The most important aspect of a CFO’s job is assisting the CEO in making informed, strategic decisions. These decisions are heavily reliant on the availability of accurate, timely, and relevant data. If the financials are a mess, it is much more difficult, if not impossible, for the executive team to make good business decisions.
The Fundamentals of a Balance Sheet
The balance sheet accounts for the assets, liabilities, and equity of the company. Every transaction made by the company changes the balance sheet over the course of a month. Significant changes in the balance sheet can alert executives to changes in the cash conversion cycle, receivables turnover, and cash flow issues.
Register Transactions in the Appropriate Time
Accounting for a transaction in the incorrect period can throw off cash flow forecasts and make balance sheet reconciliation difficult. Check to ensure that payables are resolved in the proper period.
Your Balance Sheet Must Be Balanced
Yes, it’s rudimentary, but your balance sheet should always balance. If your Assets do not equal your Liabilities + Equity, you have done something incorrectly. Check accounts at least once a month, before closing, to ensure that they are correct.
Make Use of Your Corrected Financial Data
After you’ve corrected the balance sheet errors, you’ll need to double-check your other financials. Because it informs other financial statements, you’ll need to update anything that pulls data from your balance sheet as well. Most importantly, correct any errors in your income and cash flow statements.
