Does your accounting staff give you reports two to three months late every time, making it hard for you to actually make decisions based on the numbers?

One of two things is probably happening: they don’t have the right level of expertise to give you the reports you need, or they’re spending too much time trying to do elegant accounting.

If you’re a small or mid-sized business, you don’t need elegant accounting.

Elegant accounting is all about compliance. It’s the fancy (highly technical) accounting big companies bound by SEC reporting requirements need, because their accounting legally needs to be done in a specific way for investors and other stakeholders.

The problem is, it takes a whole lot of time, it’s unnecessary for small and mid-sized companies, and it makes it hard for you as the business owner to get the information you need in a timely manner. When your accounting gets over engineered, it’s overly labor intensive with no benefit to the business owner.

You don’t have to worry about public investors and the compliance organization that is the SEC as a single-owner business.

What you do need is to have reports that make a whole lot of sense and tell the story of what happened in that reporting period.

Of course, your accounting staff does need to pay attention to good accounting practices. Your cash expenditures should be recorded as such, your t’s should be crossed. But you don’t need the elegant things only big companies need for investors and the stock market.

When you do that, you confuse the internal users of that information and can’t get the reports you need to make decisions on a timely basis.

Case in point: a medium sized non-profit I worked with recently.

The prior director of finance, who was acting more like a senior accountant, was recording payroll and the billing out of expenses in a very technical manner.

They accrued on actuals every month, but the board reports and reports to the executive director were always late. They were always late because they were waiting on payroll and billing reports to do technical accruals and deferred revenue entries.

Every month, they were more than six weeks behind. End of January reports came out sometime in March. It was too late to do anything about the numbers in the January reports. The executive director’s hands were tied and he was frustrated.

For me looking in from the outside, that’s a ridiculous amount of time to be spent spinning wheels on something that’s not going to make a difference. It won’t benefit the actual accounting of revenues and expenses, and it won’t benefit the decision-making process. They were trying to put an elegant solution on top of something that didn’t require it, and the cost of doing so greatly exceeded the benefit. Nobody wins in the over-engineered approach.

So if you don’t need that, what do you need?

For starters, here are the basic reports you should have in your monthly management package:

  • Profit and loss statement
  • Balance sheet
  • Statement of cash flow

Those are the Big Three. For bonus points to round out the package, get aging reports for your accounts receivables and accounts payables.

Together, these reports help the CEO understand what needs to change in the business. But they need to be succinct and in a format that leads to you understanding the story of what actually happened, not data vomit of a bunch of numbers that make no sense. With the right reports in your hands, you can understand what happened and make decisions to get back — or stay — on course.

Tired of delayed reports, data vomit, and numbers that don’t make sense? Let’s talk.

Your CPA Shouldn’t Be Your CFO!

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