The Importance of Efficiency in Accounting

In observing and working with many different companies over the years, I’ve always appreciated and respected operating environments where processes were managed well, and efficiency was valued and prioritized. These settings display the timeless values of leadership, excellence, and stewardship – all of which play into the overall goal of maximizing efficiency and return on investment within a company. 

A businessperson uses a finger to increase an efficiency measurement slider.

I have a lot of respect for accounting leaders who take pride in the way they manage every aspect of their company. 

Let’s take a look at a few reasons why maximizing efficiency in your accounting department is important.

Time and Cost Savings
The first reason why efficiency is important involves time and cost savings. The less efficiently your accounting department operates, the more time and money it takes to get the job done. The more efficiently your accounting department operates, the less time and money it takes to get the same job done. This translates into maximizing a greater return on investment (ROI) for a company’s asset base, as well as equity.
 
Example: Utilizing technology such as cloud-based accounting systems and collaboration tools can greatly increase productivity and efficiency. Cloud-based systems allow accounting teams to access financial data and reports from anywhere with an internet connection, which is particularly beneficial for remote teams. Cloud-based systems also allow accounting teams to work collaboratively on documents in real-time, eliminating the need for email exchanges or multiple versions of the same document. This means multiple team members can access and work on the same document simultaneously, saving time and improving collaboration.

Accuracy
A second reason to maximize efficiency in your accounting department is accuracy. It is of the utmost importance to maintain the highest levels of accuracy possible in your accounting department. Without accuracy, financial statements have no integrity and cannot be relied upon. A lack of financial statement reliability can have a significant impact on the stability of a company.
 
Example: There are many ways to ensure accuracy in your accounting department, but let’s focus on accounting processes. Accuracy is preserved and maintained when accounting processes are strategically planned and structured. One can never go wrong investing whatever amount of time is necessary to develop world class processes. Efficient accounting processes ensure that data is accurate and consistent, reducing the risk of errors and financial discrepancies.
 
Use these steps to establish efficient accounting processes in your accounting department:
 

1. Identify the Process – Identify the existing process and its shortcomings.
2. Map out the Process – Map out the current process to identify the steps involved, the inputs and outputs, and the key players involved.
3. Analyze the process – Once the process is mapped out, analyze it to identify the areas for improvement. Identify bottlenecks, redundancies, and inefficiencies in the process. Obtain input from multiple sources to ensure a full perspective is represented.
4. Develop a Streamlined Process – Based on the analysis of the current process the accounting department should develop a streamlined process that is simple, straightforward, and easy to follow.
5. Communicate the New Process – Communicate the process to all key players through training, workshops, or written instructions.
6. Implement the New Process – After the new process has been communicated, it is time to implement it. The accounting department should ensure that everyone involved in the process understands their roles and responsibilities and follows the new process.
7. Monitor the New Process – The process should then be monitored regularly to ensure that it is effective and efficient. Any issues or challenges that arise should be addressed promptly to ensure that the process continues to run smoothly.

Decision-Making
A third reason to maximize efficiency in your accounting department is so that leadership can make the best overall decisions for the company on demand. By having timely and accurate financial information, accounting departments can enable management and investors to make better decisions. There are many examples of accounting function efficiency aiding in critical decision-making. Let’s look at the most important types of decisions businesses make:
 
Example: Accounting decisions can directly impact the financial stability of a company. Decisions related to budgeting, cash flow management, and investments can all affect the overall financial health of the organization. Therefore, timely and accurate information is essential to make sure decisions can be made without delay for the best possible business outcomes.
 
Example: A second example would involve decisions around compliance. Companies are expected to comply with federal and state regulations and laws related to financial reporting, tax filings, and other financial matters at all times. Failure to comply with these regulations results in penalties, fines, and other legal challenges. Thus, timely and accurate information is crucial to maintain proactive, ongoing compliance in all aspects of the business.
 
Example: Lastly, when an accounting department produces financial information in an efficient and timely manner, risks can be better mitigated. This is especially true when it comes to a company’s financial assets. Assets in the forms of cash, investments, or accounts receivable, can be much better protected when information flows efficiently and is available on a “real time, on demand” basis. If information is inefficient and delayed, a company’s cash flow could be interpreted as being much better than it actually is in reality. This could lead to poor decision making and negative outcomes for returns on investment in various forms.
 
Maximizing efficiency in your accounting department is extremely important because greater efficiency can positively impact levers of time and cost savings, accuracy, and decision-making. When companies are trying to exercise good stewardship and maximize ROI, improving efficiency is going to be extremely important. Simply put – there is no replacement for good old-fashioned efficiency. I’ll leave you with two great quotes from two well respected business professionals that highlight that very fact:
“Efficiency is doing better what is already being done.”  - Peter Drucker
“There’s a better way to do it – find it.” - Thomas Edison
 
If you need help improving your accounting efficiency, please reach out to us! We offer outsourced accounting services to companies that need help with their accounting processes and workflows. Our team of experienced accounting professionals is ready to come alongside you to maximize efficiency and help achieve business goals. Find out more about bringing in an accounting consultant today!
 
About the Author
Eric Moor

Eric Moore is the Practice Manager of ASP. He brings two decades of progressive experience in Controller, CFO, and General Management roles with privately held companies, and has a broad perspective from working in environments ranging from start-ups to multi-generational mid-market companies with revenue in excess of $100M.
 
Eric holds a Bachelor's Degree in Business Administration from Washington State University with an emphasis in Accounting and Finance. He is an active community volunteer, serving with various faith and compassion-based organizations for the last 20+ years.

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