Part 2: Intersectional Accounting

If you know our story at CLM, you are aware that the entire reason for the existence of CLM Advisors came from an idea that the accounting profession needed to be flipped: the value of in-depth consultation would rise, and the value of compliance/tax would fall.   

In our last post, we touched the subject of what I ended up calling Intersectional Accounting.  Actually, the term we have used at CLM is Fiscal Management – and the best way to understand what Fiscal Management means is to think of it as the intersection between:

  1. Systems that lead to desired behaviors and
  2. Financial results.  

The last post ended with the thought that five common characteristics of behavioral analysis must apply to your Fiscal Management structure in your company.  In the interest of brevity, we’ll just offer a few sentences on each characteristic:

  • Accountable: Without accountability, you cannot have a successful business, long-term.  The entire basis of Fiscal Management is to create systems of accountability from top-to-bottom of your organization.  Performance-based compensation systems are often the best way to achieve and maintain accountability, because you can establish quantitative measurements that give employees substantial, direct control over their earnings.
  • Transparent: Many business owners fear too much transparency.  Some of us, especially those with corporate backgrounds, are naturally wary of putting information out there.  Well, yes, people talk and there are appropriate limits on what to reveal or not reveal.  Trust is essential.  Consider, though, that if you want strong accountability, employees and managers should know how their performances contribute to broader business goals.   
  • Achievable: Here is where you really begin to need the assistance of a financial professional.  Obviously, any Fiscal Management system must rest on assumptions of what can be done.   Your business is subject to certain constraints.  Forecasting is essential, but done right, this is a highly detailed and technical task that requires investments of time and money.  As you build a forecast, you need a parallel system of management accounting to record, collect, refine, and analyze actual results that you can then compare to the forecast.  This is your reality check.  If you don’t pass the reality check, it’s time to regroup with your trusted accounting or financial advisor.
  • Empowering: Well, this sounds nice in a management course because people think they need to “empower” their employees to step up, embrace opportunity, take calculated risks.  All of those ideas are probably good, but when I look at “empowering,” I am thinking of empowering the business owner.  Let’s empower the boss – not necessarily the employees.  The boss needs to know how to make decisions – and if he/she doesn’t, there won’t be any employees, because the business will fail.  Fiscal Management is all about driving down into the collected data so that we can build a structure.  Think of a jigsaw puzzle.  You dump 2,000 pieces onto a table and at first, they all look equally useless.  That’s how many business owners view their financial data – they have endless excuses about why this number is untrustworthy, or that report is outdated, or the last accountant messed it up…so, forget it all and let’s just keep doing things the way we always have (which is not satisfactory – it’s just easier that way). Nonsense.  No one buys a jigsaw puzzle just to throw it in the trash.  You look at the picture on the box, establish a system, and solve the puzzle.  Likewise, no one should embark on a business journey without a team and a plan (a model…a picture) in place to make sure you have the information necessary to make decisions as the twists and turns of life and business come your way.
  • Optimistic: At least half-a-dozen times, after a meeting with us at CLM, a client has texted me with something like, “thanks for time today – I feel so much better.”  What kind of thing is that to say after a dry financial meeting?  Well, it’s not dry, because this brings us back to the collision of psychology and management accounting – the establishment of a Fiscal Management system creates accountable structure, reliable data, and stronger results.  Even when business is down, for whatever reason, the owner with a strong structure in place feels control and optimism about solving problems and improving the situation.

Want to discuss any of this?  Reach out to us…

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