The Situation     We were engaged by a Manhattan business services company to remediate financial control of a subsidiary languishing for nine months since acquisition without being integrated into the parent-company accounting system.  Employment of prior financial staff had terminated, and the initiative to re-staff with appropriate full-time professionals had languished.  The subordinated mezzanine creditor that had financed the purchase was exceptionally unhappy.

We found an accounting database of unbalanced entries, negative debits and negative credits, unreconciled bank accounts (that revealed unrecorded collections and disbursements), no receivables or payables control or aging, disbursements without approval, and so on.

The Process     With realization that the creditor’s principal likely was unrecoverable, we recommended minimizing, streamlining and accelerating the books-and-records re-creation process by foregoing monthly periodicity, opting instead for a single period covering the entire nine months.  We recommended that even the prospect of an eventual large write-off was an acceptable trade-off to establish a going-forward point quickly.  Not incidentally, our recommendations actually limited the scope and cost of our engagement.

The Outcome     None of the professionals thus far assigned or engaged had been able to reconcile bank statements, which required deep and immediate hands-on involvement by us.  Simultaneously, we rebuilt accounting software journals and ledgers, corrected many entries and, for the first time, recorded many transactions previously omitted.  We subsequently prepared summary journal entries for the parent company to recognize gross activity over the relevant period, surprisingly (and happily) revealing net unrecognized revenues and earnings.

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Crallé & Company, Incorporated
Bronxville, New York
914-779-3331