Diagnosing accounting department efficiency can be difficult. It’s a subjective process that depends on a variety of factors such as company size, department size, industry, business complexity and workload. Are you on the fence about whether this is the right time for your business to take steps to make your accounting department more efficient?
Here are some common indicators that there might be significant gaps in efficiency and productivity:
1. The month-end close process seems to take a long time.
Does your accounting department have a formal month-end close process? Does the department follow any checklist or guidelines each month? Do your accountants seem perpetually busy and never have enough time?
A high-functioning department should be able to fully close its books in fewer than 10 days. Closing the books each month is one of the most important functions of any accounting department as it finalizes your numbers for the period. If these numbers are in a constant state of fluctuation due to ongoing journal entries, invoicing or bills that weren’t recorded previously, tracking company performance will be difficult. Given that management relies heavily on financial data to make decisions that impact the business for the future, delays in closing can significantly impact this decision-making ability and the profitability of the company.
2. A process or multiple processes are broken.
Is the accounting department the source of many of the everyday fire drills and bottlenecks? Are there agreed-upon methods for certain processes, or do team members each do things differently?
Your goal should be consistency across the entire department.
Even in 2021, where it is assumed that everything is digital and automated, most companies still operate with very manual processes. Manual processes are time-consuming, inefficient and prone to errors, which can cost the organization time, money and lost business opportunities.
Even having a process that works 80% of the time is a sign the process doesn’t work and needs to be fixed. By automating processes, you can make your accounting department more efficient—and shift their work to managing, analyzing and interpreting data, rather than manual, clerical work. When employees have more time to perform their work, they also feel more empowered to innovate.
Want to learn more? Read about automation and system selection in our Automated Budget & Forecasting Tip Sheet.
3. There are frequent communication gaps.
Is the department overly reliant on email as the primary method of communicating and sharing data across the organization? As good of a tool as email is, it isn’t designed to run your business processes. And, far too often, employees allow email to drive their day. This reactive, rather than proactive, approach often results in miscommunication, inefficiencies and additional delays in work product. Miscommunication may also indicate that the accounting staff are too busy with clerical or manual tasks. These tasks are the source of wasted time and efficiency, which ultimately cost the company in real dollars.
It is important that communication be transparent and that all employees within the accounting department have access to the same information. Through automation and process improvement, your organization can drastically cut down on the volume of daily emails and in turn make your accounting department more efficient. This allows more time for staff to focus on productive activities that drive revenue and profit.
4. Customer satisfaction from the accounting department continues to be poor.
The accounting department should serve as part of the back office for your organization. Poor customer service is nearly always the result of manual or broken processes. Often, an accounting department relies on many separate, manual spreadsheets to help them do their work. While this may appear to increase productivity, if not managed properly, it can also lead to lost productivity, mistakes and inefficiency.
Does the team work well together, or is their work siloed? Are requests to the accounting department handled quickly, or is there a bottleneck due to the accounting department’s workload?
As the saying goes, “garbage in, garbage out.” As all data ultimately flows through the accounting system at one point or another, data-quality issues are often attributable to broken or inefficient processes. The end result is poor customer service from the accounting department to your organization’s internal and external stakeholders. Reports and other financial data should be easy to produce, requests should be handled quickly and the information provided should be accurate, relevant and meaningful.
5. Your accounting team has high turnover.
Is there high turnover in the accounting department? This can be a sign the employees are overworked, which can lead to burnout. Additionally, overwork can drive new employees to look for the exits shortly after they are hired, making it harder to fill new positions. Your more-tenured employees lose critical time for performing the core functions of their jobs if they are constantly training new people. The ripple effect from this vicious cycle inevitably compounds and causes further delays with the work needed for the department to function at a high level. In turn, these pitfalls create additional barriers to further innovation and automation.
6. Accounting systems need an upgrade.
Does your accounting team spend more time wrestling with the accounting system than doing their jobs? If so, you may need to consider whether or not the accounting system is meeting the needs of the business. Accounting systems are designed to make life easier, not more difficult, so if your system isn’t improving your team’s efficiency, it’s not doing its job.
Some of the warning signs to look out for are:
- Employees work nights and weekends to catch up on basic accounting tasks.
- Much of the time spent on accounting duties is data-entry heavy.
- Basic accounting tasks are pulling people away from growing your business.
- The month-end closing and reporting process is slow.
- The financial reporting has a high error rate.
- Financial reporting is not timely.
- Financial reporting is not meaningful.
Systems can have a significant impact on accounting department efficiency and your whole organization. If your systems are not able to satisfy the reporting requirements of your organization, it might be time to consider implementing a new ERP. Because many businesses have numerous standalone systems that are not integrated with each other, this can also be the root cause of delays for timely and accurate financial reporting.
Seeing signs you can make your accounting department more efficient? Team up with a consultant.
If you find that you need to improve accounting department efficiency, working with a consultant is a viable path forward. This provides several benefits:
- The automation process is usually not an ongoing event. The need for consultants is usually temporary.
- External consultants will allow your team to continue to focus on their core jobs and your business during the automation process.
- Consultants can help you analyze your business and identify inefficient processes and areas of opportunity.
- Consultants can focus their individual expertise in many different areas of your company, depending on your needs.
A common myth is that process automation is only for big companies. What many companies don’t realize is that the root cause of their day-to-day problems is a lack of process automation. By attacking the root cause of the problem, you can free up more time to focus on the business.
Inefficiency is an expensive proposition, costing your company money and eating at your bottom line. While automation takes some upfront time to build and implement, the cost savings and gains in efficiency on the back end are significant.
