{"id":23571,"date":"2021-08-06T08:00:59","date_gmt":"2021-08-06T13:00:59","guid":{"rendered":"https:\/\/taxprocenter.proconnect.intuit.com\/?p=23571"},"modified":"2021-08-25T07:47:02","modified_gmt":"2021-08-25T12:47:02","slug":"the-importance-of-accurate-financial-reporting","status":"publish","type":"post","link":"https:\/\/accountants.intuit.com\/taxprocenter\/practice-management\/the-importance-of-accurate-financial-reporting\/","title":{"rendered":"The importance of accurate financial reporting"},"content":{"rendered":"

In order to run a business, owners need to have reports available to them to make informed operating decisions. Most of my clients \u2013 and undoubtedly your clients, too \u2013 are busy running their businesses, so they neither have the time nor the skills to pull specific information or generate regular reports. And, while there are many programs that have the tools and capabilities to satisfy this need, including QuickBooks\u00ae Online<\/a>, they have to be set up correctly.<\/p>\n

One of my newer clients, a construction and maintenance service provider with 26 hourly laborers and five salaried employees, recently experienced their first large net loss year. They have been in business for 10 years; it started with the owner mowing lawns as a college student. That mowing company turned into a statewide recognized company, so while the opportunity to grow was strong, there was no reporting structure to dig into the details and provide a path to growth.<\/p>\n

When the owner came to me, he knew several things: the revenue they were making by type of service, the total cost of goods sold, and the amount of overhead expenses. However, he did not know the profitability of each job or how many hours were spent by the laborers on each job. With this lack of reporting, I could only theorize why this seemingly established company was suddenly in the red for the first time. We had to quickly get to work.<\/p>\n

A four-step process to create reports<\/h2>\n

I\u2019m sure this process is different for every firm, and you have to create a system that\u2019s workable for everyone. This is how I do it.<\/p>\n

Step 1: Ask the owner some questions.<\/b> During discovery, I offer my advice on what I believe they need to make informed decisions. I want to know how they envision the reports, and what numbers and statistics they think they need. This is our brainstorming session where I write down what we need to generate better reports.<\/p>\n

Step 2: Garbage in, garbage out.<\/b> I look at their current programs, along with a high-level view of the decision makers and their roles in the company. From this analysis, I learn how information is being put into the programs and systems. The rule of thumb is garbage in, garbage out. If I am working with inaccurate data, I can never produce accurate reports. In this situation and most of the ones like it, very capable people were entering accurate data, but they weren\u2019t properly earmarking the data to create more informative reports, whether attributed to a lack of understanding or program constraints.<\/p>\n

Step 3: Review the software.<\/b> Next, I look at the program they are using, and suggest slightly new procedures\/research, or recommend something new. The company was using QuickBooks Online, but with more than 150 active projects, they needed something that would integrate with QuickBooks that offered real-time job costing and invoicing for contractors. We decided to go with Knowify<\/a>.<\/p>\n

Step 4: Implementation.<\/b> We met with all the decision makers and everyone who would be active in the implementation. I talked about the tools we would use with Knowify, how it will feed into QuickBooks Online, and how the integration will allow us to create the reports we need. On my side, I feed QuickBooks Online into Fathom<\/a> to help me analyze and interpret the data, as well as create useful dashboards.<\/p>\n

During implementation, each person had their duties they still operate in, but we slowly transitioned what they were doing from the old way into the new way. With any client, if we rush the process, there would be too many issues to fix in a timely manner. Rushing can also negatively impact the group\u2019s cohesiveness and excited spirit, and in the worst case, impact how their customers are viewing their invoices and services provided.<\/p>\n

The ink is now black<\/h2>\n

The company went from being massively in the red to hitting a net income of 863 percent over our initial target! How did this happen?<\/p>\n