Cooking the books: The ethics of accounting

You can't erase the truth

You can’t erase the truth. You can only cover it up.
Here’s an example of what we mean. You might realize a short term gain by misrepresenting your income to qualify for a loan. But when the payments come due and you don’t have the funds available, things can sour quickly.

Cooking the books may work for a while, but eventually, the lies snowball into an unsustainable situation. That’s because reality has a way of asserting itself over even the most finely crafted lies. Businesses can certainly save themselves money by underreporting income to avoid taxes and the hands of greedy government officials, but when the situation is discovered, the costs will be considerably higher.

The truth is that there’s always a paper trail. You might claim that your liabilities are lower than they are, but the actual liabilities still exist, and they’ll come calling at some point in the future.

Proper accounting practices build trust
To build long term value in a company, you need to have the trust of your business partners, suppliers, and employees. When you distort your financial situation, you’re misleading all of these players.

Your partners will make business decisions based on your faulty numbers that could get them in trouble. Your suppliers could get a rude awakening when you can’t pay your bills because you overreported your assets to get better terms. And your employees may discover they’re out of a job when the government comes seeking back taxes plus penalties, putting you out of business.

That’s why, over the long term, keeping accurate books is a far better strategy for survival than succumbing to pressure and fudging the facts. Because the truth is that if you can’t survive without cooking your books, you won’t survive. There will always be a reckoning. It’s better to spend your efforts coming up with ways to improve your processes so that you can be solvent honestly.