Are you embarrassed to show off your company’s books? Are your accounting reports difficult to read and make sense of? Does your financial data tell the story of your business and represent you well? Do your business books conform to professional standards? Want to know the secrets to easy cleanup of chronic messy reporting from your accountant or bookkeeper?
While many entrepreneurs think it will be expensive and difficult to fix this problem, the truth is, if you catch this early enough, it’s not that hard or expensive to fix and the benefits are tremendous! This issue is more about organizing your chart of accounts and adhering to a few simple binning rules than it is about “fixing” your bookkeeper or accountant. Most bookkeepers will simply continue to use whatever chart of accounts organization they find when they join you. So what should you do to fix the problem?
If you are not familiar with nor interested in digging into your own accounting system, then you can hire a management consultant or fractional CFO to help you. Modeling.finance has an inexpensive standard product designed to address this issue specifically.
But If you are the type of entrepreneur who likes to fix things yourself, as I am, then consider this framework and apply it to your books/chart of accounts. Once your chart of accounts follows this sequence, then your books will be a lot less messy, and your bookkeepers and accountants will be much more effective:
Cost of Sales 5000s
Marketing & Selling Costs 6000s
Financial Costs 8000s
What’s important here is not the numbering sequence (which is a simple standard), but to understand the order of the Profit and Loss components: Revenue; COS; Marketing; Personnel; G&A; and then Financial. This order of major categories is what will make your books readable. Start with this.
Book us for a free consultation if you want to learn more about how we do it.