Effective accounting methods can result in increased profit margins. Poor accounting methods, on the other hand, will leave you flopping like a fish out of water. The choice is yours, but it’s an ongoing process that requires continuous analysis and care
You might be attached to your current accounting methods, reluctant to kill your darlings. But if there’s one rule in business, it’s that nothing stays the same and you need to adapt to prosper.
At Fully Accountable, we understand the accounting industry is always changing and you can’t afford to get complacent. We also understand the daunting tasks you face each and every day, the pressure cooker of trying to coordinate effective accounting methods across your entire organization. Whether you’re an eCommerce company, a small business just starting out, or an established, growing enterprise, the struggle is real. And no matter your accounting needs, Fully Accountable is here to help.
In this guide, we’re looking at the various ways you can address your accounting methods and optimize your processes so your operations are a finely-tuned sports car. You won’t leave without some juicy information you can implement in your business. We promise.
Tips for Improving General Accounting Procedures
Centralizing and Streamlining With a Shared Service Model
Part of achieving financial flexibility comes from modifying management strategies and relating those structures to executives and key stakeholders in an easily understandable way. The primary focus of your general accounting principles should be to leverage accounting procedures across the organization, resulting in lower costs with agreed-upon customer service standards.
Shared services for general accounting are an excellent way to accomplish this. They achieve several key benefits, including faster time cycles and fewer errors. They can also result in a faster annual close with fewer errors in the processing of journal entry items. Conversely, self-support roles (relying on other business units for general accounting) typically report more errors.
Clean and consistent data for general accounting presents an accurate representation of your organization’s financial transactions. You should have established data definitions and a standardized Chart of Accounts (COA).
The more common definitions and data governance you devise will lead to a more standardized COA. Organizations that implement more data definitions and data governance report better cycle times and efficiency KPIs. Additionally, more thorough COAs result in faster annual close times and fewer errors in journal entry for line item processing.
Standardizing Accounting Governance
Not only does standardizing procedures drive performance, but it also lays the foundation for automation. When you manage end-to-end process management, you increase the likelihood of generating effective KPIs. The more extensive common finance processes, the faster the monthly financial statement consolidation and annual close.
Pre-Close Activities Striving for a Continuous Close
No matter the size of your company, month-end processes are always a hassle. They frequently require overtime and manual data entry, collation, and analysis. Leading organizations implement technological solutions that perform these duties throughout the month. Instead of building an extensive archive of spreadsheets, there are software platforms that automate these tasks so your team can focus on analysis. This process is known as continuous accounting and it expedites financial data gathering and analysis.
Automating and Integrating Accounting Processes and Systems
Automation unlocks untapped performance opportunities for your accounting team. It allows them to focus on more advanced initiatives rather than bookkeeping and general accounting processes. However, when it comes to automation, companies need to first understand and streamline their processes.
Cloud-based tools are becoming more and more popular and affordable to organizations of sizes and capabilities. A study published in Accountancy Age found that 78 percent of small businesses will rely on cloud software as a delivery method for their general accounting procedures. Automating data also depends on your ability to generate quality underlying data.
If you streamline your processes and feature high-quality data, automation can generate more reliable KPIs. It can also lead to faster journal entry line items and consolidated financial statements with fewer FTEs.
Leveraging Emerging Tools and Technologies for General Accounting
To remain agile and efficient, your business must continuously look at emerging technologies for general accounting. Whether robotic process automation, cognitive computing, or blockchain technologies, the more advanced you can make your processes, the easier your general accounting practices become. However, you need to make sure your infrastructure justifies the technology.
Accounting in the Cloud
Cloud accounting is hosted and maintained in central servers accessed via the internet. This means your accounting team and executives can access all of your pertinent financial details from anywhere in the world. Instead of backing up all of your important financial information on an on-site server, you can store everything in the cloud. This gives companies increased flexibility in their accounting procedures and makes it easier for remote teams to coordinate financial directives.
Treat Accounting As More than Compliance
There is a tendency for companies to try and minimize accounting to bookkeeping and compliance, but it’s much more than that. Accounting should generate business insights and shape your cash flow initiatives. You should be able to set your marketing strategy so you can ensure the optimal outcome for your business.
What Are the Most Common Finance and Reporting Processes that Need Improvement?
Accounts Payable and Receivable
Issues with your accounts payable and receivable can drastically reduce your cash flow when you need liquidity most. Additionally, not paying your bills on time can affect your reputation with vendors and hinder your brand reputation
You can address these issues by performing an honest assessment of speed, accuracy, and reliability. Understanding how much money you have coming in versus your outgoing expenses will prepare you for financial obstacles that inevitably arise.
Labor, cost-allocation, and reporting demands make it difficult to control and maximize your cash flow. Cash flow inefficiencies can also lead to capital losses and solvency issues. The bottom line is, when you don’t have your cash flow management in order, you’re dealing with a high-risk accounting environment.
Financial Planning and Analysis
Your financial planning and analysis team should be able to rely on the data you generate and the automated processes you implement. Having accurate data and reliable processes is the most important step to being able to provide nuanced financial insights.
Auditing and Compliance
The basics of accounting still stand: you need to worry about your tax compliance. To avoid any potential roadblocks to your business’s success, you should be able to archive all of your financial information in one location to ensure you don’t leave things to chance. Inefficient, ineffective practices rely on manual work and they leave compliance a messy, time-consuming process.
HR and Taxes
Your accounting processes can easily impact other areas of your business such as HR. Inefficiencies in your accounting process can impact payroll, stock compensation, and benefits. For example, vesting schedules depend on underlying processes that require calculation and maintenance for strike prices, basic information, and other critical data.
Your organization’s income taxes also rely on accurate data that stems from all areas of your organization. The last thing you need when you’re trying to grow your business is tax liabilities. Efficient accounting processes allow you to grow unencumbered.
Process Improvement Lifecycle: Improving Your Finance and Accounting Processes
Now that you understand where to look to improve your accounting processes, you need a better idea of how to change them. You should be able to break down your processes into stages of improvement to ensure you optimize them fully.
Breaking your processes into separate stages lets you examine and test your strategies. It also frees you to test your processes at any development stage. Whether you have old processes or you visited them last year, breaking them into stages will keep you on track. The most successful businesses continue to innovate regardless of what stage they find themselves in.
Assessing Existing Processes
Assessing your existing processes is one of the most difficult stages in creating more efficient accounting methods. You need to perform an exhaustive, methodical, and specific analysis of your existing processes to identify your areas of improvement. In this stage, you are separating each piece of your accounting puzzle and trying to determine where they fit within the whole.
The most glaring question you should be asking yourself during the assessment phase is whether your operations are keeping up with your long-term growth projections. Whether you’re integrating multiple acquisitions, adding more BUs, or changing business lines, your processes must reflect the goals and direction of your business. Though this process can be arduous, it’s still necessary.
While conducting an in-house assessment, you need to ensure your proposed solutions take all aspects of the business into account. From compliance to automation, your prospective solutions should encompass the various effects on departments such as HR and IT while streamlining your accounting processes. While improving your strategy, you need to keep connectivity between your team, various departments, stakeholders, and customers in mind.
The redesign portion of your improvement process is where you start to utilize all of your data and brainstorming. You’ve identified where you need to streamline processes, you’ve analyzed the data for proposed solutions, now you need to hash those proposed solutions out.
What are the best ways to implement your proposed strategy? How are you going to unveil it to the various departments? The possibilities are endless. That’s why you need to take the reins and make tough decisions about these new processes.
The whiteboard approach is often effective during this stage. Map out the processes and create flow charts or courses of action to deliver to your team. During this stage, you design a plan to transform procedures into operations.
Putting the Proposed Redesign into Action
Communication will determine the efficacy of your new operations. How can your team act on these new operations and what day-to-day responsibilities will they change? If you don’t effectively communicate your new procedures, adoption will falter, and you will find yourself where you left off.
To plan implementation, you should create company-wide documentation and archive these documents in an easily accessible format. Perform training exercises and avoid implementing the new processes until your teams prove they are ready to adopt them.
After implementing these procedures, mid-management needs to be able to generate reports on the smoothness of the adoption. People have a tendency to return to old habits after changes disrupt their daily routines. It’s up to your managers to ensure the implementation doesn’t revert after a short period.
Optimizing the Process
Processes are never complete. Accounting methods are no different. Optimizing your procedures is ongoing, and you need to look at their inefficiencies to maximize their potential. Things change. Personnel, software, the marketplace, and your growth goals continuously adapt; so should your accounting methods. The more often you try to refine your processes, the more prepared you will be when you return to an assessment stage.
How to Approach Improving Your Accounting Methods
Break It out Into Stages
Depending on how long it has been since you assessed your processes, you might feel overwhelmed, which can result in further procrastination. When it comes to assessing your accounting methods, you should eat that frog, but it doesn’t have to be in one bite. Focus on the areas of improvement that will lead to the most value for your cash flow. Then work outwardly from there.
Faster Monthly Closes
One of the easiest areas to streamline your accounting methods is reducing the time allotted for your monthly close. How many different tasks does your monthly close involve? Can you optimize any of these tasks?
You will likely find some no-brainers in your processes that feature easy implementation. Improving your monthly close speed results in more timely, relevant insights for decision-makers such as executives or stakeholders. The more timely and accurate your data, the faster you can provide business insights.
Technology Can’t Fix Everything
Yes, automation is important, but it can’t take the place of sound financial processes. If your processes are flawed, slapping a technological band-aid on the wound won’t stop the bleeding. Instead of looking for the quickest technological fix to your operational woes, opt for a detailed analysis and solution that can be used in tandem with automated technologies.
You Can’t Always Rely On What Worked In the Past
Change is difficult to face, especially if what you’ve done has always worked up to this point. However, since you can always optimize operations, the early adopters of new methods are the ones who benefit the most.
When analyzing your operations and accounting methods, examine those with the longest tenure first. Even if you decide the procedure still works overall, there will likely be one or two areas for improvement.
Communication Is Everything
Interdepartmental communication streamlines your proposed accounting method changes. When it comes to adoption, if one department stays entrenched in the old ways, you won’t be able to tell whether new procedures work. To generate accurate, thorough data, you need wide-scale adoption. Clear communication accomplishes this.
Partner With Fully Accountable Today to Streamline Your Accounting Methods
Assessing and modifying your accounting methods is an ongoing process no business should undertake alone. The experienced professionals at Fully Accountable are here to devise effective accounting methods that lead to results. No more wasting your precious time and resources.
Our fractional CFOs can partner with you when you need them most to streamline your accounting methods into a well-oiled machine you never have to fix. All it takes is a few adjustments and your accounting methods will be running as smoothly as a freshly-made Tesla.
Contact us today to watch your accounting methods start taking care of themselves.