Wednesday, December 30, 2009

Cutoff to a Fresh View

We take this commercial break from the discussions below to discuss... accounting?

For some people, December 31st is meaningless. It's just another day that rolls into another and nothing really separates the two - perhaps having to remember to change what year they write on the rare check they write, or maybe it means a nice day off. Other than that, it's really not particularly important. But for some, December 31st means cutoff day: Trying to close out your books, making sure you've put everything in the right category, trying to get everything in as much order as possible so you're as prepared as you can be to put together your financial statements as accurately as possible and in a way that any auditor in the world would be satisfied. Sure, you can always correct an error, but the closer you can get it to perfect on the first try the better.

When I used to work as an auditor, our dream was a client that didn't do any transactions in the last few days of the year. Working from the other end, it's easy to see how impossible that is - but the experience has taught how important and helpful it will be for both us and them to have as few as possible and to have a great way of showing just what's floating at the end of the period. The other important lesson was to utilize the tools and skills we developed on the audit side for ourselves - both as a check and for analysis. It will always shock me at how underdeveloped most companies are when it comes to quick and easy analysis of data. In my old job, auditing complex hedge funds, we developed formula-driven templates and pivot tables to almost instantaneously be able to analyze any data we were looking at and to find any errors - and all in Excel. Now, we're almost done developing a system to track and analyze every single transaction we make in the company outside of QuickBooks, in addition to working with a great consulting group that is helping us to tweak QuickBooks to suit our needs, so we have a great side-by-side check - plus a much better way of analyzing data and developing reports than what QB can do. [For the nerds: Rating the most useful tools in Excel, pivot tables have got to come in right at the top, challenged closely by vlookups and the now unlimited IF functions. And I barely know Excel compared to what's really available there.] We'll be able to literally group or drill down by any category we want - by division, by type of expense, by date - and see the data we want to see instantly in as detailed a fashion as we'd like.

It's fascinating to be working in a company that in has a strong start-up feel, but at the same time is really running with a huge jump start. We started with a cushion that allowed us and is allowing us to quickly determine best practices and to invest in technology and expertise that, while perhaps not cheap in the short run, will provide us with huge savings in the long-term. We also have a mostly young, bright, energetic group, peppered with some people with more experience as appropriate, but with varying expertise across the board and some specific knowledge that puts us literally years ahead of where most start-ups would be six months in. Most companies don't start earning real revenues for 2-4 years; we have the potential to do that in the very near future. At the end of the day, no business survives unless it starts earning money, and to be in the position we're in this quickly is a blessing.

We've also been able to learn from the successes and mistakes the various people we have have made in the past - whether operational, marketing, or anything else. Our cushion let us 'overhire' early to move ahead faster and to avoid letting details slip through any cracks - both operationally and financially. Last quarter, we reconciled our books to within 3 cents - perhaps something only an accountant could appreciate, but something we were quite proud of.

When I was leaving my old job, my former boss told me simply: "Public accounting just isn't for you. You need to do something entrepreneurial, start your own company or something. I'm just not sure you'll be able to do it without having to put up with a few more years in a corporation like this." It took a year, but thank God, it appears that we've been quite fortunate. It would have been impossible to imagine 7-8 months ago when things looked quite bleak that the right set of circumstances would result in being in the position and situation we're in now. Now, it's amazing to look back and see just how much has happened in such a short period of time and to think just how much can happen over the next.

God definitely works in mysterious ways, and sometimes it takes that looking back a bit to appreciate just how amazing everything was to get us to where we are, to see what we couldn't before.

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