Red flags in the reports
| Red flag | Where you see it | What it can mean |
|---|---|---|
| A discretionary expense rising steadily with no change in enrollment | P&L trend; Budget v. Actual | Personal purchases on a company card, or miscoded expenses |
| A negative vendor balance | AP aging | A duplicate payment |
| An aging total that does not match the balance sheet | Aging report vs. balance sheet | Something recorded outside the normal process |
| Discounts or write-offs growing without a policy | P&L; Budget v. Actual | Informal favors, or revenue being diverted |
| Receivables moving into older buckets | AR aging | Collection breakdown, or payments not being recorded |
| Cash falling while the P&L shows a profit | Balance sheet vs. P&L | Slow receivables, or cash leaving outside the books |
A red flag is a reason to ask a question, not a conclusion. Most have innocent explanations. The point is to ask.