“You are What Your Record Says You Are” by Brian Califano“You are what your record says you are.”  — Bill Parcells, Football Coach

In business, like football, executives view their financial statements as a barometer of how the company is performing. Although there are many ways to interpret these financial statements, the most common ones are the income statement, balance sheet, and statement of cash flows. Unlike in football, financial executives have the potential to skew these financial statements to make the company look better than it actually performs. Business owners are often stressed about their company’s financials. For example, they may need to to meet financial metrics that are required for certain debt or equity instruments that they have issued. And Chief Financial Officers (CFO) are reportedly feeling the pressure to cook the books as well — with two-thirds of them stating that not only do they feel pressure to misrepresent performance, but that it is an inherent part of the job! (See article for survey data)

Certainly there are instances when the rules and regulations allow for professional judgment, specifically in terms of how accounting policies and principles are applied and enforced. The bedrock of this grey area is, of course, ethics and integrity.

No matter what your position is, or what the expectations are, you need to be able to sleep at night. Ask yourself: Is this the fairest, most transparent, most ethical version of my company’s record?

For many small businesses, there are few layers, i.e. bookkeeper and owner. Whether it’s a year-end close, tax preparation, or filing with the bank, it is important to get to the right answer, not an answer designed or manipulated to achieve a certain goal. The right answer is recorded properly in accordance with generally accepted rules, regulations, and accounting principles. While there is some grey area and room for judgment calls, it is imperative to put your company in the best light without being deceptive, misleading, or fraudulent.

Take-away: There is nothing more important than your word. When faced with indirect pressure, address it head on and make it clear that the reported information is fairly presented based upon your judgment and current rules. In the face of direct pressure, walk away if it’s not something you can sign your name to. When in doubt, choose the action that would make your family proud.
Brian Califano & Scott MargolinBrian Califano

Scott Margolin

Co-founders & Managing Partners

AcceleratingCFO


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