Duvall & Associates, Inc.
BUSINESS ADVISOR NEWSLETTER
 

 Businesses make sense of past,

plan for future with financial reports

- by Alan Duvall 

Published in Dayton Daily News  June 24, 2007 

“I don’t know where we come from, don’t know where we’re goin’ to.”  Steppenwolf. 

Sometimes you read an editorial that expounds an idea that is so inane – well, you feel compelled to respond in kind.  And that’s where I found myself when I recently came across an article in a local magazine titled, “Financial statements for small companies are a waste of time and money.” 

Written by a sensationalist author who believes accountants get “excited” reading financials (Not true – it’s actually quite difficult to arouse accountants), the piece nevertheless articulated a dangerous message to business managers. 

Financial statements indeed provide a valuable tool to successful management of a business enterprise.  How else to determine if you are actually making money (and owe taxes), correctly pricing products, controlling overhead?  How does one project into the future in the absence of guidelines from the past? 

Financials must be timely since their value withers with age and accurate to avoid faulty conclusions. 

Monthly financials may not be a total substitute for alternative management reports.  Each business manager should consider use of a “trend line” report which encapsulates daily/weekly data specifically relevant to tracking a company’s progress.  For example, manufacturers could use several reports to track backlog and inventory; sales, cost of sales and gross profit; as well as cash, receivables, payables and line of credit. 

Certainly a cost-benefit analysis in bookkeeping effort must be considered.  The expense of generating detailed financial information should never outweigh the benefits of data so provided. 

Generally, it’s best to conduct as much of the bookkeeping effort in-house as is reasonably feasible.  Since many small businesses cannot afford high-powered internal controllers, it often proves beneficial to have internal bookkeepers prepare initial financials to be periodically reviewed by external accountants.  Such a process is cost effective and provides a level of professional quality assurance to the final product.  The accountants may also aid in the interpretation of the often complex financial information for management. 

“I’m so blind ...This time I look to see what’s between the lines.”  -Korn

Alan Duvall is a certified public accountant in Dayton.  Contact him at Alan@Duvallcpa.com.  Previous articles archived at www.duvallcpa.com.