Learn The Key Importance Of Accurate, Dependable Finance And Accounting Systems.

Finance and accounting systems should be designed to provide necessary information, accurately, and in a timely fashion. I once evaluated a business for acquisition that had a system that was almost the exact opposite. The monthly statement was not available for at least 45 days. But it really didn't matter because it was all nonsense anyway.


Ultimately you need to know where you are making money, and where you are not. So you can try to do more of the former, and fix the latter. You also need to know what your cash flow will be. You need to be able to track and manage accounts receivable and inventory. And relate that information to sales and predicted sales.


You need to know that the count in accounting is being done, and done properly. Finance and accounting systems do not stand alone. They gather information from the various activities that go to make up any business. They process this information in a way that makes it meaningful and actionable. And to be actionable it must be reliable.


Remember that finance and accounting systems produce the monthly and annual statements that buyers review as they evaluate businesses. They also form the basis of much of the work done by business valuators as they value businesses. Your business will be difficult to sell if your statements don't reflect the reality of your business. And you don't even want to think about the consequences of someone buying your business based on statements that turn out to be grossly misleading.


If you find big irreconcilable discrepancies between items like cash on your monthly statement, and your bank statement, you probably have a problem. You would be unwise to get rely on the person or persons causing the problem to fix it. Bring in an outside accounting firm to develop a system specifically for your business, or customize an off the shelf system to suit your needs.


The theme will probably now have a familiar ring. Develop a system that works for you. Document it so that the appropriate people have written instructions on its use. And so that someone not familiar with it, can review the documentation and make it function. So if your main accounting person is hit by a truck, a replacement can hit the ground running.


Finance and accounting systems can be first rate, the documentation can be extensive and easy to follow, and there can still be trouble. The human factor must be engaged. The systems must be used as designed. The system works, work the system.


You deal with use through management, leadership, and using your reward system. Although there is lots written about creative financing, you don't need and don't want creativity in your accountant. You need timely, accurate information. Accountants that get too creative often end up in trouble or causing trouble.


Buyers, valuators, and suppliers of capital are all repelled by sloppy, inaccurate, late financial information. It introduces uncertainty, and reduces confidence. And that leads to lower valuation and reduced access to capital to finance the purchase.

You may wish to return to Systemize Your Business from Finance And Accounting Systems , or go to

Home Page