Firstly, a quick disclaimer. I have been doing some valuations lately where the quality of financial reports have been on the poor side and contained several clear errors. So, to slay these dragons (yes, I am a GOT fan) I thought its best to write about it so, hopefully you don’t make the same mistakes.
Turnaround times for valuations are crucial, so spending additional time trying to decipher the data delays the process unnecessarily and raises doubt as to what the exact trading position of the business is. We must also consider who the users of this data are:
The banks are relying on these reports to see if you are meeting reporting covenants, for making funding decisions,
Valuers to determine the value of your business.
Your accountants to prepare your tax returns.
Future potential junior partners who may be buying into the pharmacy.
Future buyers of your business.
Partnership exits.
Lastly, even owners trying to make future strategy decisions.
We have said this repeatedly; good data means good decisions.
So, this blog is all about the little tips and tricks that can help improve the accuracy of your financial reports;
1. Ask yourself “Does it make sense?”. When ever you or your bookkeeper prepares and presents a set of financial statements, always look at the data and ask yourself, does it make sense? So many problems can be solved by asking this simple question.
2. An accurate Point of Sale System will lead to accurate financial statements. It is often the simple things, but you must have good systems in place to ensure things like your Stock on Hand reports are accurate. Stock invoices are entered in on invoice date. Check and fix the obvious errors like items sold with nil cost, negative stock count items etc. Ensure you have the systems and procedures in place to get your POS data accurate.
3. It is a basic thing, but ensure you also have regular physical stock takes done. Twice a year is a good practice. At the very least 30 June each year. POS stock counts v actual stock numbers on the shelves can often be different things. Your POS won’t pick up the theft element.
4. Don’t make the financial data too complicated. There are some financial statements I have seen contain so many non-business elements in them, it makes it so hard to understand the true position of the business. Keep the main business accounts simple. Don’t confuse it with too much personal, or investment activities.
5. Have the PBS accruals and customer debtors reconciled in the accounts every month. Often these elements are missed out altogether. If you are looking after a nursing home also ensure Scripts Owing is also reconciled monthly.