In Pursuit of Profit
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Don't wait around for "the right time" to improve your accounting functions! Now is the time to stop putting off the planning and cleanup work that always seems to get pushed to the backburner. Commit yourself to embracing a culture of continuous improvement – looking for places where you can overhaul whatever is broken and streamline areas that are not working optimally.
So, how do you identify where your accounting department needs to improve?
Ask your accounting team and any staff that deals directly with them where their pain points are and what they would prioritize fixing. By including both the team’s feedback and the rest of the organization’s perspective, you will get more balanced input on what kinds of changes should be prioritized.
Focus on operations, processes, and policies with the potential to have a big impact on either efficiency or accuracy. Possible areas to focus on include:
Bank and credit reconciliations should be performed regularly as part of cash flow management best practices. When reconciliations are not being performed often enough or with regular predictability, it opens the door for not only cash mismanagement, but also fraud.
Ensure reconciliations are being done in a timely manner by lower-level accounting and bookkeeping staff. In most cases, they should be performed at least once a month (although there may be circumstances under which an organization could choose to do them less frequently). High volume businesses and those at a greater risk for fraud may even consider doing daily reconciliations.
Remember, regular reconciliations will better prepare the company for year-end close as well.
Improving the Budgeting Process
Creating a budget provides a whole host of benefits for the company in addition to instilling financial discipline, making it a cornerstone for effective financial leadership. However, many organizations fail when it comes to budgeting. Either they create a budget with incorrect or incomplete information, or they overspend against the budget.
Developing a budget requires understanding income, fixed costs, variable expenses, and upcoming costs. If any of these components are missing or improperly reported or forecasted, it can skew the budget. Once the budget it finalized, it should be reviewed, amended according to the feedback received, and then approved by leadership. Ensure each team is recognized and included fairly and get buy in from key personnel.
Look at your budgeting process for places where you can improve the process as well as the budget itself instead of simply rolling over last year’s budget. If significant budget deviations have occurred in the past, include an analysis of those events in the next budgeting process as well.
Formalizing Policies around Accounts Receivables
Formalize policies for sending invoices and pursuing collections. Have clear cut policies around when invoices are sent that are in keeping with the revenue recognition principle. Additionally, determine how you will handle late payments and formulate a collections strategy. Preemptively knowing how you will deal with outstanding accounts receivables (AR) helps improve your cash management strategy.
Automate regular financial reporting to keep leadership informed on pertinent financial metrics. If your accounting software does not make automated reporting easy, consider switching to a solution that is better customized for your needs. Remember, going digital is likely going to be your best bet to improve the accuracy and timeliness of your reporting. A cloud-based accounting software will likely provide the most robust reporting capabilities to streamline both the regular reporting and ad hoc reporting that your accounting team is responsible for delivering.
Moving to Cloud Accounting
Migrating to a cloud-based accounting system not only improves reporting, but also offers numerous other benefits, such as:
While most companies have transitioned to cloud solutions in the wake of the pandemic, many made the switch suddenly to whatever software was the easiest to adopt quickly. If the platform you are using does not suit the entirety of your needs, leverage your accounting team’s expertise to migrate to the best solution for your specific business needs. Evaluate the most popular online accounting tools to determine which is the right fit for your company as you look to change accounting software platforms.
Allocating Time for Professional Development
Accountants need to stay on top of the laws, regulations, market trends, and topics that pertain to their trade. Failing to provide time for professional development leaves accountants with the difficult choice of either falling behind in the industry or taking time away from their personal lives, increasing the chances of burnout. Give your accountants the time and resources needed to stay educated and informed so they can do their best work to benefit the organization.
Remember, a culture of improvement cannot flourish without the right personnel in place. If your accounting team needs an accounting manager, senior accounting manager, or controller to lead them, hire an accounting recruiting firm to find the right person for the job.