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  • Pam Prior

Three Steps to Meaningful Accounting Reports

Every step of your accounting process was created with the best intentions. There was a problem, and someone solved it.

But over time (and it’s a lot less time than you think), business processes change. You hire new people, you have a change in leadership, and slowly but surely, you start to make micro-adjustments to your process to evolve with the changes in your company. It’s all good, but the last place to get investment during these periods of high change is often the accounting and finance processes that are intended to give a true and understandable picture of your business. And one after another Band-Aid is applied in order to keep up.

And these micro-changes? These Band-Aids? They add up quickly. Sooner rather than later, you have an accounting and reporting system made up of primarily one Band-Aid taped over another over another over another, and so on.

How does it happen?

“Oh, we added a product. We need a new line of business. Let’s add one in.”

“Oh, we need a code for the region. I really should go back and recode everything on all of our subsystems, but that will take forever… I’ll just put a mapping table in place.”

“I need to import that mapping table into Excel… Whoops, I forgot our Excel files got wiped out! Let me just do it in the database.”

“Well, Excel is back up and running! I guess I’ll go back to using that…”

“Let me just keep this sticky note here on my desk to remember to manually change that formula every time we download the data.”

You get the point, before you know it, you’re relying on humans, and memory, and sticky notes to represent the changes in your business. You’ve stitched it, glued it, you’ve patched it. Each time with all of the right intentions – but now, when you look up, it’s your own business Frankenstein.

Your processes have now officially veered into “Franken-ccounting” territory. You are relying on one or two key people to hold the whole thing together; and without them, you fear a complete disconnect between your financials and your real business.

Now, if you’re dealing with these kinds of hodge-podge processes in your business, don’t feel bad! The road to “Franken-ccounting” is paved with good intentions; and there’s not one place I’ve worked in a very long career that hasn’t succumbed to some extent.

But you can be different! If you want your business to run at its maximum efficiency, you’ve got the power to do the opposite of “Franken-ccounting”. You can insist on a systematic approach to adapting your finance and accounting processes to positive organizational change.

So how exactly do you do that?

Step One: Connect With Leadership

The first step to improving your accounting processes is to connect your accounting and finance leader directly to the top! Be sure he or she knows exactly how you think about and view your business. I have business owners draw their business model out on a piece of paper. (Face it, many of them have already done the “back of the napkin” sketch anyway!) You need to show your team how YOU think about the business. The accounting team’s job is to make the reporting align with that! So – yes – draw it! What things come into the company; what do you do with those things; and how do you send them out to your customers when you’re finished? These facts exist for every business – service and manufacturing; retail and distribution. Help your accounting lead drill down and understand exactly how the business functions. That gives him or her the information needed to align the accounting and reporting with that vision.

Also – require that your finance team, or person, or bookkeeper, understands what information you need in order to run your business! With that information, they can set up the accounting processes in a way that delivers exactly what you need.

Step Two: Define Your Reporting Structure

Once your finance lead has an understanding of leadership’s needs, it’s time to define exactly what reports and information they need to pull together, how frequently, with how many different dimensions (by region, by product class, by price category?), and at what level of detail.

Once they know this, they can figure out how to structure your process to deliver the information the way YOU want to see it; in the way that reflects your business as YOU see it.

Step Three: Define the Data

Now your team will figure out where to get the data from to feed your reports. At its best, this takes the form of a process map.

So, for example, let’s say you needed to see the sales by region. Where does that sales information come from? Well, it comes from a customer management spreadsheet that in turn feeds QuickBooks. Okay, great. How does it get into the customer management spreadsheet, and how does it then get from there into QuickBooks? Oh, it gets pulled from Kajabi. Geez, how does it get into Kajabi? Oh, someone creates a form… and so on and so forth, until you’ve mapped out the entire data process from start to finish. Your accounting team shouldn’t stop asking “why” or “what is the source” until they can fully map out the stream of information from the original physical transaction to the final output on the reports you want.

To summarize …. there are three steps:

  • What information you need to see and how often;

  • The data needed to provide that information; and

  • Where that data comes from.

Going through these steps will help to get the most efficient and cost-effective systems in place for generating your financial reporting.

What it boils down to is this: If you want to improve your processes and systems, accounting or operational, you need to get the data into the pipeline correctly at the source. If that is ensured and proceduralized, then everything else flows smoothly from that point. You can get your data earlier and earlier to make more responsive decisions. And most importantly, you can build confidence in the information that you are reviewing, because it reflects your view of the business and the team’s understanding of your processes.

Author, Virtual CFO, and Finance Coach

"Your First CFO: The Accounting Cure for Small Business Owners" on AMAZON.

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