Armanino Blog
Article

Measuring and reporting financial results

by Steve Chapman
March 13, 2014

Financial results is the main scorecard used to measure business performance. Used by internal and external parties, you want to make sure that financial results for your business are reported accurately and on time. You also want to make sure that all users of the results have a common understanding of how to interpret the results.

Accounting standards provide a common basis for publishing and consuming financial results and are fairly easy to adopt. The challenge in a business then is how to accurately record and classify business transactions on a day-to-day basis so that the periodic presentation of financial results is a routine process that can be accomplished easily.

Having a reliable accounting system is essential to meet that goal. If you're still using spreadsheets or rely on an abundance of manual records for this, you're not taking advantage of an easy solution. An integrated accounting system can keep you on top of things.

These are some of the common business situations that are greatly improved by using an integrated accounting system:

  • Inventory – For organizations that incorporate inventory as a significant part of their business, the control of inventory is essential. The sheer volume of transactions and the necessity of having to track quantities and values for every inventory transaction make utilizing an integrated accounting system with a perpetual inventory module necessary. If you're not tracking inventory valuations for every transaction, your reported financial results will not be correct.
  • Deferred Revenue – If your organization is in a business where revenue from a sale is recognized over multiple periods, you have an issue with deferred revenue. Accounting standards for this type of sale are very specific as to how related transactions are to be valued and recorded. Many organizations that defer revenue use huge spreadsheets to track these types of transactions. Unfortunately, spreadsheets are prone to error and require a fair amount of labor to maintain. An integrated accounting system can be a great help in controlling and accurately reporting financial results, which is why Armanino developed our Revenue Recognition Management for Microsoft Dynamics AX to streamline companies' accounting processes and manage complex BESP, deferrals, reallocation and carve-outs.
  • Accounts Receivable – Collecting customer payments for previous sales is the last step in converting purchased inventory back into cash or recovering your expenses and expected profit from your business activities. If you cannot maintain accurate records of what people owe you and support your claims for payment, your business will suffer a slow withering of cash balances. An integrated accounting systems allows you to accurately record customer sales in a timely manner and facilitates collecting money owed you. And in most cases provides the basis for the "top line" of your financial results.
  • Manufacturing Costs – Manufacturing operations vary from relatively simple to very complex. You have to know what your costs are by product so you can accurately measure product and customer profitability. From a financial reporting standpoint, you also need to be able to accurately present inventory, work-in-process and cost of goods sold values in your financial results. Easily accomplishing this goal is almost impossible without an automated accounting system.

The presentation and reporting of financial results should be very easy. If it takes a lot of time to publish the financial statements, you're not taking advantage of business tools that are readily available and easy to implement and use.

If you'd like to learn more about any of these topics, let me know. Armanino offers ERP implementation, consulting and variety of stock, revenue and reporting solutions.

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