{"id":1190,"date":"2025-10-02T17:38:06","date_gmt":"2025-10-03T00:38:06","guid":{"rendered":"https:\/\/www.karlongroup.com\/blog\/?p=1190"},"modified":"2025-11-25T13:26:52","modified_gmt":"2025-11-25T21:26:52","slug":"how-to-turn-finance-into-your-impact-engine","status":"publish","type":"post","link":"https:\/\/www.karlongroup.com\/blog\/2025\/10\/02\/how-to-turn-finance-into-your-impact-engine\/","title":{"rendered":"How to Turn Finance into Your Impact Engine"},"content":{"rendered":"\n
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It takes 1-2 years for a company to get a grip on its finance fundamentals. This is the job of an early stage company\u2019s finance and accounting team. The close. Reporting. Budgeting. To be sure, these aren\u2019t simple processes. They take significant time to set up properly, even with AI tools to help.<\/p>\n\n\n\n

But once the fundamentals are in place, your company will inevitably reach a crossroad. If you get to this point and you don\u2019t ask the right questions, you risk falling into what I like to call the \u201cReporting Trap\u201d.<\/p>\n\n\n\n

Two Sides of the Reporting Trap<\/strong><\/h3>\n\n\n\n

The reporting trap starts innocently enough. A new request from your Controller, a new question from the Board. The walls of the reporting trap grow slowly over time as the requests for more information pile up. Eventually you feel trapped by a level of complexity that burdens the team and wastes time. There are two areas where I see this happen most:<\/p>\n\n\n\n

Getting obsessed with accounting accuracy<\/span>: Every prepaid gets amortized no matter how small. Every expense gets accrued no matter how trivial. The chart of accounts keeps getting bigger and bigger. This obsession is usually driven by the finance and accounting team, not the CEO.<\/p>\n\n\n\n

Getting obsessed with FP&A<\/span>: There’s a \u201cbridge\u201d or \u201cwalk\u201d analysis for everything from revenue to gross margin to cash flow. Variances versus last month, last year, and budget are explained down to the dollar. Don’t get me wrong, FP&A analysis is crucial for understanding your business. But there’s this tendency to think that by analyzing every variance, and doing so every month, you’ll learn something new. The truth is, after a while, you don’t. This obsession almost always comes from the executive team or board.<\/p>\n\n\n\n

The Impact Problem<\/strong><\/h3>\n\n\n\n

The problem with these obsessions is that they have almost no impact on the business. They don\u2019t make the company more efficient. They don\u2019t drive growth. They don\u2019t even protect the company from a black swan event. They just don\u2019t matter very much. What they do is keep your finance and accounting team busy while giving the impression of progress and competence.<\/p>\n\n\n\n

This phenomenon has been studied extensively (Selznick\u2019s Institutional Theory, Parkinson\u2019s Law, etc). The core idea is: work expands to fill the time available and that expansion tends to lead to complexity that pulls focus away from what really matters.<\/p>\n\n\n\n

Finance and accounting is particularly prone to this, because:<\/p>\n\n\n\n