When businesses or an entire industry face financial pressures, they are usually forced to reduce costs. This may include downsizing their workforce, finding alternative suppliers/vendors, and generally finding other areas in which they can cut costs. As a result, a company’s finance and accounting department may be operating at less than an optimal number of staff. If this is not managed properly, several finance and accounting issues could arise. Following are some tips to help ensure that your finance department continues to operate effectively after a downsizing:
- Internal Controls – It is important that an organization carefully considers potential segregation of duties issues before a downsizing. Identifying potential issues and developing plans to mitigate these risks in advance can help management avoid problems down the road.
- Financial Reporting – Consistent, monthly financial reporting is imperative to a business’s success. However, reducing staff in the finance function may disrupt the flow of information to decision makers. Make sure you proactively consider the potential impact of a downsizing on the reporting function, and also make sure you consider whether some reports can be eliminated.
- Efficiency – Make sure you have considered whether you have the technological tools necessary to allow a smaller team to operate efficiently.
- Oversight – As departments get smaller, owners’ and stakeholders’ day-to-day roles in each of the company’s departments become more critical. As such, an owner(s) involvement in the finance department should include reviewing budgets and financial results, banking relationships, and customer collections.
- Personnel –It’s important for an organization to make sure that the finance and accounting team members have strong technical abilities as well the ability to work efficiently. Consider whether your planned team has these skills before making final decisions and, once you make an announcement, make sure the remaining team members understand that their roles are secure in order to avoid any unwanted turnover.
It is never easy for organizations to reduce their workforce so, if you have to do it, the last thing you want to do is cause collateral damage. Pausing to consider these factors can help owners address the financial issues facing their businesses without unnecessarily increasing risk or decreasing the flow of information needed to manage the business.
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