As we come to the end of 2007 and enter 2008, there is no better time than now to think about doing things differently in the New Year. While I am not a big fan of New Year’s Resolutions (any day is a great day to start a new habit), it is a perfect time to update financial reporting. Finish 2007 with current reporting so you have complete year of trends on the same basis. But consider beginning January with a new look to your financial reporting. It is the perfect time to decide what is working and what is not.
When developing financial reporting (aka accounting reports), strive to make sure that they provide meaningful information and can be easily understood by all of the users. Specifically,
1. Use meaningful accounts with intuitive descriptions (update them as needed to reflect the current business, not what it was ten years ago!).
2. Make sure cost centers reflect the organization chart and tree to the person who is responsible for spending. Hold them accountable to monthly results.
3. Allocate costs only where meaningful. Avoid trivial allocations to people who have no control over the spending.
4. Utilize month-to-month reporting so that people can see trends as they follow the columns across the page (generally six months works well).
5. Answer questions about the business (gross margin by product line or customer, or fixed versus variable costs analysis, for example) through meaningful analysis.
6. Integrate any important analysis into regular reporting where appropriate.
7. Make reporting transparent . . . it should be easy to understand how decision making and actions result in profit and loss.
8. Simplify the process of producing the reports by eliminating unnecessary steps and automating those that remain (recurring journal entries are a good example). Make your accounting system work for you.
9. Distribute your reports to those with spending authority and key management.
10. Seek input from the users as to what is meaningful to them and what will help them do their job better.
11. Ask for, or provide, (depending on your role) written explanations of changes from prior periods (either last month or same month year ago) and to budget or plan.
12. Get the entire organization focused on a few key numbers so that everyone has an appreciation for the results of the organization.
Financial reporting is meant to be a tool that helps you drive your business forward through better understanding of revenue, margin, costs and important financial ratios. Your reporting should provide information in a meaningful way to help drive the business to increased levels of profitability and cash flow.
In business, change is a constant. Your financial reporting should reflect those changes!
Happy New Year with Best Wishes for a Prosperous 2008 with Positive Cash Flow!
If you need help with your business, financial plans, or goal setting, please give me a call at (314) 863-6637 or send an email to And, remember . . .
your cash is flowing. know where.
Copyright @ 2007 Homza Consulting, Inc.