Do I need a CFO? · Section 3 of 4
Books you can trust
Are the numbers right, and on time?
1What it is
Before a CFO can forecast, price, or raise money, the books have to be true. That means closed within a couple of weeks of month end, on an accrual basis, with the balance sheet reconciled to the bank and nothing sitting in 'Uncategorized'.
Bad books don't announce themselves. They show up as a P&L that looks fine until the accountant fixes it at year end, a margin that moves for no reason, or an inventory balance nobody believes. A CFO's first month is usually spent finding out which numbers to trust.
2The signs you need help here
- Your books close weeks or months after month end — or at tax time.
- You read the P&L and something always looks off, so you don't really use it.
- Revenue and costs are recorded when cash moves, and it makes good months look bad and bad months look good.
- You couldn't hand a lender last month's financials without a scramble.
3What a CFO does about it
- Sets a close calendar and holds the bookkeeper to it — ten business days is the target for a small business.
- Moves the books to accrual if the business has invoices, inventory, or prepaid anything.
- Reconciles the balance sheet monthly: bank, receivables, payables, loans, inventory, deferred revenue.
- Builds a chart of accounts that matches how the business is actually run, so reports read in the owner's language.
4What you can do yourself this month
- Ask your bookkeeper for a close date every month and write it down. Slippage is the first symptom.
- Open the balance sheet. If a line makes no sense to you, ask what it is. 'Opening Balance Equity' with a balance is a classic.
- Search the ledger for 'Uncategorized' and 'Ask my accountant'. Clear them before month end, not year end.
5Practice — 9 questions
Every question the quiz can ask about this. Answer each to see the CFO's read behind it and how your answer scores.
1.How long after month end are your books closed?
2.Who does your bookkeeping?
3.When you read your P&L, do you trust it?
4.Does your balance sheet balance and tie to the bank?
5.How much sits in 'Uncategorized' or 'Ask my accountant'?
6.Are revenue and costs recorded in the month they happen, or when the cash moves?
7.When did your accountant last surprise you with a number?
8.Are inventory, deferred revenue, and loan balances right in the books?
9.Could you hand a lender or investor last month's financials today?