Best Practices For Your Accounting & Finance Department

Assessing Your Accounting and Finance Department’s Effectiveness

For many company owners, assessing the performance of their accounting and finance department is challenging. On the surface, the staff seems very busy and engaged. They provide monthly financial statements, collect money from customers, pay bills and taxes, etc.  When something needs to get done, and there is not an obvious person to be held responsible, the task typically gets assigned to and handled by a finance or accounting resource.

But getting stuff done should just be the proverbial “table stakes.” The accounting and finance department should be held to a higher standard of performance. Beyond keeping score and making sure money is paid and collected, the department should be providing timely, accurate, and actionable financial reporting that help drive sound business decisions throughout the organization.

With that in mind, it is helpful to look at your department’s performance relative to critical best practices:

• Monthly financial statements:
  Accounting circulates reports in time to help drive the next month’s results. An achievable goal is producing a revenue flash by day 1 or 2, a profit flash by day 4 or 5, and final monthly statements no later than day 10.
• Forecasts:
  Finance, with business input, forecasts monthly, or no less frequent than quarterly, to reflect the latest view of what is achievable for planning purposes and the opportunity to course correct for the near-term and current year.
• Knowledge of profit pools:
  Finance provides company leaders with visibility into their most profitable products, services, and customers and those where improvements are needed.
• Strong operational cash flow:
  The business grows profitably without constant equity infusions due to attractive terms with customers and vendors. AR and AP aging are generally in line with the agreed-upon terms, with extended receivables comprising less than 10% of the outstanding balance.
• Annual plan (budget):
  Finance leads the process with accounting assistance, with real involvement from other departments, so everyone “owns” the plan by having a top-down and bottom-up approach. The company completes the plan no later than the end of the first month of the calendar or fiscal year.
• Ownership of revenue drivers and cost centers:
  Departments receive information monthly to assess and manage their performance relative to the plan they helped develop.
• 13-week cash flow forecasts:
  Finance updates the forecast weekly by the end of day Monday with sufficient detail and accuracy to minimize disruption and surprises.
• Organizational financial acumen:
  Accounting and finance educates other departments so they understand how their actions affect financial results and cash flow and either make good judgments or reach out when they need assistance.
• Effective decision making:
  Accounting and finance directly engages in or creates tools to lead or assist in costing and estimating new products and services, designing new compensation plans, and evaluating new markets or acquisitions.
• Optimal cost of capital:
  The capital structure enables the company to operate effectively managing with an appropriate level of debt to improve equity returns without any real or intangible costs of financial distress.
• Strategic involvement:
  Accounting and finance leaders should help maintain discipline in following a strategic plan they help shape.

This level of accounting and finance performance might seem too aspirational, especially with a limited staff to handle all the above activities. Further, the cost of adding more full-time staff or upgrading the talent might be too expensive for some companies. When faced with this challenge and trying to determine how to prioritize where they should utilize best practices, business owners should consider engaging an experienced and talented fractional Controller or CFO. Leveraging this talent pool can be a cost-effective solution to achieve those goals to drive significant shareholder value.

Interested in Client Accounting & Finance Services for your business? Keiter provides flexible access to highly skilled accounting and finance professionals without the overhead of hiring a full-time controller or CFO. Contact your Keiter Opportunity Advisor| Email | Call: 804.747.0000 to learn more.