Issuing a formal engagement letter to new clients is imperative in providing a clear understanding for both parties on what the working relationship entails. Review your client mix and try to increase the proportion of clients requiring low-risk advice to those needing high-risk advice.
Create a risk management strategy
Depending on the size and service offering of your firm, the risks you face will vary in comparison to other companies.
Start off with a strengths, weaknesses, opportunities and threats (SWOT) analysis to identify your key risks. Once this is done, you can implement a risk-management strategy for your firm. This may include developing formal risk-assessment documents to proactively evaluate and report risks.
Remember to regularly review and update your risk-management strategy as your firm develops its staff base and expands its service offering.
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