Real Time Accounting and Outsourced Bookkeeping

With advancements in the design of bookkeeping and accounting software, it is now possible to make daily appraisals of the effectiveness of business operations. The daily use of available reporting tools permit the business owner to run a faster, better, and cheaper operation.

The AICPA (American Institute of Certified Public Accountants) has established a new framework for financial reporting. While this Enhanced Business Reporting Model (EBRM) is oriented toward public reporting entities, it is beneficial for privately held businesses as well.

The EBRM is supported through what Ron Rael calls, “The 3 Rs of Real Time Reporting.”  These are: REFLECTIONS OF REALITY; REPORTING FASTER, BETTER, AND ON TARGET and REENGINEERING THE BUSINESS PROCESS”. The job of the primary financial advisor is to ***ist clients in reaching their goals through better and timely decisions. In other words, help the client recognize the principles of cause and effect: “When I do this; that is what happens.”

Real time accounting and reporting provides the business owner with immediate feed-back and results from yesterday’s actions. This feed-back keeps the owner focused on the most critical issues they are facing and prevents them from getting off-track. The reports a business owner should track daily include: the day’s profit & loss, the day’s sales, the day’s accounts payable and receivable situation, and the current cash balance.

According to Ron Rael, accountants should communicate the following to clients:  

Explain new reporting rules

            Post the score

            Recognize the efforts

            Reward the improvement

            Raise the bar for measuring success

Think about real time reporting in the sense of a baseball game.  If there is no score keeper, how do we know who won, who lost? If there is no statistician how can we tell who was the best player, what happened to the batting averages, what was the pitcher’s earned run average, who was the worst player and should be traded? It is the same for every business.

You do need a good structure for your real time reporting system. For users of QuickBooks®, that structure is in place through the 5 reports noted above and the “Company Snapshot” dashboard. This is a presentation of the business results as the door opened this morning.

Last year our basic metric of performance was the primary equation: Revenue-Expenses=Profit. This year and for the years to come the metrics have been changed to: People x Processes = Profit and Decisions x Activities = Performance.

Moving a business from historic batch processing and end of period adjustments, (then waiting ***ks to see the results), requires a change of mindset so that planning, budgeting, and forecasting become the framework for measuring the key performance indicators of the business. It includes all levels of the business from the employee on the floor first and mid-level management up to the CEO and any other executives.

The on-line outsourced bookkeeper and accountant become the client’s CFO/Controller and guide and provide a clear map to the business owners’ success. If you are not getting this from your financial service provider, you should talk to a Cash Cow Accountant.

Richard Robinson, CPA Santa Fe Business Solutions

www.cashcowaccounting.com