A GOOD accounting department will accurately close and report financial results within 2 to 3 weeks of each month end. However, a GREAT accounting department will move past just that and will offer insights about results, provide risks analysis, comment on areas of concern and most importantly will help you improve cash flows. In this blog, I assume you have the basics, a good accounting department; however, here are some actions to help you set up a great accounting department. You have a lot to gain from improving your accounting department.
1) Steer your Accounting Team to Issues through a Budget or Financial Projection
While there are many reasons to set a budget or to create financial projections in your business, one of the key benefits for your accounting team will be their ability to compare results to expectation. If your team doesn't really know what's good, bad, normal or abnormal, it limits their ability to provide pro-active analysis and information. In other words, the budget or financial projections steers them to areas for investigation and detailed review.
For example, if a certain type of revenue was discussed and projected to hit $X, and it didn't meet expectation and was off by 30%, your accounting department can help pro-actively figure out why. At your monthly finance meeting, instead of simply identifying the missed expectation or poor result through reporting, your accounting team could come with the specific reasons for the variance and other key information. At that point in time, you and your operations team can reduce wasted time by discussing the situation right at the meeting. The effect is a much more nimble business with better response and reaction time.
2) Ensure your Accounting Team has enough Resources to be Great
If your accounting department is delivering you accurate, timely month end results but that's pretty much it, try asking your department leader about their capacity. If they tell you they are just making it, or struggling to maintain just this basic standard, there's not much more you can reasonably expect. However, this isn't necessarily an indication that you need to go out and hire new people to get more from your accounting department. This might be the case, but, before you do that, there's two things you should do first:
a) Assess the Current Accounting Processes: Over time, especially as your business grows and evolves, accounting processes can become redundant, not necessary or simply inefficient. You, your accounting team lead, or an experienced 3rd party should take time to review the current processes. If you can eliminate processes or find better ways to do things, this will free up time for your accounting team to do more valuable tasks.
b) Review your Technology in Place: You'd be surprised how much technology has helped streamline accounting processes and functions over the past 10 years. The best practice is to review technology continually, however, sadly this isn't a reality for many businesses. If you haven't reviewed your accounting technology in 2 or more years, I think it's safe to say you are definitely missing something because technology is rapidly evolving. Leveraging technology is in my opinion the best way to free up your accounting team to provide more value to you.
3) Ask lots of Questions about the Monthly Results
Often times there is an inherent disconnect between leaders of a business and the accounting department. I think it stems from the fact that owners and executives don't necessarily know what they can get and what they are missing. The reality is that a great accounting department can really help business owners and executives thrive but the working relationship, strategic priorities and what will really move the needle for the business needs to be clear and stated.
To help foster a more meaningful relationship with your accounting department, try this: During your current month end meetings, ask lots of questions and don't assume your team knows what you know. By asking certain questions, explaining things and making strategy and goals clear, your accounting team will naturally lean in to try and help. As a result, while they are working all month and as they prepare the month end reporting, they are probably going to be making sure they can answer your questions easily and will try to better anticipate your needs. In addition, with a clearer picture of the overall business' strategy and priorities, your accounting team is going to be in a better position to report items that could help or hinder those priorities and strategy.
4) Make sure You and your Operations Team are Helping and aren't a Hinderance
You and other leadership positions in your business need to help and not hinder your accounting department. For example, all too often I see top level executives and business owners not following established processes, not adopting new technology or not responding to requests in a timely fashion. I will tell you straight up, this sucks, it wastes a ton of time and is a huge source of frustration for your accounting team. However, even worse than that, is the poor "tone at the top" it creates that leads to even more problems with lower level staff at your business. If you want a great accounting department, make sure you are a leading example for others to follow.
5) Hire a Fractional CFO to Help
If you want a great accounting department, experience and know-how are going to be big factors and there's really no way around it. As a result, you should look into hiring an experienced fractional CFO to help bolster your accounting department. The best fractional CFO's are those that are willing to integrate into your business through regular, ongoing hours and time. A fractional CFO in my opinion isn't someone that comes in from time to time with certain projects. Your fractional CFO should be your most trusted advisor, they should have an entrepreneurial mindset and they should understand your day to day, business strategy and goals.