Submitted by Olivia.Sellke on Mon, 11/28/2011 - 1:00am

For many electronic systems contractors (ESCs), discussing the financials of your business seems as appealing as getting a root canal. In an industry filled with people who do what they do because of a passion for technology, the “business” side of running a business can sometimes seem like a necessary evil.

But if your company is not making money and you don’t know why, the answer may be hiding in your financial statements. And you may not be able to find the solutions you need if your financial statements are not organized in a meaningful way.

Many ESCs rely on a CPA or Tax Preparer to help them set up their books. There is nothing wrong with employing a professional to help you, but be aware their methods may be more focused on what makes things easier for them, and not necessarily the best setup for your business. Another popular option is to purchase an off -the-shelf generic accounting package that helps you set up your book in an all-purpose general fashion. When all is said and done, either one of these methods may work for you, but they probably won’t show you the information you need to help you make important business decisions.

To better understand your financial statements, you need to look at your Chart of Accounts, which forms the backbone of any financial system. The Chart of Accounts is a list of all the possible accounts which can be used to categorize money in and money out. These accounts are grouped together by account types to create the Profit and Loss Statement (also referred to as the P&L or Income Statement) and the Balance Sheet. But unless these accounts are created and organized in a meaningful way, the statements that are produced from these accounts will not be effective for good financial management.

Many ESCs have long looked for guidance in creating a set of books that is specifically designed for this industry and have not been able to find it. CEDIA has recognized this need and has created a tool to help members start to “own” their books.

While technical knowledge is crucial to operating a company in this industry, business knowledge is crucial to managing a successful and profitable company. Therefore, as a benefit to CEDIA members, CEDIA in partnership with Leslie Shiner of The Shiner Group has developed a recommended Chart of Accounts. As part of this package, CEDIA has made available as a download both an Excel spreadsheet that contains a listing of suggested accounts as well as a white paper to help you understand how to use the Chart of Accounts.

The New Year is quickly approaching – start it off in the right financial direction by familiarizing yourself with the new Chart of Accounts and preparing yourself for the new process of organizing your financial data.

CEDIA members can log in to the forum on CEDIA Crosspoint at www.cediacrosspoint.com, where they can download the Recommended Chart of Accounts and corresponding White Paper, make comments, ask questions, and share information with peers. In addition CEDIA will present a webinar on December 8 to help members get started.

If you have questions about the Recommended Chart of Accounts, contact Erica Shonkwiler at research@cedia.org.

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