Accounting – Sometimes Less Is More

I was recently asked by a client to assist with setting up some accounting policies for his bookkeeper. When reviewing the client’s financials, I could immediately see why this was necessary.

Here’s an example of “more:”

·         A chart of accounts that reads like a phone book

·         A balance sheet that is 4 pages long

·         A profit and loss that has a line item for every.single.vendor

For example, here is what I saw on my client’s chart of accounts:

·         Taxes

·         Taxes & licenses

·         Property taxes

·         Income taxes (which he never had to pay)

·         Taxes – payroll

·         Payroll taxes

·         Sales tax (again, he never had to pay sales tax)

·         Car taxes

This is what we proposed:

·         Taxes – Property & Other

·         Taxes – Payroll

·         Business license

Boom! This was only one example of what we changed. The financial statements were condensed from nearly 9 pages (most of which were never reviewed) to only 3 pages (all of which contained useful information for our advisory work). The banker who had to review those statements each quarter thought we had invented the wheel and maybe even fire.

Accounting isn’t about endless data. It’s about useful data. Sometimes less is, in fact, more.