May 6, 2021 Meeting Notes
/May 6, 2021 Luncheon
Financial Statements & Reports!
Our Speaker today is Sharon Braseth from the CPA Firm Pittman & Brooks P.C., with a discussion on how to use reports to translate bookkeeping work into meaningful and actionable information for your clients.
Sharon is a Shareholder at Pittman & Brooks, P.C., where she has worked for the past 12 years helping to advise small and medium businesses on tax and accounting strategies.
We meet with our clients on a regular basis, annually and sometimes quarterly, and we are hoping that they are also meeting with their bookkeepers on a monthly basis so that they aren’t seeing their balance sheet for the first time in a year. There are no surprises.
As with many reports, the numbers don’t mean much unless you are comparing it against something else. So when we run a balance sheet we are often comparing it to the year prior and adding a column for the change in money to make this more clear.
We look at a few different ratio’s, for example we compare our current assets to our current liabilities.
We look at prior year profits to make sure they have been closed out to draw/equity accounts or Retained Earnings.
We also look at the P&L and look at comparatives of the percentage of income and dollar changes. The next report we look at is the P&L displayed by months which can tell a different side of the story.
If the client is not keeping track of inventory on the Balance Sheet, they will not get a clear picture of the overall picture of how you are performing, (if your expenses aren’t matching when you are selling those products and receiving the revenue)
If client only looks at reports for tax time, they not be around for tax time next year!!!
Standardize COA or Customized COA? Most want customized, it’s not just about taxes its about business analysis. Account numbers can be used as each Biz can call it whatever they want but the number stays the same. Sometimes different words speak differently to the client/biz owner. They need to see it from their own perspective. Some start with the COA mapped to the tax form. Then can add/rephrase some accounts for managerial purposes. This could be an ALA carte item on your list of services.
We also like to go over A/R Aging Summary. Customer balance detail can also help as a lot of customers have credits that they have never used.
Bonus Tip: if a customer is appearing on the A/R Report but with a row of zeros, that means there is an open invoice and a payment for the same amount but it was never applied to the invoice.
When looking at A/P Aging Summary, if there is a negative amount, it means an expense was coded to accounts payable that didn’t have a bill to match it to. It should have just been expensed.
Some clients are afraid of financials. It may be beneficial to develop separate schedules and drill down on just a few key areas that they are concerned about tracking. Let them know they aren’t alone, most business owners don’t relish looking at the financials, but also remind them that it’s our job to help them understand it. That may help them relax.