Pro Tip

Pro Tip: Financial reporting is only as valuable as the data that is being recorded in your financial software. Common roadblocks to effective financial reporting that can create difficulties with using financials to drive strategy are:

• Inconsistent or irrelevant accounting principles. Some common examples of this are revenue recognition that is haphazard or that does not make sense with the way you do business and cash basis accounting for companies purchasing goods in large bulk quantities. 
• Commingling of personal expenses in business financials. 
• Operational practices that undermine accountability for accuracy in record keeping. 

In general, these result in financials that are not as useful for strategic decision making because they are disconnected from the reality of business operations. Indicators that could demonstrate this in financial statements include things like inconsistent gross margins, variabilities in operating expenses that are not traceable to specific business decisions and periods where large adjustments have been required to restore accuracy in financial reporting.

In some instances these roadblocks can also create significant audit risk.

The takeaway: Prioritizing relevant and consistent accounting principles is the foundation of effective financial reporting to drive strategic enterprise value growth.

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