Use a family business diagnostic to rate your key success factors

The accounting department is a critical component to the success of any business, yet in many instances this function does not receive the attention it deserves. Customers, employees, and products and services that drive business naturally take precedence over back office operations. However, taking time to perform a process review of your key accounting functions can uncover efficiencies that that will ultimately benefit your business.

The accounting department can be somewhat of a mystery. It is vital to the success of your organization, yet it can be the least understood when other facets of your business require more attention. While paying invoices, processing payroll, and producing month-end reports seems straightforward, the processes involved to execute these functions can be more manual and time-intensive than you might expect. Are you comfortable with your understanding of how these end results are achieved and the accuracy with which they are performed? If your answer is not a firm 'yes,' you are not alone.

Performing a periodic review of processes performed within the accounting department, also referred to as an accounting department diagnostic, has many benefits. During a diagnostic, you will gain a better understanding of how information is received and disseminated, the system access available to your employees (you may be surprised at what they can do), the review and approval process, and the accuracy of data input and reporting.

The diagnostic identifies changes that will increase efficiencies, and improve the accuracy and relevance of reporting that you use to make critical business decisions.

To perform a diagnostic, it's best to start by considering the users of the information being disseminated. Understanding who uses the daily, weekly, or monthly information that is produced and focusing on what is important to those users will help ensure that your team does not spend a significant amount of time preparing materials that have limited value to them. It is also a good time to ask users what information they would like to see and how often. We have often found that teams spend a long time producing reports, metrics, and data that are not used by the recipients. The accounting diagnostic presents an opportunity for you to redirect the team’s focus to those items that are most important to the users of the information that they produce. This is often one of the biggest areas where efficiencies are gained.

In performing a diagnostic, be prepared to meet with employees that perform functions such as:

  • Accounts Payable
  • Accounts Receivable
  • Treasury
  • Payroll
  • Fixed Assets
  • Inventory Management

As you review these key processes, consider the following:

  • Deadlines: Are there deadlines or timelines in place to ensure that tasks are performed on a timely basis and within an expected timeframe? For example, are bank account reconciliations required to be submitted for review and approval on the same date each month? Within Accounts Payable, are employees required to submit invoices by a certain date? Deadlines require employees to work in an organized manner, prioritize activities, stay focused, and establish accountability.
  • Effective Use of Software: Is the accounting team still using spreadsheets to track information that could be more efficiently managed by a system or software? Many employees struggle to convert from practices they’re comfortable with to trying new methods such as using available software that would reduce the time it takes to perform a function. Information that is tracked manually tends to take longer to gather for reporting purposes and is more prone to errors, impacting the timeliness and accuracy of the financial reports you use to help manage your business. As a result of the diagnostic exercise, you may determine that procedures that are performed manually would benefit from an investment in software, and the payback would be almost immediate.
  • Batch Processing: Does the accounting team receive the daily mail and process what comes in each day? Do invoices or receipts come in sporadically and are they processed that way? To improve time management, consider implementing batch processing that carves out specific periods of time for these types of tasks.
  • Employee Skill Sets: As you meet with the accounting team, consider their knowledge and skill sets for the roles they are performing. Many accounting team members join a business in its early stages. As the business grows, accounting responsibilities naturally grow – but your employees may not be equipped to handle these evolving needs. Do they appear to be struggling to keep up with the demands of the job? Proper training, whether provided internally or externally, will improve a team member's performance in terms of efficiency and accuracy.

In addition to the efficiencies to be gained from an accounting diagnostic, you will likely also obtain a better understanding of your internal controls.  A fundamental building block of internal controls is segregation of duties.  To safeguard your assets, one individual should not have the ability to authorize, execute, and record transactions.  An accounting system diagnostic can identify the instances described herein, and help you mitigate your risks.

Reviewing all of your key accounting department functions can seem like a daunting and time consuming task. Consider prioritizing those areas that need it the most. The efficiencies gained by performing an Accounting department diagnostic far outweigh the time invested to perform the review. If you are interested in outsourcing an accounting department diagnostic to gain efficiencies and strengthen your internal controls, please contact us.

For more information about this topic, please contact us at Email or 215.441.4600. 

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