After completing the financial information assessment of your small business using the F.I.R.S.T. Diamond©, it is important to look at ways to improve your information collection. This post is dedicated to breaking down the four categories of the F.I.R.S.T. Diamond© and giving you some areas to on which to work in order to improve your data collection.
Accuracy
- Procedures need to be in place to identify and correct inaccuracies in your financial information
- Reconciliations are important – Any account directly tied to cash (checking, savings, credit cards) should be reconciled monthly.
- Discrepancies need to be researched to correct them and determine if they are one-time issues or recurring issues that need procedure changes in order to eliminate them.
Timely
- Financial statements and information reports need to be completed and examined (for accuracy) as quickly as possible.
- The goal should be for financial statements to be completed within 15 days of the period end.
- Using accounting software, it may be possible to have immediately accurate financial statements with the correct procedures.
- The goal for information reports should be immediate access.
Useful
- Accurate and timely information is important, but you also need the information to be useful in decision making. Procedures are needed to gather financial information “on demand” for decision making.
- Feedback on needed information – Feedback needs to be given to perfect the information necessary for decision making. Feedback also needs to be given for new information necessary for decision making.
- Monitoring – procedures need to be built to collect information on monitoring of prior decisions.
Efficiency
- The goal should be to create procedures that provide the other goals of financial information as efficiently and cost effectively as possible.
- Software – The most efficient use of time involves using accounting software – QuickBooks, Peachtree, or an industry-specific software should be used.
- Data entry – The goal should be to have information entry done by someone other than the owner or manager.
- Excel usage – Excel is an excellent tool for data manipulation (the ability to take a “stock” report and get new useful information out of the data). The goal should be to export data directly from the accounting software into Excel. No duplication of data entry into Excel should be done.
Case study examples for financial information assessment tools