Bookkeeping and Benchmarks – Getting the Numbers Right
I am a big fan of business analytical and reporting tools. I very much believe in using industry benchmarks as a means to understand various aspects of business performance as it is compared to others. I feel strongly that this type of information is essential at all stages of the business, and is useful for planning and forecasting as well as in daily business management. There are a lot of tools available now which provide KPI (key performance indicator) reporting, dashboards, and industry comparisons. The thing that none of these tools provides is an assurance that the underlying data is any good.
For data-driven reporting and analytical tools, the reliance upon customer- reported and accumulated benchmark data is both the benefit and the problem. Drawing upon actual customer financial data is what makes the reporting solution useful – reflecting the realities of the business as they are revealed in the accounting data. The problem is that the data will often be flawed in some manner due to the lack of accounting knowledge of the user. Particularly when small business owners take it upon themselves to perform their own bookkeeping work, there is a large potential for the information to be incomplete or erroneous, or at least not truly reflective of the business finances.
It is essential that accounting professionals be involved in the accounting process to ensure the accuracy of the information presented to any analytical and reporting solution, thus improving the quality and value of the information. Further, I would suggest that accounting and business professionals would look to these types of tools to assist in the identification of issues or conditions which exist in the business requiring attention. Business owners would get far greater value from the services of their accounting professionals, and accountants would deliver a much higher level of tangible value to their clients.
If the accounting professional is not regularly discussing business issues and conditions with the small business client, the client can use their own tools to attempt to gain the insight. HOWEVER (note the big letters), any small business owner who tries to do their own books and use their own decision-support tools is likely to run into problems. While it is true that some accounting professionals are not offering the level of guidance and insight (“value intelligence”) that some analytical and reporting solutions might try to offer a small business user, suggesting that the DIY reporting tool is useful when coupled with DIY accounting is questionable at best. Why? Because most small business owners and untrained bookkeepers do not know how to perform proper accounting. And bad accounting data turns into bad business decisions really fast, even with the coolest-looking reporting tool.
What’s the bottom line? The participation of a qualified accounting professional is necessary to make sure business bookkeeping information is properly accounted for, even and especially when great tools and solutions designed to help small businesses get their work done are being used. The accounting professional is necessary to make sure information is classified correctly, connected and associated with the proper supporting information, and that the data is complete. This is a lot of work if done on a regular basis (which it should be) yet many accounting firms don’t even offer the service, or offer it affordably.
Accounting professionals working with small businesses, look at it this way: it makes more sense for you to engage a contract bookkeeper and make a bit of money on the work they do to serve the client than it does for you to
a) lose the client to an accountant offering bookkeeping services, or
b) charge the client to re-write up the information, which isn’t really profitable for you and isn’t as valuable to the client
Serving larger businesses may provide firms with an ability to be more selective of the services they offer, but small business accountants need to take an entirely different approach. Small business accounting professionals need to be full-service providers and help clients get the complete range of services they need, including daily bookkeeping.
Accounting professionals helping their small business clients get complete service – from basic bookkeeping to insightful planning and advice – that’s the benchmark for high value accounting in the world of small business. It’s the only way to make sure the numbers are right, and that the business owner is looking at the right numbers.
- Read more about Data Dashboards and Financial Analysis: Comparing Apples to Aardvarks
- Read more about how accountants need business intelligence, too
- Read more about how there’s no fear and loathing in accounting
- Read more about the pressure on accountants to deliver more value and intelligence to their clients
- Read more about Data Warriors: accounting in the cloud