Hello gang! This is Michael Hsu from DeepSky.
One of the things that frustrates me the most is that
accountants tend to spend countless hours on things
that are technically correct but practically useless
Today I'm going to talk to you about why that is
and what you can do about it in your business to ensure
that you don't waste money on that.
A buddy of mine reached out to me
this morning.
He couldn't understand why is that his bookkeeper
could not close his books on time and that
his financial reports are always slowing down
always coming in too late for him to make
any meaningful decision or a strategic decision
on a month-to-month basis.
So, I took a look at it and at first
I was a little bit confused
because he had a relatively easy company I mean
It's a three million dollar agencies that is
pretty simple, straightforward, not too
many crazy things going on.
But when I look into his books...
it's ridiculous, it's super confusing
it's got a lot of transactions and I couldn't figure out why.
So, I had my team look into it and then we discover that
he was doing a lot of accrued revenue.
Now, accrued revenue is one of those things that are
technically correct.
Like they teach us that in school.
The principle of it is so that you can aline your revenue
with the expenses that you outlay
However, it is not ideal and practically useless
in a small business like ours,
three to five million dollar companies
because it takes a ton of after-the-fact effort to
fix something that could be fixed easier
For example, you can totally as a company
send out invoices on a week-to-week basis versus
a month-to-month basis.
And that will fix two things.
One, you are accounting all of your revenue
for the month accurately along with your expense
so then you have accurate financial.
And you fix your cash flow issue.
So you're receiving money faster.
It's one simple change in your business practice to fix
that extremely complex accounting problem.
And that should really be the way to do it
instead of trying to take complex accounting concepts
to a fixed simple business problem.
So, there you have it.
Until next time
I hope you guys are growing profitably.
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