Financial Reporting Authority

Written by Patricia Tunstall
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If you are a business manager, you must understand how your business is doing in order to make the simplest decision about it. If you are an investor, you have to know how to read the annual financial statement so you can tell if your investment is in good hands. Lawyers, bankers, government regulators, politicians, economists, newspaper editors, voting citizens--everyone who has any connection to business would benefit from some understanding of basic accounting.

The Importance of Managing Money

How can a manager manage without determining profit and cash flow? Accounting quantifies the essence of a business operation. Accounting can tell a manager if profits and cash needs are being sustained, which in turn will give input into everyday decisions, as well as major ones such as when to add people, invest in capital equipment, and most importantly, how to price product.

Business managers should be able to abstract what is essential to their authority and expertise from financial statements and their respective impact on profits. Positive earnings and cash flow are driven by selling each product of a business at the right price for the manpower employed. The effectiveness of financial statements is timeliness and how these key drivers are exposed from the thousands of transactions that take place in a business each month.

Unit and hour data is connectable as one, then understandable and available to every manager as often as daily. It is just a matter of harnessing connectable data instead of unraveling it after accountants put the data into their various compartments. It is analogous to Windows and its ability to find files and unravel data from a personal computer.

Unless a business manager wants to be dependent on the accountant to interpret how well the business is doing a manager would do well to become something of a financial analyst relevant to his or her authority so that they can exercise their expertise.

GAAP is for accountants and the SEC, management authority comes from timely financial statements that report the units sold at their respective prices and how much a business is paying all its employees.

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