Wednesday 18 July 2007

How Things Look

In a restaurant, good food is what's important to me. I don't care what the place looks like or how the food's arranged on the plate as long as it is a quality meal. My wife, on the other hand, says, "Presentation is half the meal." She wants the pressed linen, the flowers on the table, and the waiter to be attentive. If you're presenting financial statements to the Board of Directors, you should listen to my wife.

Case in point: I was working with a not for profit trade association to re-energize their accounting system. The accountant said that the Board was always criticizing the amount that was spent on consultants. We looked at the financial statements and there it was: a single line called "Consulting" with a large number beside it.

"It's so unfair," the accountant continued. "The Board knows that most of that expense is for the speakers we bring in to do seminars and their cost is covered by participant fees."

"Then let's get the financial statements to tell the same story," I said.

So we separated Participant Fees from Conference Revenues and Speaker Costs from Consulting (as well as the other costs of running seminars) and all of a sudden the cost of consultants looked more reasonable. It was also clear that the association was earning a small, but important amount from its seminars.

The other important change we made was to synchronize the financial statement formats. Previously the President and Treasurer had a detailed income statement and the Board members had summary statements. But the formats were different, making it difficult for the Treasurer to answer questions quickly. With the new format, the detailed statements had the same subtotals as the summary ones, so questions could be answered with more confidence.

My wife is trying very hard not to say, "I told you so."

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