When I returned to Australia in 2011 after 10 years in Europe I was shocked to see how poorly businesses valued proper financial understanding and management. It felt like almost everyone in business here was behind, ignorant or just unwilling to have a proper grasp of their business finances. People just didn't care how they were really performing.
Accountants and bookkeepers are engaged mostly because of compliance requirements with the ATO and ASIC... mostly, not entirely. Most advice asked is around these areas too. Management reporting simply isn't up to scratch. It pains me to see business owners and managers think that having transactions entered and bank accounts reconciled is adequate. That this is at all acceptable for spitting out financial reports from the accounting software such as Xero and MYOB... expecting those reports to make real sense and be any sort of indication of performance.
People need a harsh reality check. Those surviving in business, even managing growth and turning some profit are often very lucky. They're are simply good at providing their products and services. Customer needs, established relationships, social profile and image might all be enough to pull businesses through whilst people remain clueless as to the details of their financial performance or how it may be improved.
A Reality Check... You Could Be Doing Better!
Chances are you could be operating more efficiently, making better use of available resources, and operating more effectively. You could be seeing greater outcomes that get your desired results. Accountancy services aren't just about ticking boxes to meet government regulations and requirements, although that's important. Management accounting gives you a way to look deeper at how your business is operating. It identifies areas of poor performance, levels of profitability, wastage, changes in performance, areas for cost savings or better utilisation of resources.
Management reporting isn't spitting out financial reports from templates in software. It firstly ensures the accuracy and timeliness of the reports and then ensures reports are meaningful. It provides the stories, the reasons behind the numbers. It provides an indication of where things are heading and gives direction for making decisions.
Financial management doesn't operate alone. It considers all aspects of your business, communicating and understanding what's happening throughout.
If you're operating whilst whilst wearing blinkers with your financial management... count yourself very lucky although it won't last.