90-Day Sprint – Organize Accounting System
Step 2: Organize Your Accounting System (Weeks 2-4)
Following initial interviews, company analysis, and your action plan, it’s time to zero in on your financials. A well-organized accounting system is fundamental to a thriving business, providing the bedrock for smart decisions.
Why a Solid Accounting System is Non-Negotiable
Strong financial leadership depends on reliable data. A chaotic system produces unreliable insights – “garbage in, garbage out.” Even the most sophisticated analysis is useless without accurate financial information.
If your current system is already top-notch, great! Move on. But if improvements are needed, now is the time to build a clean and efficient foundation. A well-organized system allows you to track vital metrics, empowering smarter, forward-looking decisions.
Understanding Your Company’s Financial Engine
Before diving into the numbers, understand how your business generates revenue. Ask your CEO or department heads to explain the company’s financial model.
While CEOs often grasp this, operations or sales leaders might struggle. Crucially, how often is this model linked to financial results? Rarely. This disconnect shows why traditional (and often outdated) financial statements fail to provide the actionable insights modern businesses need. To drive real value, you need forward-looking financial tools, not just historical reports.
Existing Financial Leaders: How are you being progressive in your accounting department? Comment about it here.The Danger of Delayed Financial Reporting
A common mistake is preparing financial statements weeks after month-end. By the time issues surface, you’ve lost valuable time and potential revenue.
Imagine this: a strong start to the quarter, followed by a sharp performance decline. These losses might only be revealed too late to react. Therefore, implementing real-time tools like flash reports or dashboards is crucial. These tools provide the insights needed to proactively address issues and adjust course.
3 Signs of a Healthy Accounting System
How can you gauge your system’s health? Consider these key indicators:
- Fast Month-End Closures: Aim for closing the books within 7-10 days; achieving it in 3 days or less is excellent.
- Minimal Year-End Adjustments: Fewer than 10 journal entries indicates a smooth and effective system.
- High Profit & Loss Accuracy: Strive for 95%+ accuracy in your P&L statements to ensure reliable, actionable data.
Balancing Speed and Accuracy: The Sweet Spot
Striking the right balance between speed and accuracy is a key challenge. While auditors might spend months on minute details, businesses need insights now. Leadership teams are focused on the future, not the past.
Consider this: Perfect financial statements might take six months to prepare, whereas reports prepared in three days might sacrifice some accuracy but allow for much faster action.
Therefore, ask: Does 100% accuracy matter for everyday decisions? For most businesses, the answer is no. The goal is relevance, not perfection. Closing quickly, even with minor inaccuracies, empowers your team to make timely, informed decisions.
Alignment is key. Emphasize that speed amplifies impact. A faster month-end close helps the business stay ahead of problems and seize opportunities.
Take Control of Your Financial Narrative
Organizing your accounting system lays the foundation for real-time insights and strategic action. This is how strong financial leaders stand out – not by analyzing old data, but by steering the company towards a successful future.
Financial Leaders: What innovative practices are you implementing? Share your ideas below!
Resources:
Complete Monthly Close Checklist
Financial Statement Cheatsheet
7 Habits of Highly Effective CFOs