Skip to main content

Accounting System Overview

1. Purpose​

The Accounting System (System 07) is the "Scoreboard" of the business. It tracks the flow of value (money) in and out of the organization. Its primary goal is not just compliance (taxes), but strategic clarity—giving Leadership the data needed to make safe decisions.

2. Core Principles​

  • Accrual Basis: We track revenue when it is earned, not just when cash hits the bank (though we watch Cash Flow separately).
  • Profit First: We allocate profit and tax reserves before spending on expenses.
  • Audit-Ready: Every transaction must have a source document (receipt/invoice).

3. Key Components​

  1. Bookkeeping: Categorizing daily transactions.
  2. Invoicing (AR): Collecting money from System 03 Sales.
  3. Bill Pay (AP): Paying vendors and tools (System 06).
  4. Payroll: Paying the team (System 08).
  5. Reporting: Telling the story of the business to System 01.

4. Interactions​

  • Input (From Sales): Deal "Closed-Won" triggers an Invoice.
  • Input (From Fulfillment): Project completion triggers final billing.
  • Input (From People): Hiring a new employee increases Payroll liability.
  • Output (To Management): Weekly "Cash Snapshot" and Monthly P&L.

5. Success Metrics​

  • Days Sales Outstanding (DSO): How fast do clients pay? (Target: < 15 days).
  • Net Profit Margin: (Target: > 20%).
  • Cash Buffer: Days of operation with $0 revenue (Target: > 90 days).

Related Documents: