GIP 2019 Article #3 Accounting & Invoicing

In Article 1 we over viewed the documents you should receive monthly; whether provided by an accountant or from a software package. Article 2 focused on Staying Profitable. This article starts at the strategic level on the types of accounting and then moves to how to make it work for you. There are 2 types of Accounting, Financial and Managerial. Financial Accounting is well known to most business owners. It meets the requirements of investors, creditors, and government taxing agencies. The standards for proper Financial Accounting in the United States are set by the Financial Accounting Standards Board (FASB). Financial Accounting is a legal requirement and you must play by its rules. Managerial Accounting is not ruled by any standards except common sense. There are several models employed like ABC (Activity Based Costing) and are unique company to company. So what is it? It takes the same numbers and recasts it to track true costs by step, activity, product / service line, or customer. It provides you with the total cost of each step in a process. At this point you should ask yourself - why do I need to know this? The why is your ability to answer the following questions: Who are our most profitable customers? What are our most profitable products (services)? Are our products (services) correctly priced?