Last summer, I visited Scotland and had the opportunity to drive on the left side of the road (and the right side of the car) for a few days. A van nonetheless!
I loved every minute of it – but I quickly realized I could no longer rely on muscle memory; I had to concentrate completely on what I was doing. It was a very odd sensation, and the first few times we stopped and I stepped out of the car, I realized that I had a little bit of vertigo. It was almost as if I could physically feel my brain working to direct my actions and not allow it to relax into habit.
It struck me recently that this is probably similar to the feeling of discomfort that some business owners might have when they have a habit-based, visceral, and accurate understanding of their businesses; and yet their financial reports are reflecting controls and dashboards on the other side of the car, and a view from a foreign angle.
These business owners know what controls create specific directional changes; they know what different feedback from the field means, and when they need to tweak their approaches. Yet nothing in their financial reports is speaking in their language from their vantage points.
You shouldn’t have to experience that feeling of disconnect with your business muscle memory.
How Does Your Accountant Communicate with You?
Many accountants default to their own muscle memories and use terms from their own accounting language. It is an important language, but it is unique to the profession, just as any jargon resonates with the practitioners, but not necessarily with anyone else.
A healthy accountant-client dynamic, based in a common language, leads to your receipt of financial information in a timely, reliable, transparent, and relevant format, well-formatted to support proactive business decisions, frustration free; in a language, and with a clarity that aligns 100% with your view and perspective on the business.
A less well-oiled relationship leads to a push and pull that never gets out of the starting gate: You are driving from the left side of the car on the right side of the road, and they are doing the opposite (at best the opposite!) relationship with your accountant is like the relationship you have with your own car. You drive on muscle memory and react quickly.
You know where your controls are; when you push a certain button, the radio will come on. When you step on a certain pedal, the brakes will activate. When you look for feedback from the road ahead, or your dashboard, you make instinctive adjustments.
Therefore, without exception, you need reports that facilitate that deft and efficient leadership ability. Three key characteristics required to create those reports are
- Consistency from month to month
- Timeliness of delivery
- Alignment with your view of the business
Three Things To Discuss with Your Accountant
Most accountants and bookkeepers want their reports to be useful to you, their client. Their only shot at it, however, relies on their clear understanding of how you see your business. Without that, they have no choice but to revert to the standard templates and jargon that are used to support so many industries.
To breach the chasm, take the time to explain your business to them from your perspective, and to clearly set your expectations around consistency, timeliness and alignment. Let them know what you need to measure , how often you need to measure it, and what activities you lead that you want reflected in the reporting.
Here are three expectations that should be clarified with your accountant or bookkeeper at the onset of their engagement with you:
1. Establish the timeline for financial reporting
Make it very clear what date each month you need to see your closed financial reports for the prior month. Establish a preliminary review of the financials if your business is complex enough, from which you can provide feedback to the bookkeeper in order to make any changes or adjustments.
Many businesses allow their service providers to set those report delivery dates based on their own calendars. This is a case where the squeaky wheel gets the grease. Start with a request for financials by the end of the second workday following the month-end. Then negotiate from there.
In no case is there a business so complex (that is under $100M in revenue) that final financials should be delivered beyond the 5th workday of the following month. Note that this assumes you are paying fairly for your bookkeeper, and have set up your processes internally to provide the required information for closing the books.
2. Ensure the right processes are in place
An efficient, consistent and timely financial reporting process requires a few things. Make sure that you and your bookkeeper have these in place:
a) A list of rules for how to book and categorize transactions
b) A requirement of everyone on your team to promptly deliver required documentation (yes, expense reports for example!) for approval and payment
c) A checklist for all of the items that are required to complete the closing process, and what date those items are to be completed, and what input upon which each is reliant.
d) A process by which your accountant can deal with new or complex transactions (such as invoices from new vendors, or year-end processing)
3. Provide the Business Drawing
It is critical to let your bookkeeper and accountant understand your business model. They need to know the inputs into your business process, the outputs, and the value that you add for your clients. They can translate each of those key business properties into the appropriate accounting elements to be able to provide you reporting according to your view of the business.
These are three of the important conversations you should have with your bookkeeping and accounting service providers. They are there to keep track of your business transactions in a way that informs your decision making and measures your success. With a few early conversations, you can ensure a smooth on-boarding and on-going conversation that reflects your business from your side of the car.