Many companies tend to view their internal accounting team as a data processing department and a necessary cost center. However, more successful companies have integrated their accounting department to be part of their key management team and rely on them for providing quality information to assist in making proper decisions for the business.
Conducting an accounting department diagnostic entails walking through several specific steps to provide valuable feedback on how effective your accounting department operates in supporting your organization, as well as insight as to how effective the internal controls are working.
In order to obtain proper information and feedback, several days are needed on-site at your organization to interview members of the accounting department, management, and the other key users of the financial information. This will establish an understanding of how the information is being used and whether the needs of the users are being properly met. During the interview process, particular attention is paid to how information currently flows through the accounting department and how technology is being integrated into the process. There are often opportunities to reduce redundancy in a system, particularly one where an accounting department is left to update what seems to be an endless number of spreadsheets. Finally, during the interview process, there is a review of the financial reports that are generated on a daily, weekly, and monthly basis.
At the end of the process, a written report is reviewed with key members of the company to discuss the findings and recommendations for improvement. A scorecard highlighting six key areas is included as part of the report. These areas include:
- Accuracy of the information being generated by the accounting department
- Timeliness to which the information is generated
- Effectiveness of the internal controls in processing the cash coming into and leaving an organization
- Overall efficiency of the systems and technology
- Quality of the financial reports and how they are organized
- Overall sufficiency of the personnel
The accounting department diagnostic often uncovers weaknesses in internal control and identifies efficiencies for how information is processed. So, if you have ever wondered how effectively your internal accounting department operates or have questioned whether you are receiving the right reports, an accounting department diagnostic may be of value.