Accounting Department “Tune-Up"
Accounting Department “Tune-Up”…
As a company grows from one level of business to another, its functional departments must make similar transitions. A department’s organizational structure is set in place based on the processing requirements at the then current processing level. When a company experiences sustained growth, it eventually reaches a level where the existing structure is no longer appropriate for the new level of volume. Aside from the processing inefficiencies, information flow can be significantly impaired. In the accounting department, any obstacles to the free flow of information to management can have serious consequences.
Drawing on our experience with high growth environments, we evaluate the accounting department processing flow to determine relative priorities. Based on those priorities, we redefine and partition tasks to effect efficient processing at the current volume level (and beyond). Through the teaching experience of our consultants, the office staff is effectively trained to meet their altered responsibilities.
Putting the “Small” in Small Business:
- Next, we evaluate the structure and reporting ability of the current accounting system. Often, the accounting system architecture is determined at the time of installation, and with the popularity of QuickBooks, it is frequently set up by someone outside the field of accounting.
- Thus, when new opportunity presents itself, the opportunity is exploited, but frequently, long needed adjustments, coupled with the ones necessitated by the recent growth are not made to the financial reporting system to collect all of the relevant data.
- When a company experiences such growth, relevant financial information must be communicated to management in a timely manner. If the accounting system cannot provide such information, it has to be provided manually if it is to be provided at all. As a result, financial staff is occupied with manual reporting tasks and both the accuracy of the manual reports and the financial control of the business risk being impaired.
Anticipating Cash Flow
Such forecasting can provide advance “notice” of cash flow excesses and shortages – both important pieces of information for managing debt. Remember, when you borrow money, the lender usually wants to understand your strategy for paying it back.
Forecast -vs- Budget?
We like to use the term forecasting. For the larger organization, the budgeting process is more of a tool to restrain the spending of its managers. For the small business, the forecasting process helps the company’s management to understand the varying costs of varying levels of volume.
Get A "Future" Shock
To meet new challenges and exploit new opportunities, this planning process is essential. A carefully effected forecasting process allows management to determine appropriate expense and revenue levels. These levels determine appropriate profit expectations. Cash flow is not far behind!