Proper monitoring of a business is critical to maintaining its health. One of the best methods is to review the three financial statements: income statement, balance sheet, and cash flow statement. While it may sound simple, the reality is that accurate accounting is rather difficult.
But the complexity of accounting isn’t the reason most managers don’t review the financial statements. After all, every company must have some form of financial statements in order to pay taxes.
The reason that most managers give for not reviewing the financial statements is they don’t have enough time. The irony is that if they reviewed the financial statements, they’d have more time because they would’ve been able to identify and fix many of the problems with their business.
However, managers aren’t fully to blame because not all accounting softwares have the proper reporting features to create the three financial statements. It sounds unbelieveable, but one of the most popular accounting softwares of all time, QuickBooks, cannot generate monthly cash flow statements.
If you’ve ever used QuickBooks, you’re probably thinking that I’m crazy because they do have cash flow statements. You’re probably thinking that they look something like this:
If that’s what you were thinking, you were right. That is in fact a cash flow statement from QuickBooks showing the results for the 2015 fiscal year.
The problem is that in order to really learn something, you need to compare the 2015 results to previous fiscal years. Or you may want to break 2015 into months like so:
But for some inexplicable reason, QuickBooks doesn’t allow you to break the cash flow data into multiple columns. QuickBooks does allow you to do that on the income statement and balance sheet. But not the cash flow statement.
And QuickBooks doesn’t have a good explanation:
All the QuickBooks representative is saying is that the option isn’t available because the feature hasn’t been built - that doesn’t even come close to answering “why.” Unbelieveable for an accounting software that’s almost two decades old (first released in 2000).
This is a really big problem because it prohibits managers from monitoring the health of their business. It also causes complications in M&A because:
- The seller has to export every monthly cash flow statement one at a time and
- The buyer has to manually combine all the reports in order to analyze month-over-month variances.
This creates hours of work every time the financials change, which happens at least once a month for the entire deal.
I simply cannot explain why QuickBooks wouldn’t have made this feature a priority in all the years it’s been a known issue.