Accounting Process Improvement: How to Reduce Inefficiencies
Inefficiencies prevent your accounting team from responding quickly to changing business demands. When left unresolved, its ripple effect on your organization can be troublesome — from delayed projects to unguided financial decisions. Developing an accounting process improvement plan can help you address this. Here's how.
This article covers:
What is accounting process improvement?
Accounting process improvement is the practice of refining your existing workflows to increase your department’s efficiency. It usually involves the use of technology to achieve any of these goals:
- Automate manual, repetitive and time-consuming tasks
- Free up the time of your in-house accounting professionals. This way, they can focus on other higher-level, urgent accounting duties
- Provide data-backed insights to decision-makers
- Prevent manual data entry errors
- Fast-track the turnaround time for completing projects
- Create a formalized set of guidelines to assist each team member to adopt the new processes
Making the best use of your accounting staff is crucial in building a scalable accounting practice. It’s important to make sure that your operational processes and procedures are efficient and productive. Thus, as a CFO, department head, or team leader, it’s your duty to implement initiatives that promote accounting process improvement.
Common causes of inefficiency in accounting departments
Finance and accounting belong to a transformative industry. With its sheer amount of data and ever-changing regulations, finance leaders must strive to streamline their processes. Through this, they can keep pace with their requirements and make smart business decisions based on real-time data.
But how do you do this?
Understanding the root causes of inefficiencies is one of the first steps you need to take. It can show you what and how you can address the issues that slow down your team.
As a guide, here are some of the common inefficiency issues in accounting departments.
1. Manual, repetitive and time-consuming tasks
Aside from its slow turnaround, these types of tasks also demotivate and wear out your skilled talents. Its error rates are also higher, which can cause more delays due to the corrections it needs.
2. Organizational silos
Siloed systems, processes and teams can prevent your accounting team from obtaining a unified view of the company and its financial goals. As a result, it limits your ability to deliver quick and informed decisions.
3. Unclear designation of duties
Reaching out to the wrong person for help or approval can only lead to redundancies and workflow gaps. That’s why on top of their individual roles and responsibilities, your accounting staff must also know who handles certain duties inside and outside of your department. With this information, they can escalate their concerns to the right person and get the answers they need faster.
4. Outdated tools and processes
Tools and processes become obsolete with time — the ones you've used to make your accounting processes more efficient 10 years ago may not be effective anymore. Every year, faster and more powerful technologies are being released for commercial use.
If you keep using your old software despite these developments, your processes will be comparably slower when benchmarked with today’s industry standards.
5. Lack of feedback
You’re leaving your accounting staff in the dark if you fail to give them feedback about the quality of their work. Without it, they may feel clueless about what they need to improve to deliver better accounting support.
As a finance leader, it’s your responsibility to keep them in check — whether it’s about acknowledging their satisfactory performance or giving them constructive feedback for improvement.
By understanding these efficiency killers, you can shift your focus on identifying, evaluating and implementing the most appropriate solutions.
Key areas you must focus on for improvement
Below are some of the accounting tasks you can prioritize to increase your department’s efficiency rate.
- Accounts payable and receivable
- Tax compliance and reporting
- Admin-related responsibilities
- And any manual and repetitive accounting tasks
It's also worth evaluating your current accounting software — including its integrations — to see if you can make any updates.
How to improve accounting processes and procedures
Here are the seven (7) ways to reduce inefficiencies in your accounting department and, in turn, improve its processes and procedures:
1. Ensure that your staff is sufficiently trained
Mitigate the risk of inaccuracies by assessing the capabilities of your in-house staff. See to it that they have received the proper training to perform their tasks and use modern accounting tools.
2. Use cloud accounting and data analytics tools to address inefficiencies
With proper use and extensive working knowledge, cloud accounting and data analytics tools can help you work faster and smarter. Your accuracy can also improve.
Still looking for the right cloud accounting software? Check out this list.
3. Get feedback from your staff
During non-peak times of the year, set aside time with your staff to ask for their opinion and suggestions. If they were in charge of the firm, what do you think would they have to change? By finding out what works and what doesn’t for your staff, you will find more ideas for the development of cost-reduction strategies and initiatives for accounting process improvement.
4. Reassess your processes regularly
Do you have clients that create too much drama or unnecessary stress? Which parts of your processes are not working, and which aspects of your client engagement system can be improved?
These are questions that your management team and your staff should revisit during off-peak seasons. By determining how your processes and procedures can be improved, you can zero in on what works and what does not.
5. Use a project management software
If you’re handling a big accounting team, keeping everyone’s progress in check manually can be a ground for inefficiency. It's counterintuitive, especially if you also need to work on other critical duties such as the implementation of your company’s ESG strategies.
A clever way to resolve this concern is by using reliable project management software. With this tool, you can track your team’s performance, assign the right tasks to the right people and review any finished tasks all in one place.
6. Standardize your accounting processes
When you’re done with improving your accounting processes, standardizing and documenting those processes will be your next step to ensure seamless implementation. Aside from the actual processes, it’s also crucial to assign process owners who will oversee the adherence of your team.
Moreover, a standardized process also comes in handy each time you onboard a new talent as it can help them adapt more quickly to your team and methods of working.
7. Outsource non-core accounting tasks
While accounting technology can streamline most processes, you’ll still need a reliable accountant to manage your data. If your in-house team is currently at full capacity to handle this, outsourcing can be an ideal option.
Delegating your non-core tasks to a specialized accounting outsourcing company is the fastest way to increase your department’s capacity cost-effectively. Through this, your in-house accountants can focus more on higher-level, urgent tasks.
Just remember to work with a reliable accounting outsourcing company with first-hand experience in your niche and a working knowledge of your region’s accounting standards.
Get scalable accounting outsourcing support
Accounting process improvement should be the responsibility of everyone in your firm. If needed, you can even get an outsourcing partner who can scale with you as you grow your accounting department. Download our whitepaper, The Rising Frontier: Harnessing the Power of Business Analytics, to find out how D&V Philippines mobilize accounting technology to streamline our service delivery. You can also contact our experts to get a customized quotation for your accounting needs.
This article was first posted on 2 January 2018 and has been edited ever since for clarity and comprehensiveness. Edited by: Mary Milorrie Campos