September 13, 2011
Many small emerging companies lack financial literacy. As a CPA, I have specialized in enterprise-wide software solutions consulting over 200 companies since 1981. Too many decisions are based on "gut" not the financial results of operations and unfortunately, the Balance Sheet serves few.
Too often, a small business only utilizes their outside CPA for their annual tax return. A tax accountant minimizes their professional liability by accepting management's representation thus, years of errors and omissions can accumulate on the Balance Sheet. How can anyone make good business decisions without accurate financial statements?
In 2011 with automated accounting systems, there are no longer excuses for untimely and inaccurate financial data. It took years before I realized that the litany of excuses were in fact designed to cover-up dysfunctional organizations or worse, fraud. Small business owners must realize the same.
Small business owners need to understand not only the importance of their financial statements but they must learn to understand the information represented. The SEC needs to design more financial literacy programs to help small businesses emerge with a strong foundation.