What Google Map Can Teach Your Accountants

Date

Google Map’s new feature

I was navigating my way through Los Angeles traffic the other day when I realized Google Map for iOS now gives you route options to choose from.

Then I noticed something else that wasn’t there before. With each route, Google Map now gives you a vital piece of information that will likely drive your decision making: time to destination. Which is much more relevant and useful than the distance to destination in most cases.

Because, not surprisingly, there are often routes that are farther in distance but take a (life changing) shorter amount of time.

Actionable data is to accounting

It got me thinking about accounting (I know, weird, right?) But isn’t that what a good accounting department should be about? Providing not just financial information but the knowledge that drives decision making?

Sure, plenty of CPAs and accountants will claim that they tell stories with numbers, but few of them actually do. Most will resort to the traditional bits and attempt to tell lousy stories: Income Statements, Balance Sheet, EBITDA, blah blah blah. Who cares?

What is actionable data

Example 1

What’s important is not that we have $256,150 in the bank but¬†that it’ll last us until end of January at our current burn rate.

Example 2

What’s important is not that our gross profit went up 10% over last year but that our gross margin had decreased 8% due to higher freelance designer rates.

Example 3

What’s important is not that our net profit only decreased 1% in this terrible economy (woohoo!) but that our bank fees have increased 3521% because there was a lag every month between when we pay our bills and when the transaction posts to our account. (Late and overdraft fees are the devils!)

Example 4

What’s important is not knowing that we have negative cash flow but realizing that we are unprofitable at over half of the jobs we are accepting (profitability¬†issues are often misdiagnosed as cash flow issues – and it will cost you dearly.)

So, knowing this, what will you have your accounting department do differently? Or better yet, think about what is it that you really care about. What piece of knowledge can you obtain from your financial reports that will change the decisions you make? Then stop your accountant the next time he/she starts to blab about anything that is not relevant. Go. Entrepreneurs. Change the world. We’re here to help.