Accounting Lessons Learned from a Bankruptcy by Guest Blogger Leticia Flores, CPAPosted: October 17, 2016
I would venture to guess that most CPAs in industry will never go through a bankruptcy affecting their area of employment. The thought never crossed my mind either, but after 28 years of working in various industries, it happened. As a CPA, I found myself in the midst of this process and learned quite a bit from this very difficult situation.
Being the largest secured creditor in this bankruptcy, our strongest asset to develop the case was the documentation and recordkeeping. The lawyers insisted having this down to a tee, and although I wasn’t deposed, getting the facts straight gave the lawyers a strong arsenal for all the legal documents that followed. The greatest lesson learned was document, document, document.
Strong communication (and learning bankruptcy lingo quickly) was also key. A new team of lawyers, forensic valuation accountants and bankruptcy accountants quickly came to my rescue. Once they understood the facts of our position, they were quick to position the organization for the defense. The strong team of accounting experts developed valuation analysis, cash analysis and forecasting models. While I provided the facts and internal resources, they coached me on the legal position to help the team. The next lesson learned was to stay flexible and always open to learning new ideas.
Staying on track and on time was the motto to this case. Bankruptcies are extremely expensive on all accounts. The legal team published a calendar of events normal to the bankruptcy process with deadlines and deliverables. By anticipating the needs for the next filing, and preparing analysis ahead of schedule, the legal team was able to stay ahead of the game. Just like a monthly close calendar, we stuck to the plan, met deadlines, reviewed legal documents and the lawyers were able to sell our position.
After months of supporting the bankruptcy team, long nights reading legal documents, negotiating with the judge and multiple depositions (luckily not my own) we won the case. By now, the lawyers and accounting experts are long gone and me, the industry CPA, picked up yet another entity to consolidate.