Accounting Consistency

We went through our accounting records and concluded that we don’t have a clue about our expenses!

How could this happen? After all you paid your bookkeeper to enter all the information. You paid your vendors. Why is the information useless?

Many businesses make the mistake of carelessly cost coding their accounting records. One month the rent will be placed in the rent column. The next month it may be placed under lease. The month after that it may be called facilities. Over time it becomes very difficult to determine what is going on. Rent is usually a fairly large payment made monthly that can be sorted out. Think of the work involved to sort out with office purchases, material purchases, travel expenses and other variable costs.

To obtain valid data that becomes more meaningful over time you must consistently classify your expenses the same way every month. Then over time cost trends can be compared. These comparisons should be used to manage your business.

For instance carefully coded travel expenses will allow you to immediately see when your sales force decides to travel first class without your approval.

Don’t end up with tons of useless data. Cost code and enter accounting data with care. It really will not cost you any more and the information may one day save your business.