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Transform Your Accounting Department By Outsourcing

Many businesses owners and CEOs come to us because they are experiencing frustration with their business’s bookkeeping and accounting. Whether they have severe inefficiencies in their systems and processes, have continuous cash flow issues, or that they’ve been a victim of fraud… Each one negatively impacts the success of their business. They find themselves being tethered to closely managing their bookkeeping and accounting back office. As a result, this prevents them from dedicating their time and energy to leading and growing their business. If this sounds like you, then it’s time to transform your accounting department by outsourcing your bookkeeping and accounting to an outsourced full-service accounting department.

Past Bookkeeping and Accounting Options

In the past, the only bookkeeping and accounting options for business owners were one of the following:

  • To handle the back office themselves or with a part-time in-house hire.
  • Ask their CPA that files their taxes to help with daily bookkeeping functions.
  • Try building an in-house accounting department, hiring one or more full-time employees to manage the back office

But thanks to recent technologies, like cloud-based software and platforms, small businesses now have a better option when it comes to managing the back office.

So, how does outsourced bookkeeping and accounting compare to having in-house staff? What are the challenges and benefits, and how do you choose the right partner?


Click here to download: The Guide to Outsourcing Your Bookkeeping & Accounting for SMBs


Compare In-House vs Outsourced Bookkeeping and Accounting

Building an in-house accounting department brings many challenges. Likely, it will not yield the results expected or desired in order for the business to grow.

The costs of having in-house staff is a major concern, not just with salaries, but also the costs of overhead, IT, and employee turnover. Other hidden costs that inevitably begin to surface, such as:

  • Bookkeeping mistakes
  • Continued education
  • Unfortunate costs and risks of fraud

Businesses with internal back offices also do not typically have back up plans to cover/replace employees in the event of illness, vacation, or employee loss.

Outsourcing your back office with a fractional share of a full-service accounting department provides many of the same benefits and functions of having in-house staff. But it’s a fraction of the cost.

By outsourcing your bookkeeping and accounting functions, you will see a return on investment in the form of streamlined operations and risk mitigation. Relying on a purely compliance oriented back office will not help your business grow.

Outsourcing to the right partner will help your business gain a competitive edge with optimized systems, improvements in your cash flow, increased profits, and the ability to have management reporting delivering actionable financial intelligence for making data-driven business decisions.

How to Recognize When Your Business is Ready to Outsource

Outsourcing will bolster your business’s back office at an affordable price. Many business owners and CEOs do not know when the time is right. The following are common signs that it is time for you to consider outsourcing:

  • Vision and goals are delayed because you spend more time functioning as a bookkeeper than you do as CEO
  • Back office has no separation of duties, exposing your business to risk
  • No contingency plan for the loss of your in-house bookkeeper
  • Financial reports are geared toward compliance and tax compliance, but not managing your business
  • Base business decisions on gut feelings, rather than data
  • Business is growing
  • Cash flow concerns

Your business can begin outsourcing some or all of its back office functions at any time or size. A strong outsourced accounting partner will work with you to provide the services you need at the right time. In addition, it will set your back office processes up in the beginning to accommodate growth in the future.

Best Time to Outsource Your Back Office Function

You can transfer your bookkeeping and accounting functions from in-house to outsourced whenever you are ready.

Many businesses think that it would be better to begin outsourcing at quarter-end or after this year’s taxes have been filed. Waiting for these timelines, however, just delays receiving priceless data, saved money, and extra time that comes from having a smart back office that combines the tools, technology, and expertise necessary for a solid financial foundation.

Common Outsourcing Pitfalls to Avoid

If you decide outsourcing some or all of your back office functions is right for your business, then careful discern who you want to partner with.

Outsourcing your bookkeeping and accounting can do wonders for your business and its future. Choosing the wrong provider can be costly. Be on the look-out for the following when selecting services.

Hidden Costs

Be very clear about your expectations of service. Ask questions about what your scope of service includes up-front to avoid unexpected costs appearing on your invoice.

Availability

Consider how much involvement you want to have with your bookkeeping and accounting. Be sure you choose a provider and service level that will include enough availability to meet your needs. While some will only communicate on a weekly basis, on a different plan, other providers will be available whenever you call.

Small Firms

Although a small firm might be full of amazing individuals, they might not have a plan if someone quits or goes on vacation. Ask your potential Client Accounting Services (CAS) providers how many team members will be dedicated to your account and what will happen in the event someone leaves their firm.

Offshore Firms

These CAS providers often come at a much lower price, but they also have many drawbacks. They often operate in different time zones than your business, making their availability difficult. Communication, skill sets, expertise and processes can be a challenge when being serviced by firms in other countries.

Transform Your Accounting Department By Outsourcing

There are scalable solutions that grow with your business. With a highly personalized touch, GrowthForce dedicates an entire 3-person team to each of its clients. We offer a range of outsourced bookkeeping and accounting service options designed to grow with your business, as its back office needs expand and change with growth.

With the right outsourced bookkeeping and accounting partner, you can transform your standard back office (performing housekeeping duties) into a solid financial foundation for your business (providing actionable data and management accounting to grow your business).

If you would like to learn more about the process and reasons to outsource your back office’s bookkeeping and accounting functions, we encourage you to speak with a GrowthForce specialist today or take a look at our latest resource, The Guide to Outsourcing Your Bookkeeping and Accounting.

Transform Your Accounting Department By Outsourcing


Stephen King is a guest blogger at The Strategic CFO. He is the President and CEO of GrowthForce – an outsourced bookkeeping firm based in Houston, TX.


Transform Your Accounting Department By Outsourcing

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Role of a Company Back Office

When customers, clients and entrepreneurs visualize any business, they usually imagine the operation’s storefront, logo, products, services, or marketing campaigns. In other words, most people choose to define businesses by their brands, products, services, ideas, and messages. Behind the attractive exterior and desirable offerings, however, the heart of most successful businesses is a well-functioning back office that provides the platform for organizational growth. In essence, your company’s back office is the lifeblood of everything your business does and will do. This article will look at the role of a company back office and how to optimize it.

The efficiency and reliability of the back office ensures the health of your business… It allows you to continue to do what you do best – focus on your core competencies.

The Role of a Company Back Office: Foundation for Financial and Operational Success

Your small or medium sized company’s complete back office may consist of HR, Operations, IT, and Accounting and Compliance. The back office should stay abreast of ever-changing federal regulations, safety laws, and employment standards. In addition, it should also maintain up-to-date information systems and bookkeeping records.

The role of a company back office should help strengthen the infrastructure of your business by establishing and maintaining efficient business operations. In this article, we focus mainly on the accounting and compliance functions of your back office.

Layers That Build The Accounting Foundation Of Your Back Office

There are 4 layers that build the accounting foundation of your back office.

Accounting Systems Design and Optimization

A fully integrated accounting system maintains and manages all of your company’s bookkeeping, payroll, and accounting functions; thus streamlining financial operations and reporting.

Policies and Procedures

The design and implementation of your company’s policies and procedures covers everything from daily financial operations, weekly and monthly reporting, due diligence, and bookkeeping and accounting best practices.

Compliance

Compliance is the necessary and legally required responsibilities with respect to financial reporting and record keeping. Efficient bookkeeping and accounting practices involves maintaining accurate financial records essential to tax compliance and for avoiding audits, and enables you to keep track of your company’s financial (and overall) wellbeing.

Staffing and the Cycle of Hiring

Management Reporting will help determine a budget for the number of employees needed for profitable operation. The back office must also be able to synchronize the timing of onboarding and training new employees with the demand created by your growing business.

Transform Your Back Office from Mundane to Miraculous

Establishing a smart back office helps create operation efficiency and build a strong financial foundation for your business. With a streamlined, integrated system, and accurate data, you can leverage a wealth of financial information to optimize every business decision you make. Management accounting and cash flow forecasting can be tailored to accommodate successful strategic planning.


Click here to download: The Smart Back Office for SMBs


System Optimization: Recognizing the Difference Between a Successful or Struggling Back Office

A neglected back office is one that seems to work against you rather than for you. In other words, if you still see your back office as a mundane chore that primarily exists to take up your valuable time, then you are overlooking one of your company’s greatest assets.

For example, business owners often neglect their back offices. They do not take advantage of the financial information at their fingertips. As a result, they find themselves in cash flow crunches. These business owners often become too caught up in doing what they do best… They are focusing on product development, sales, and networking. Without a full accounting department in place, they may not getting the kinds of cash management tools they need to forecast their weekly and monthly needs. As a result, these business owners tend to find themselves reacting to negative cash crunch situations. If they spent more time on the back office, then they could be proactively avoiding cash shortfalls.

What sets a successful back office accounting solution apart from a struggling one is its ability to help business owners foresee cash flow issues and take proactive steps to avoid these sorts of challenges before they occur. In addition to cash flow forecasting, an experienced accounting team will also help you with the following:

  • Pinpoint and correct costly inefficiencies in your business
  • Predict your cycle of hiring
  • Establish policies and procedures that work for your business’s bottom line rather than against it

Next Steps For Improving the Company Back Office

So, what are the next steps for improving the company back office? Outsource back office functions. Then optimize your small business accounting system. Finally, eliminate the burden. The right online accounting and bookkeeping services provider can help you create a smart back office and strong financial foundation to drive growth and success in your company. An outsourced accounting department as part of your back office frees up your time by tackling day to day bookkeeping and accounting tasks. In  addition, an outsourced accounting department could be providing the financial information you need to make data-driven, strategically smart decisions for your company’s future.

With the right mix of team and technology, you can build your company on top of a strong financial foundation.

To learn how your business could benefit from shoring up your financial foundation with outsourced bookkeeping services, download The Smart Back Office below.

With 20+ years of experience providing professional bookkeeping services to businesses like yours, our back office experts can help you eliminate the learning curve by setting up your back office right the first time. We will help you optimize your small business back office efficiency to improve operations, streamline technology, and leverage financial information to accelerate your company’s growth.

Role of a Company Back Office


Stephen King is a guest blogger at The Strategic CFO. He is the President and CEO of GrowthForce, The Strategic CFO’s strategic partner. King has 3 decades of experience in accounting system design, technology development, and management services.


Role of a Company Back Office

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4 Problems with In-House Accounting

When running a business, the goal is to have good operations and profits. You’re also in a constant state of awareness for ways to protect your business from harm – whether that comes in the form of increased competition, property loss due to theft, or some other factor. Have you considered staffing and managing an in-house accounting department? This is a very important and foundational part of any business, so it’s key that you address accounting. Now, your bookkeeping may be managing its bookkeeping and accounting in-house; however, that may not be the smartest choice. There are 4 problems with in-house accounting that we are going to take a look at in this blog.

4 Problems with In-House Accounting

Whatever your reason for wanting to keep your accounting in-house – control – it’s important to know how those problems with in-house accounting may impact your business.

1. Costly Bookkeeping Mistakes

If you employ a bookkeeper to handle your day-to-day financials, then you’re relying on one single person for this critical function. Since human beings are fallible, it’s not unusual for people to make mistakes. This is especially true when said person is inexperienced and/or tired.

In the best-case scenario, your bookkeeper or accountant will catch any mistakes made themselves before you catch it. Then, they will correct them in a timely manner.

In the worst-case scenario, however, a mistake will go unnoticed. That means it could be used to generate reports or even prepare audit and tax readiness inaccurately — and that’s the last place you want errors. In other words, one single mistake can have far-reaching consequences for your company, both financially and fiscally.

On the other hand, if you outsource your accounting to a reputable firm, then you’re guaranteed that the expert services you receive are accurate. With an entire team looking at your books and handling your reporting, any errors are more likely to quickly be noticed. And the team can address those issues immediately.


Click here to download: The Guide to Outsourcing Your Bookkeeping & Accounting for SMBs


2. Outdated In-House Financial Training

When you hired your accountant, you probably took great care to verify that their certifications were valid and up-to-date. Yet over time, even the best training becomes outdated. Just look at the new revenue recognition updates!

Accounting professionals need to stay current not only about things like new software and integrated apps for greater efficiency, but more importantly about things like amended regulations, changes to tax rules, and other important developments that affect their field.

Unfortunately, especially when your bookkeeper or accountant has a heavy workload, it can be challenging for him or her to stay current with these things. Furthermore, it’s going to be difficult for them to complete any professional development courses. That means that before too long, the quality of your in-house bookkeeping and accounting will suffer.

When you outsource your accounting, the right firm will ensure that its people are up-to-date on all of the latest technology, regulations, tax codes, and other developments. That means you never have to worry about the quality of your accounting.

3. Potential Internal Fraud

On average, organizations lose 5% of revenue to fraud annually. In addition, small businesses are typically more susceptible to fraud. Why? Because they don’t have the resources to perform all of the checks and balances needed to detect and combat fraud. Payroll fraud and skimming are common types of fraud that occur.

In a larger company, you can set up a system of internal controls to ensure that the various financial responsibilities and authorizations are handled by different people. In a small company, this often comes down to one or two people.

No matter how much you trust your bookkeeper or accountant, he or she can miss all the signs of fraud. What’s worse is that they could even be the person committing fraud. And when you know that the average fraud incident for small businesses amounts to $150,000 median loss, then you have to ask yourself, “Can my company afford this kind of risk?”

An outsourced accounting firm provides protection against fraud by ensuring multiple people review your accounts providing separation of duties and follow up on every potential sign of wrongdoing.

The best firms have procedures in place that virtually eliminate the chances of fraud going undetected. If they do detect fraud, then they can follow the trail back to determine which of your employees is the fraudster. Then you can take appropriate action.

4. Higher Costs for In-House Accounting Staff

Hiring a full-time bookkeeper or accountant involves significant costs. First of all, there’s the time and money that goes into recruiting, screening, and onboarding the new employee. If you work with a recruiter to do this quickly, then you’re looking at a bill of between 20-30% of the new employee’s salary. Then, there are the costs of employee salary or wages.

According to GlassDoor, U.S. salaries average $43,874 for a bookkeeper, $55,093 for a staff accountant, and $100,705 for a controller annually. Of course, there are also additional costs such as benefits, paid time off, retirement, overhead, etc. And last but not least, you have a contractual and financial commitment to the employee. You can’t simply let them go without a certain financial obligation.

In contrast, an accountant’s firm will cost between $24k-$60k annually. That range depends on the size of your company and the type of services you require. On average, you can expect to pay around $2,500 per month when you outsource your business’s bookkeeping and accounting. That’s considerably less than hiring a full-time bookkeeper!

If you want to learn more about how outsourcing your accounting can help your business, then contact us at GrowthForce. We’re always happy to learn about your business needs and discuss how we can help you achieve your financial goals. In the meantime, download our free Guide to Outsourcing Your Bookkeeping & Accounting to avoid those problems with in-house accounting.

Problems with In-House Accounting


Stephen King is a guest blogger at The Strategic CFO. He is the President and CEO of Growthforce, an outsourced bookkeeping firm.


Problems with In-House Accounting

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You Can’t Afford Not to Spend Money on the Accounting Department

As a former CEO to some CEOs, this Blog is to my counterparts that “don’t know what you don’t know.”  I have seen time and time again closely held businesses that have experienced growth make the same mistakes over and over again. To the CEO that believes bookkeeping is a necessary fixed cost that should be minimized, here is a money making tip. You can’t afford not to spend money on the accounting department if you want to be successful.

The Big Mistake

Your company has grown over the years; you have experienced good times and maybe some bad times. Additionally, you have taken a nice paycheck and sometimes, some nice bonuses.  You got used to a certain life style. And you did all of this with a bookkeeper that does not cost you much.  But your company has grown. Still in the back of your mind, you know something tells you that you are not comfortable with your accounting records. But you elected to keep cost down for the bookkeeper and you do not spend much on accounting.

You Can't Afford Not to Spend Money on the Accounting Department

My Tax CPA Does It All

Maybe until now, some of you have your outside CPA that prepares your tax return also prepare year-end financials. This is not a knock-on tax preparers, but your CPA that prepares your tax return is an expert in one of many fields CPAs work in. For example, I am a CPA, but there is no way I would prepare my own tax return. Tax laws change way too often. I just want to maximize my deductions and pay my fair share of tax, but not more than that. That is why I have my tax CPA prepare the tax return.

But over the course of my career, I have found that most tax CPAs do not have operational expertise. They have not run a manufacturing or service business, nor have they had any P&L responsibility. The Tax CPA is considering accelerated depreciation, maximize expenses, etc. This is quite the opposite from a management set of financial statements. The role of the CPA Tax preparer is totally different from a “operational” CPA, Controller or even CFO.

Minimizing the Back Office For the Wrong Reasons

Most CEOs that I have worked with argue to minimize the cost of the back office. That includes the cost of preparing financial and accounting records. But think about this… The Securities and Exchange Commission (SEC) does not require public companies to prepare their financial statements according to Generally Accepted Accounting Principles (GAAP) because they pulled this out of thin air as another way to regulate.  The SEC requires public companies to prepare their accounting records and financial statements based on GAAP because it is the best way to present fairly the results of your financial operations to third parties reading your financial statements.  In other words, It’s the RIGHT way to keep your books!

In some cases where there is significant debt and exposure, some banks also require that the company present your accounting records based on GAAP – regardless of whether it is a Public or Private company.  Some debt situations even require an audit. The banks simply make it one of the covenants related to your debt. When you present your books and records per GAAP, you have accurate financial statements, everyone is assured your accounting is correct.


Click here to download: The Smart Back Office for SMBs


The Importance of Using GAAP

So, if a lot of brain power has been put into coming up with GAAP, and the general consensus is that GAAP is the right way to present your financials and accounting records.  Why would you as CEO not require that your financial statements be presented per GAAP?

I have been an “operational” type CPA for over 27 years now. In addition, I have held the office of CEO twice. I have used my expertise in public company environments and private companies both as an employee and as a consultant in the U.S. and in other countries. I have seen many very successful small, medium and large private companies and they were all keeping their financial records per GAAP. Yet, I have NEVER seen a significant company (not a micro or small business) be successful and properly run without keeping their books and records per GAAP.

So why is it that CEO’s of closely held (private) business still permit their accounting records to be kept some other way?   The answer: they do not want to spend money on a fixed cost such as accounting. But they will spend money on the sales team, hunting leases, extravagant meals or parties.

Not getting the basics down – such as GAAP – leaves money on the table when you are exiting the company. Increase value with our Top 10 Destroyers of Value whitepaper.

You Can't Afford Not to Spend Money on the Accounting Department

You Can’t Afford Not to Spend Money on the Accounting Department

These are real life examples and outcomes of minimizing the cost of your accounting department that I have lived…

The service company incorrectly books gains on U.S. dollar receivables. In conclusion, they had to reverse $8 million from earnings.

I have seen this one several times. The company does not have some large assets on the balance sheet, because their tax preparer said they used accelerated depreciation. As a result, the balance sheet assets are severely understated. Hint: your value is understated. IT’S ABOUT THE MONEY DUDE!

The manufacturing facility does not properly accrue costs. As a result, their margins are way off, and the CEO wondered why they were always short on cash.

The company did not properly reconcile accounts including cash. This led to fraud.

The company did not properly recognize revenue. In conclusion, the company was understating revenue by millions of dollars.

I can go on and on with more real-life examples.

If you do not have your financial statements presented per GAAP, how are they prepared and presented? Do you really know your margins in your P&L. Do you really have all your assets, liabilities and equity presented correctly? Is your P&L, Balance Sheet and Cash Flow statement presented correctly? Guess what? Your ratios that your controller or CFO should be analyzing are not correct.

Leadership Needs to Believe in GAAP

Why do you think Exxon, Walmart and all other public company CEO’s believe in GAAP?  I have also seen many small, medium and large closely held private companies keep their accounting records per GAAP.  These are all successful companies. They know their margins, they know where cash is, they know their ratios and guess what, they know how to forecast!

I have also seen time and time again good companies that have been around a while and have experienced growth, and NOT prepare their financials per GAAP.  And every one of these CEO’s and companies has the exact same issues.

  • They really don’t know their margins in their P&L
  • Some companies don’t even really know their actual revenue
  • There is always that doubt in the CEO’s mind as to what is really going on in the business
  • The CEO lives a stressful life
  • Every time there is even the slightest decrease in margins, there is even a bigger disproportionate stress on cash
  • If your books are not per GAAP, then most likely they are not on the accrual basis; if that is the case, then you are 60-90 days behind your business
  • Having your books on an accrual basis is just the first step. There are many other accounting rules, procedures and pronouncements to get your books per GAAP. Just because they are on accrual basis, does not mean they are per GAAP. GAAP “rules” actually change frequently

You Can't Afford Not to Spend Money on the Accounting Department

In Summary

In my consulting business, I have seen CEOs that are “smart” as in they know what they don’t know. They bring us in to get the problem fixed. Although it takes time and money, the CEO is fully supportive and we get it done. These are the companies that grow and ultimately have a successful liquidation event. Or they leave a well-run machine to their family or employees.

But it shocks me to continue to see companies as large as $120 million in revenue, with a couple hundred employees that have not professionalized their accounting department. No one knows the true margins. Everyone stresses out about the “accounting records.” There are no correct historical financials, and most certainly, there are no forecasts. Unfortunately, there is no analysis of the business at all. In some high margin “hot” industries, this works for a while. The sins are buried. But millions of dollars are lost without knowing it. But, since ultimately everything ends up in cash, when that “hot” industry has even a slight downturn, the CEO feels the cash crunch.

Whether you are trying to increase the value of your company or positioning it for sale, this issue of unknowingly leaking cash is a destroyer. Learn how to tighten your belts and increase value with our Top 10 Destroyers of Value whitepaper.

Don’t be Cheap

Don’t be cheap. Spend the money (which is usually less than the hunting lease) to get your books and records based on GAAP basis.  Get your priorities straight.  Continue to have a professional accounting department in your business. YES, you will spend more than you are currently spending. But you can’t afford not to spend money on the accounting department!

Consider this… I had one investment banker with a very large firm tell me the difference in a valuation of an acquisition target from a company that has accounting records per GAAP and solid accounting department versus one that does not have a professional accounting department and accounting records not per GAAP is a difference of 20%-30%.  I had another investment banker tell me the difference in valuation is “one turn of EBITDA”. The use of EBITDA and multipliers is often used in valuation.

So if your company generates $2 million EBITDA and the multiple used is a 5, then your value would be $10 million with a professional accounting department and books per GAAP. In comparison, your value is $8 million with an unsophisticated accounting department and accounting records not per GAAP. I don’t think your professional accounting department will ever cost you $2 million per year! But not having it will.

Not having your financial records per GAAP is one of the destroyers of value. If you want to protect the value of your company, download the free Top 10 Destroyers of Value whitepaper to learn how to maximize your value.

You Can't Afford Not to Spend Money on the Accounting DepartmentYou Can't Afford Not to Spend Money on the Accounting Department

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Productivity of an Accounting Department

Most people (especially those outside the finance side of the business) see the financial function as a cost center. Although an accounting department does not generate any revenue, it has the potential to dramatically improve profitability. Think about this: you should be able to convert 1-2% of sales into profits if the department was more productive. The productivity of an accounting department is directly linked to the improvement of profits and cash flow – the bread and butter of financial leaders.

How Productive Is Your Accounting Department?

Before you attempt to improve the productivity of an accounting department, assess how productive or unproductive it is currently. First, log what is working and what is not working. By going through this process, you will allow yourself or the financial leader of your company to fully evaluate what is going on. There are a couple areas that you can start considering when asking the question: how productive is your accounting department?

If you find that your accounting department is productive, brainstorm ways to make it more productive. The great thing is that there is always room for improvement.

Track your accounting department’s productivity by using KPIs. For help, download the KPI Discovery Cheatsheet!

productivity of an accounting departmentTips to Improve Productivity of Accounting Department

While there may be a million little things that you can do to push the needle a little, we have found that there are a few focus areas that allow you to take the biggest strides ahead. When improving the productivity of an accounting department, start by using best practices, training and developing your team, automating as much as possible, communicating effectively, tracking progress, and outsourcing. Finally, walk through your accounting department to ensure maximum profitability.


Click here to download: The Smart Back Office for SMBs


Use Best Practices

The best way to accomplish this first tip is to continually read up on, research, discuss, learn from thought leaders, and attend events to catalog the best practices used by others to attain a productive accounting department. In addition, if you keep ahead on implementing the best practices, you should be able to accomplish company goals quicker. According to GAAP, some best practices include regularity, consistency, continuity, and recording sales when they are certain.

Training & Development

Unfortunately, some employees are simply not going to do the dirty work of reading up on the best practices. They are leaving that up to you ­– the financial leader. Those employees are going to continue to do exactly what they have done in the past; and therefore, reduce the chances of being more productive. So, it is up to the financial leader to provide training and development for the team. If the team hears and learns the same training and development sessions, then there is a huge opportunity to create a more synergized accounting process.

In his book The 7 Habits of Highly Effective People, Steven Covey says that synergy “is the habit of creative cooperation. It is teamwork, open-mindedness, and the adventure of finding new solutions to old problems. But it doesn’t just happen on its own. It’s a process, and through that process, people bring all their personal experience and expertise to the table. Together, they can produce far better results than they could individually. Synergy lets us discover jointly things we are much less likely to discover by ourselves.” The more your team is on the same page, the more productive your accounting department.

Automate

One of the great things about technology is that you can automate almost everything. While that could be bad news for those of you whose jobs could be automated, it is great for the productivity of an accounting department. Rather than laying off those employees, strategize how you can transition those people into more value-adding roles.

Communicate with Team

There’s a joke that you can tell extroverted accountants from introverted accountants by whose shoes they look at – their own or the other person’s. All jokes aside, it is critical that the financial leader get themselves and their team out of their office to communicate. During the hour or so when you take lunch or get coffee, ask one of your team members to join you. In addition to getting to know them better, see if they have any ideas about how to make the department more productive.

Identify Skills of Team

Part of communicating with your team includes identifying the skills of your team. Understand what talents they may have that was not on their resume. Assign projects to them in areas that they excel. Ask questions like: What’s the first thing that you like to do at the beginning of the day? Or if there is something that you could do all day, every day, what would that task be? When you identify the skills, talents, likes, and dislikes, you will be able to further develop your team.

Have KPIs

Identify those key performance indicators (KPIs) that indicate the productivity of an accounting department. Once you have identified them, use and track them. If you find your department sliding backwards, reassess and start the process over again.

If you are struggling to identify and track the KPIs that indicate the productivity of your accounting department, click here to access your free KPI Discovery Cheatsheet!

Outsource

If a specific job or task is not a core function of the business, explore whether it can be outsourced. For example in our retained search business, we have discovered that many companies are outsourcing their accounting departments to countries like the Philippines and Germany because it is more cost-effective for their organization. While that decision may be outside the norm, it is an opportunity to step up and be a financial leader. Outsource tasks and roles that can be accomplished at the same quality for a lower cost.


Click here to download: The Smart Back Office for SMBs


productivity of an accounting departmentWalk-Through Process

Finally, generate a list of topics to run through when evaluating the productivity of an accounting department. The Journal of Accountancy developed a questionnaire as part of a walk-through process checklist that can be accessed online (we have also included it below). When you ask yourself these questions, you’ll be able to better gauge the productivity of your accounting department and exactly where you need to focus.

Time

  • How much time are you spending on any given task?
  • Is it labor intensive?
  • How many people participate in the process?
  • Does it take excessive time to complete?
  • Is there a duplication of effort?
  • Are too many handoffs occurring?
  • Are roles and responsibilities clearly defined?
  • Is anyone performing similar tasks?
  • Are roles and responsibilities appropriate?
  • What is slowing down the process?
  • Do you require needless reviews or approvals?
  • What are the busiest times of the day, week, month and/or quarter?

If there is a task or job that is time intensive, judge if that job could be automated, outsourced, or done quicker. The goal is to reduce the cost associated with that task or job. Unfortunately, you are going to find that there are jobs that simply cannot be trimmed as they are essential to the business itself. That’s okay! But try to find and reduce the costs associated for as many tasks as possible.

Necessity

  • Is the step or process necessary to the company’s success?
  • Can you eliminate it without causing any damage?
  • Do you have more tasks to do because of a single task?
  • Is duplication of information necessary?

Automation

  • Can you automate a task?
  • Are you keying in the same data into multiple places? (For example, the accounting system, an Access database, spreadsheets, etc.)
  • Does a backlog exist?
  • How often are your deadlines missed?
  • Where is there a breakdown of a streamlined process?
  • Is there a person or a job that stops the production of financials?

Value Adding

  • Does a task add value?
  • How accurate is the data?
  • How much value can come from automating/outsourcing/etc.?

Conclusion

Streamline your accounting department by asking questions, automating, outsourcing, and find more profits and cash flow. Don’t continue to just be a cost center… Transform your department into a value-adding entity within the company! For help and tips to track your transformation, you need something to measure your performance. For help, download our KPI Discovery Cheatsheet and start measuring your accounting department’s KPIs today.

Productivity of an Accounting Department

Productivity of an Accounting Department

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7 Warning Signs of Fraud

warning signs of fraudUnfortunately, companies of all sizes can become victims of fraud. In fact, a study on fraud published by accounting firm KPMG International found “a very large increase in cases involving the exploitation of weak internal controls by fraudsters up from 49 percent in 2007 to 74 percent in 2011.” Thus, internal controls are a first line of defense and are important in any size organization. So, implement them to reduce the opportunity for fraud. Whatever the size company, there are some warning signs of fraud that are important to pay attention to.

7 Warning Signs of Fraud

1.  Is the person reconciling the bank statement also a check signer?

These are important duties to segregate. When combined, a person signing a fraudulent check can go on without being detected.

2.  Does your company have several bank accounts?

Multiple bank accounts make inappropriate movements of cash harder to detect. So, make sure you understand the business need for each bank account the company has and use as few accounts as possible.

3.  Do you have a budget to compare with your actual financial results on a monthly basis?

This is an important control in the detection of unauthorized transactions.

4.  Have you noticed a controlling personality or secretive behavior on the part of an employee?

This may be a sign that a person is being deceptive or needs to control people or the environment in order to conceal their activity.

(Have you ever heard of skimming fraud? It’s the most difficult fraud to detect.)

5.  Are there accounts on your financial statements that you do not understand?

Ask! If your question is not welcomed or answered to your satisfaction, then pay attention to this response.

6.  Financials that are not timely or closed on a monthly basis.

Lax or non-existent cut offs leave room for inappropriate entries in months long gone.

7.  Are employees related in your accounting department?

Part of a functioning internal controls system is the need for collusion in order to circumvent controls.

The Fraud Triangle

What is the motivation for an employee to steal?  The fraud triangle shows us 3 following conditions:

  • Pressure (motivation or intent to steal)
  • Rationalization (justification of dishonesty)
  • Opportunity (ability to carry out misappropriation of company assets.)

Well designed internal controls serve to mitigate the opportunity for fraud in your organization.

(Have you every wondered does fraud follow economic cycles?)

How to Reduce Fraud

What can you do to reduce the chance for fraud in your organization? First, remember that internal controls are necessary for all size organizations. Check out the following ideas that you will find helpful as you assess controls in your organization:

Live Ethics in Your Corporate Culture 

A culture of ethics starts at the top and you start by demonstrating it on a daily basis. We cannot emphasize this enough as it sets the bar for acceptable behavior in your organization.

Trust is Not a Control 

Trust is not a control, so design internal controls. Then put them in place for the position. Thus, they should not be for a particular employee, regardless of how trusted that employee is.

Pre-Employment Screening

Conduct pre-employment screening including background checks as appropriate.

Utilize Entire Team

If you do not have enough employees in accounting, then utilize others as part of your control system.

Have Different Signers

If your bank account reconciler is a signer, then find a different signer. Segregate the check cutting, signing and reconciling duties from each other.

Unbiased Reviewer

Have the company bank statements go unopened for review by someone in a management position who isn’t cutting or signing checks.

Choose Signers Carefully

Understand what authority signers have with company bank accounts and choose signers carefully. Add extra controls to your corporate bank accounts – an example is precluding any counter withdrawals so that all bank account withdrawals go through the check writing process.

Anonymous Alert System

Set up an anonymous way for your employees to alert you of any concerns/suspicions related to potential fraud within your company. Then take these alerts seriously.

Segregation of Duties & Controls

Segregation of duties and internal controls protect both your employees and the company.

If you want to reduce the fraud or detect fraud in your company, then check out our free Internal Analysis whitepaper. We have designed this whitepaper to assist your leadership decisions and create the roadmap for your company’s success!

warning signs of fraud
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