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Finance, Accounting, and BI

I was talking to a friend/prospective client recently about the accounting knowledge that is a key part of my work.

We agreed that in too many non-profits, the board’s finance committee doesn’t perform its necessary function. The committee members look at a few reports when they meet, but they don’t really dig in. They may have a soft connection to “numbers,” but they aren’t always great at picking apart financial statements.… Read More

In this blog post, I describe a challenge we're having with SSAS cubes. In this case, the challenge isn't caused by technology. It's caused by data. Here’s the situation: Our client has used SSAS to build several cubes for reporting, which they’re using to replace a no longer supported version of Business Objects. We’ve been asked to review the Business Objects reports and create new reports using SSRS with these cubes as a data source. While my client has some technical challenges and room for optimization, my technical folks are handling that aspect of the project well. But the project also has a larger challenge: The client has two different SSAS cubes, one built from sales data from the order processing system and one built from general ledger data. And the two cubes don’t always agree. This is a problem. Only the sales cube can give information by product. And only the...

Over the years, I’ve rewritten many financial statements. Unlike other reports, financial statements represent special challenges in that, most often, they specify particular ranges of data. Let me explain. When we build a sales report, we generally start with all the data we want and then sort and select from there. We may select all invoices and matching customer data. We may sort those invoices by region, salesperson, store, or line of business. We may allow the user to select one or several regions, salespeople or lines of business. But no matter how we sort or select, we can always run the report for everything and confirm we’re getting the full picture. Financial statements are different. With the exception of a very basic trial balance where you can select all the natural balance accounts, a financial statement is built line by line. For example, the first line may be sales – 40000-42000....

Over the years, I’ve gotten pretty good reviews of my training. People say I communicate clearly, understand the material and am even somewhat entertaining. (Go figure.) But I also know that even though most people like my training, they often don’t remember much. I think it’s because I’ve been following the standard methodology of software training, which means covering as many features as possible. This satisfies the goal of completeness – but not necessarily of learning. But of late, I’ve changed tack. I think a better approach is to cover a few key points several times. Don’t just create one parameter, create multiple. Don’t immediately move on to the next concept, repeat the basic one several times. Most people won’t “get it” the first time. And even if they do, they won’t remember what they’ve learned unless it’s repeated. I’ve been thinking about this while preparing new Crystal reports training sessions, which...

So far in this series, we’ve covered the basics of exchange and revaluation and revaluation and translation as it relates to accounts and controls. In this final post on currency accounting, we’ll provide a few additional pointers to help your currency accounting run smoothly. Watch Your Rates Everything depends on having good rates in your system. To be good, a rate needs to be updated frequently and accurately. 1. Update rates frequently When you first start with multiple currencies, it’s often not a crucial part of your business. So, some businesses decide to update rates only monthly. If rates are stable, this isn’t much of an issue. If rates swing, it becomes a problem. Let’s take an example. Say ACME only sets rates once a month. They send out weekly invoices to their U.K. Customer. At the end of the month, they revalue these invoices. For the entire month, they used a rate of 1...

When we started our series on complex accounting challenges, we explained that our data consultants need to educate our clients in what we do before we can explain how we can do it for them. This is particularly true with foreign currency accounting. In Europe, it’s rare that to find a company of any significant size that doesn’t face currency issues. As a result, most European accountants have at least a basic understanding of what’s involved. In the U.S., that just isn’t the case. Given the size of our market, many companies expand extensively without ever trading internationally. And if they do trade internationally, often their trading partners use U.S. dollars. So, they operate internationally and still have no currency exposure. But that’s not always the case. And indeed, with opportunities in developing worlds often outpacing those in the U.S. domestic market, it’s happening more and more. So, in this series of blog...

Continuing our previous post on currency accounting, we’ll now move onto translation and revaluation as it relates to accounts and controls. Revaluation doesn’t just impact accounts payable and receivable. It also impacts foreign currency bank accounts and/or intercompany payables and receivables. The challenges with these accounts are often more system-based than conceptual. Most accounting systems that can handle foreign currency can track the currency and initial rate of payables and receivables. Because most systems require complete information for transactions these transactions are generally entered with complete information (you can’t print an invoice/cut a check if you don’t specify the currency correctly), revaluation is usually fairly smooth. Bank accounts can be more of a challenge. Accountants unaccustomed to working with different currencies often take short cuts when doing account reconciliations. They reconcile their financial statements, but they don’t always reconcile the foreign currency balance. Some systems have the ability to insist that currency...

As discussed in an earlier post, we’re creating a series of posts to cover some of the complex system accounting challenges we commonly run into. In this first blog post of the series, we’ll review the basics of VAT, especially as it compares to sales and use tax. When U.S. companies expand internationally, they find themselves having to meet a new set of reporting and regulatory requirements. They wonder how (and if) their enterprise software solution can meet them. But before addressing these questions, it helps to understand the requirement itself. VAT vs. Sales and Use Tax VAT (or value added tax) is different from sales and use tax. Sales/Use tax in the United States is only charged to the final consumer of the material or service involved. Wholesalers who buy in bulk do not pay sales tax nor do the retail stores that buy from them. Retail stores at the end of...

Consolidation is a basic accounting concept that's simple in theory, but complex in the real world. In this post, we'll cover the basics of consolidation, some of the challenges that emerge and possible solutions. Understanding Consolidation In the context of financial accounting, consolidation is the aggregation of the financial statements of two or more companies under the same ownership into a consolidated financial statement. To really grasp consolidation, you need to understand that in the outside world, no one cares about money that’s traded back and forth between different companies under the same ownership. In the outside world, the only revenue that counts is revenue coming from a real customer. That’s what consolidation is all about – putting together financial statements that eliminate all the internal back and forth and focus only on “real” customer revenue. Let’s explain how this works with an example of a growing company. ACME makes and sells widgets to...

In our previous posts on consolidation, we’ve reviewed consolidation basics and complexities. In this post, we’ll cover system solutions to consolidation challenges. If you’ve been following our blog for awhile, you probably know we believe in implementing the simplest solution possible to get the job done. We apply this approach to consolidation as well. We’ve identified four different ways to solve consolidation challenges. 1. Outside Accountants For mid-sized companies with two or three entities, the most common approach is to let outside accountants deal with it. When a company has to answer to its bank and a few owners, a consolidated statement is generally not all that important – it’s something they have to produce once a year at most. And while auditors who follow strict rules of independence shouldn’t be doing your consolidation for you, smaller accounting firms generally handle such things in the normal course of business. 2. Excel When all else fails,...