03/28/2013
When it comes to financial information, there is often a great divide between consumers of the information and those who compile it.
There is the high level information an owner (or manager) needs to run a business.
And then there are the daily transactions, the volumes of paperwork that have to be handled. There are bills to be paid, invoices to send out, payroll checks to be cut. There are taxes to be filed, deposits to be made, funds waiting to be transferred between accounts.
All of these Individual activities are recorded as debits and credits as they move through the business. Someone, usually a bookkeeper or accountant, records the transactions in their proper place in accounting software (or in limited cases, on paper) so they can be organized into financial statements.
Once they reach the financial statements, that series of debits and credits come together to tell the story of a business. But the participants remain separated.
•On one side of the divide, there are the owners who crave actionable insights into their business. These consumers of financial information often don't speak the language of the story they are presented. Its meaning is lost.
•On the other, there are the (exhausted) preparers of information who are immersed in the details of managing the transactions.These preparers are generally ill-prepared to be story tellers. They might not explain the results of their work but they know with absolute certainty they have kept everything in balance.
Eventually the preparers hand over their nicely formatted, perfectly balanced, evenly spaced, properly underlined story to the business owner who can't decipher the secrets contained within. The information has little value. Everyone gets frustrated and no one achieves the results they desire. The answers remain locked in the pages of the financial statements.
It doesn't have to be this way. With coaching for people on both sides of the divide, owners and preparers can meet in the middle to have a shared understanding of the story of the business.
•Owners can be trained in what to look for, what questions to ask, how to read a statement of cash flows. They can be shown that a P&L only addresses one piece of the business puzzle and can learn to look to the Balance Sheet for new insights. They can learn to focus on not just one bottom line, but all three.
•Preparers can be trained to communicate with owners, explain the numbers, share and format reports. They can learn to look beyond the transactions that consume them. As they learn to take a step back, they can see information from an owner's perspective.
Once a bridge is in place, both sides can work together to write the next chapter for the business.
posted by: Geni Whitehouse
