What Your Financial Reports Really Tell You

Financial Reports stacked on top of

I recently had a client say to me “My bookkeeper told me they could print these reports in 2 minutes”.

Well yes they could. In fact you can automate the running of reports in most accounting systems these days….so why would you pay a CFO to “print” your reports for you?

Well I guess that all depends on what the underlying purpose of your financial reports is…

If you’re just going to print them, look at the revenue, costs and net profit and then file them in the drawer thinking “great that was a good month” or “oh well that was a bad month”, then I guess you probably only need a bookkeeper or the system to do this for you.

But if you look at those reports and think, “can I trust these numbers to make really important decisions?” then you probably need to engage someone with CFO level qualifications and expertise who will do a lot more than just simply enter your data and print out your reports.

A CFO will review your reports and consider things like accruals and prepayments, capital expenditure, depreciation of assets, movement in work in progress and inventory, leave provisions and so on. All of these can have significant impact on your bottom-line profit each month and if you don’t account for income when it is “earned” and expenses when they are “incurred” you will never have a true and accurate picture of the profitability of your business and without that at best you could be making decisions based on mis-leading information, at worst those decisions could be detrimental to your businesses’ long term survival.

I recently came across a new client who had invoiced about $100K in advance for services that would be delivered in the next 12 months.

The problem was they reported this as income in the month they invoiced, therefore showing a huge profit that month.

As it was year end, they had overstated their profit for that entire year…

Over the coming months they started delivering those services, however, there was no revenue to attribute to the month’s the services were delivered.

All of a sudden they were making a loss and wondering what had gone wrong? PLUS they had spent the income they’d invoiced in advance and now had to find a way to fund the delivery of those services.

Had they had a CFO overseeing their accounts back then, they’d have moved the $100K to the balance sheet and highlighted that in fact the business was making losses that needed to be addressed.

Unfortunately the income they billed in advance masked the fact that the business had underlying profitability issues and underlying financial reports which should have been addressed earlier.

💡 A good CFO will help you understand and interpret your numbers so that you can make informed decisions and not make stressful mistakes like this.

Rachael Turner, Managing Director

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