Financial Statements


[John]: Hi, I’m John Geraci and I’m here today
with Jim DeCasar from LGAs accounting and auditing department. And we’re here to talk
to you about the financial statements and sort of the difference between the way that
we’ve people tend to historically look at the financial statements and the way that
I think they should be looking at the financial statements. So, um, we’re at that time of
year where we’re all doing our year end prep and the teams are going to be out in the field.
So Jim, could you tell me a little bit about what people are seeing when they go out and
deal with the financial statement side? [Jim]: Yeah, absolutely. So, most of our financial
statement engagements are either review or audits. In both of those engagements, we work
with the client’s numbers to identify some business trends and changes within the company.
And it can be within the industry as we, as we dig in and really understand how those
are affecting our clients, how they’re gonna affect the financial statements, and then
the tax return. [John]: So you actually said audit versus
review. So just a real simple explanation. What’s the difference to the lay person? Yeah,
definitely. So an audit review is very similar. Both involve talking to management, both involve
analyzing the numbers and understanding those changes in the business I described. On an
audit, we’re simply looking at more of the underlying documents, contracts, invoices,
cash transactions. At a review, it really sticks at a higher level. [John]: Okay. And so how do we transform the
way we go about sort of viewing a financial statement, engagement? How do you make it
more of a value add? [Jim]: Well, what we do is we really try to
understand those underlying factors that are driving the changes in our client’s business.
Those are the things that they really find important. They’re going to affect the way
that someone reads their financial statements or the taxes they pay, whether it’s a corporation
or an individual. And we really want to understand what, what’s, what’s the cause that year?
Is it going to be effective on the company for future periods? Is it something that only
affected this year? And, and have that larger discussion. Because there might be something
that they don’t, they have a question on that’s unrelated to the financial statements but
does relate to that change or it could be something that we think they should be thinking
about further. That was driven by that change we noted within our work. [John]: So there’s just this buzz going around
for the last couple of years. This word KPI, what’s a KPI? [Jim]: Thanks, that’s a great question. So
a KPI, people love acronyms when they know the acronym, but we all get confused if it’s
an acronym or hearing for the first time. So it’s a key performance indicator. And so
it’ll be something that management has determined is a ratio or a number that really drives
their business. It may drive their bottom line, it may drive their top line if we’re
talking about the gross profit or net income for the company versus the revenue. And it’s
something that they’re focused on as part of their, their review of their own information. [John]: And so how do, how do we transform
this process so that it’s not just a sort of backward looking, engagement where we’re
focused on the historical but more of a forward looking? How do we leverage those KPIs? What
do business owners do to come up with what’s meaningful for them? [Jim]: That’s great. We see business owners
and I strongly my clients to be looking at this information at least quarterly. It should
be tied into your annual review of your, your financial operations. But I think if, if you’re
doing it appropriately, it really is a monthly review and it’s part of a robust monthly process
to identify those, those ratios and those numbers that really drive your business forward
and monitoring them and, and understand why, why they dip in one period and why they grow
in another period. [John]: Yeah, that makes sense. So if there’s
anything that LGA can do to help you set your KPIs so that we can transform that for you
and your business, please reach out to us. I’m sure Jim would be happy to talk to you
or anyone on the AnA team here at LGA. Thank you. [Jim]: Thank you.

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