02 / Business context
First, understand the business.
Before we organize the books, we need to understand how the business creates value, delivers work and moves money.
A financial report shows what was recorded. It cannot, on its own, explain what customers bought, how work was delivered or why a payment arrived late.
What are we trying to understand?
Who buys from the business, and what are they paying for? What needs to happen before the customer receives that value? Who does the work, when does money change hands, and who keeps the records?
We look at the flow of value, work, people and cash. A sale may become a project, an invoice, a payment and a bank deposit. A vendor bill moves through a different path. Contracts, approvals, employees, contractors and supporting documents connect those events.
Not every company follows the same path. Some collect before delivery, some invoice afterward, and some receive platform payouts. First we need to understand what actually happens.
Why this comes before the accounting
Suppose reported revenue is below expectations. That may mean sales declined, work was completed but not invoiced, payments are outstanding, or the records need correction. Each calls for a different response.
Without business context, even tidy books can tell an incomplete story. Understanding the operations is what makes the records meaningful.
How we begin
We trace one ordinary customer transaction from agreement through delivery, invoicing, collection and recording. We follow an important cost in the same way. Then we learn which systems are involved, where responsibilities change hands and what happens when there is an exception.
There is no universal software arrangement. What matters is a process that can be explained, checked and maintained.
An example
Illustrative only: a company sells workshops and recurring advisory services. One customer pays for a workshop in advance; another pays a monthly invoice for services already delivered. Both produce deposits, but their timing, costs and obligations are different.
Those differences should inform how revenue, products and costs are recorded. The business comes first; the account structure follows.
Why we keep returning to the business
Products change, people change, payment systems change and the business grows. The finance team can maintain the records and surface questions. The owner and operating team supply the context that the ledger cannot know on its own.
Answering those questions is part of maintaining the financial foundation, not an interruption to it.
Understand the business before deciding how its numbers should be organized.
A question for your business
Could you trace one typical customer transaction from first agreement to final payment, and identify who is responsible along the way?