Creative Accounting. Sounds suspicious doesn’t it. In many contexts it is a phrase to be weary of, but it can also refer to the creative side of accounting. Most people think of accounting as cut and dry, boring, and unimaginative. Well, it can be if you want it to be, but how you setup your finances, processes, and reporting tells a lot about your business. It is essential that your financial story matches what you are selling.
There are standards and good practices to follow in bookkeeping and accounting, but there are also a lot of choices and interpretations to be made. Setting up your Chart of Accounts and how you use those accounts should follow basic and accepted practices, such as how they are numbered, but what accounts you use and how you label them should match how you understand your business and how you want others to understand your business.
A big reason that people don’t like working with money or have trouble understanding their money is that they are using systems and terminology that they have been told use. These people have never had the opportunity work with someone that is not afraid to bend the rules and break the mold a bit. Your financial statements need to be accepted and understood by those outside your organization, but they do not need to be standardized. Having clear financial reports that mean something and connect with what you are doing will go a long way towards convincing others that you know what you are doing and that you have it together.
Money is not the end goal of many organizations, but money is the fuel that feeds the goals and mission of an organization. It is important to make sure your funding is truly going towards your priorities and not meandering in areas that are less important and less effective. Setting up your accounting correctly will help with using your money intentionally and see areas where money is drifting off course and could be used better elsewhere.
Don’t be afraid to have books that you, your staff, your donors, and grant administrators understand and reflect the true nature of your organization. However, a word of caution that all trained artists understand, you must know and respect the rule before you can break the rule. Be sure you understand the accounting rules you are breaking or work with someone that can help you break them.
Are you ready to break some rules today?