Whimsical musicals are all very good when you want to escape reality. They are, however, not what you need when reviewing where your business’s finances stand. This information should be coolly realistic propped up by the accountant’s core touchstone: a fully reconciled balance sheet.
I sometimes hear some finance directors or accountants explain that they do not fully reconcile the balance sheet every month, leaving it to year-end or quarter-end, for various spurious reasons. For any finance department that is serious about keeping its management team well informed of its financial position every month, THERE IS NO EXCUSE FOR NOT FULLY RECONCILING THE BALANCE SHEET EVERY MONTH!!! Got it?
I won’t go into the technicalities. Those of you who are accountants know that 9 times out of 10 a misstated balance sheet means misstated profit. In my experience this invariably leads to cash-flow problems and the pain that then ensues. It certainly has in every business that I have seen where the balance sheet is not under regular tight control.
So keep your balance sheet tied down every month and you will know clearly where you stand. If you are not doing this, start now: the information you are producing is not reliable. If you are worried about the reporting timetable find ways to move the reconciliation work out of the period for month-end close. A robust balance sheet is a key foundation of every effective finance function.
I help people run effective finance functions. Get in touch if you would like to find out if I can help you.
Happy New Year!