We’ve got to get the story.
And then report it. Quickly.
Eventually just isn’t good enough.
Good financial management requires good financial reporting.
Good doesn’t necessarily mean exhaustive.
But it does mean timely.
Why not just rely on day-to-day information from our accounting database?
Well, for a couple of reasons.
This data usually isn’t reliable (or even available) until the most recent round of invoicing has been completed and posted to the system. Our profit/loss data is only current and reliable immediately after completing the last billing cycle and booking those revenues.
And, even then, we or someone else must look for the data we want to review, whether by creating reports, or looking at a “dashboard” created by our accounting system. Most of us are just too busy to stop every day, pull these reports, and then study them.
Put a Stake in the Ground
I am a strong advocate for a regular, printed (paper or PDF), end-of-billing-cycle financial report. A stake in the ground, if you will. That way, we have our data permanently recorded, and easy to review.
Really? We should devote our valuable time to this?
Well, yes—ours or someone whose job it should be to create our financial reports. I like to be personally involved in assembling these reports, because it forces me to really understand where the data is coming from.
But it’s much more than this.
Why Bother?
Here are the 5 major reasons you need to do this:
- It maintains a focus on firm finances.
If there is an actual report, it creates the expectation that someone has reviewed it. Create that expectation.
- It enforces accounting discipline.
The accounting process must be thorough and timely in order to generate the report every cycle.
- It communicates to partners and stakeholders.
It is clear, objective data, in one single document, and no one can say they didn’t have the information.
- It provides data for strategic decisions.
You and your partners are now armed with the best, most current information needed for decision-making.
- It captures the firm’s history.
If you are not already compiling your financial history, you can be as soon as you are generating regular financial reports. (Collecting historical data is important— more on this later.)
Exactly What IS a Financial Report?
A good Financial Report should include the following:
- Financial summary (with revenue forecasting)
- Income Statement
- Balance Sheet
- Accounts Receivable
- Individual project earnings data
- Other documents or reports
We should create this report monthly, immediately following the invoicing of the past month’s services. Or, if we bill on some other cycle, we should do it then.
Less frequent reporting, such as quarterly, allows too much time to go by without review of our financial health. Much of a delay after the past month’s invoicing means the data is now old.
Let’s get the scoop, and go to press!