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Little Lies, Big Lies And Financial Statements

April 13, 2012 | Comments: 0 | Views: 125

A tip to the wise follows. Not facing up to financial problems when they are in their infancy lets them grow into eight hundred pound gorilla issues. Almost any month you will see or hear about some financial issue that was missed or ignored until it reached crisis level.

How would you like to be a director or officer at a public company where the Security and Exchange probes your first set of public company financial statements? A basic cause for a review like that can be that the financial statements do not include a large enough balance in the reserve account.

When you see how many publications have versions of this story, see yourself in a less widespread day of infamy when the business decides one more time to put off a day of reckoning to present a realistic reserve account to fairly present financials, as opposed to waiting to a better time to address the issue.

Do not be the person who reads this and still will be in that embarrassing spot in the future.

When a public company with extensive controls and procedures and a substantially staffed accounting department including an experienced Chief Financial Officer can be embarrassed professionally and legally, what risks exist in privately held substantially smaller organizations with much more limited resources for corporate governance and accountability? Read on for tips to reduce those risks.

Far too often, people have a common tendency to defer addressing issues which grow to larger and larger levels of risk. In case you doubt this happens in your organization, when was the last time you heard phrases like the following?

  • This is not a good time to address that issue.
  • Wait until we have a better month.
  • The boss is not going to be happy to hear that.
  • I am not going to tell them that.
  • Are you really sure you want to raise that question?

How long does it take before small issues grow larger and what can you do to unearth some of the common blind spots to look for?

On the first question, the time it takes for a small issue to grow is normally a whole lot less than you think. On the second question, five comments which can unearth common blind spots that develop in the organization follow:

  • My business is unsure of who are its ten most profitable customers.
  • My business occasionally capitalizes expenses that had created an asset with what now may be a questionable recorded value.
  • My business does not know how changes at one of our top ten customers may affect our bottom line.
  • My business is not yet looking into an asset that it will be better off selling at a loss to free up cash to pursue a more promising opportunity.
  • My business paints an overly optimistic picture of itself to a customer, vendor, or financing source.

Improve your information accuracy, and therefore business decisions and profitability, by reviewing your operations periodically to be sure you can critically respond to these statements to prevent small issues growing up to become embarrassing oversight which Murphy says always occur at the very worst time.

Bottom line? - Find Your Million Dollar Blind Spot Opportunities to Accelerate Correct Fiscal Leadership Decisions!

Nurture Financials - Avoid Disaster! Helping your company become fiscally fit and make you more money. THE NUMBERS WILL NOT SCARE YOU WHEN YOU LEARN TO apply this information to improve your fiscal management, profitability, re-engineer business models, and strengthen or gain competitive advantage in the marketplace.

And apply the free Fiscal Test available at

From the author of the upcoming book "Your Million Dollar Blind Spots" and "Stick Out Your Balance Sheet & Cough: Best Practices for Long Term Business Health". A video discussing his book is available at

From Gary W Patterson, FiscalDoctor® Copyright 2011

Source: EzineArticles
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