Accounting basics: The balance sheet and KPI

Contributed by Michael A. Webber, All. AIA, A/E Finance

Summary

The basics of accounting for architecture firms are not complex. However, an understanding of certain fundamentals—by every manager at every level of a firm—is imperative for the firm to be able to manage toward profit and financially stability.

Certain industry-standard “key performance indicators” (KPIs), derived from specific elements of the balance sheet, are essential to monitoring the overall financial condition of a company. As with the income statement, basic accounting data are used to create financial information used to better manage the firm. These are the bridges from accounting to finance.