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Let's face it: the basic accounting reports generated by most accounting systems show where funds came in and where they went out; they show the balances on accounts; they show cash flow vs. revenue and expenses. All of these things look at what happened. This is important and essential information for determining whether something went as planned. It is also essential information for steward leaders to use to create new plans and generate projections as to what something might look like as the enterprise moves forward.
But reports that make the most sense to accountants and translate well onto tax forms and accounting systems aren't always the best reports to use to govern, develop strategy, manage, or procedurally maintain the work of an enterprise. For enterprises that have constituencies and stakeholders - and not just shareholders, owners, workers, and customers - reports must also make sense to what that audience needs.
For those in the governance and oversight roles of an enterprise - or even ownership role - traditional accounting reports tend to encourage leaders to govern by looking backwards into what was done, rather than forward into what is going to be done. Many times, these reports lead people into discussions of what should have been or what could have been, not into what can and should be done moving forward.
As the typical investment fund prospectus says, "past performance does not guarantee future results." Governance reports must spend appropriate time looking ahead, projecting revenues and expenses, cash flow and the overall business model's sustainability.
The traditional accounting reports are best classed as management reports. These reports help day-to-day management of funds according to budgets, purpose, and categories. Nevertheless, even still, they often do not reflect the trends that most managers need to know. Typically, managers, too, need to look ahead, rather than behind. Looking behind only serves them insofar as they are able to hold others accountable and project forward toward goals. Depending on their level of management, some managers are more strategically-oriented, while others are more tactically-oriented. Good steward leadership suggests that these differing roles may require different reports.
Finally, for those working in the financial procedural roles, many of the more technical accounting reports make the most sense to them: trial balances, vendor activity reports, and so on. The more typical accounting reports help them to see that everything is in good order before generating more strategic and analytical reports.
Design Group International's Financial Services Roles tool can help steward leaders determine which roles require which reports to best accomplish the enterprise's goals. The tool is free, and it may be downloaded by clicking the button below.
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