How to Assess or Evaluate Your Accounting Department
Results from a Client Assignment for a $250 Million Multi-Location Retailer
On several occasions I have been engaged to assess a business’s accounting department and make recommendations for improvements. My process typically includes interviews with staff members, asking staff members to complete task and activity lists, review of organizational charts, follow-up questions, and general observations. My experience suggests that many companies have the same problems and issues. Below I have listed the results of one such assignment, for a multi-state, multi-location business with sales of about $250 million a year. If you are having problems in your accounting department, compare the results of this project to what is going on in your business. My report could be a useful guide in assessing your own accounting department.
Workload
There is a common complaint from the staff that there is too much work. As a result, staff say they are stretched too thin, and work falls through the cracks. Further, as a result, they are under stress. My observation is that their assessment is correct. Of course, this begs further questions: Is there just too much work? Are staff members engaged in unneeded or unnecessary activities? Is it a man hour problem, a process problem, or both?
Organizational Structure/Line of Reporting
The organizational chart for the group needs to be updated and reporting lines clarified. Some staff were unclear about who exactly they reported to, or who reported to them. The org chart shows HR reporting through the CFO. For an organization that has a significant labor force, and where culture would seem to be an issue the question comes up should the head of HR (Director of People Resources/Experiences) report directly to the CEO? How should the accounting and finance group be organized for optimal performance?
SOPs
There are no properly documented standard operating procedures (SOPs) for various tasks and activities, making training more difficult and increasing the risk of work disruption during employee absences or employee terminations. There are many tasks that only one person in the department knows how to do. No backups, cross training, or redundancy. There should be SOPs for all major activities and cross training for all important functions.
Performance Metrics
The group does not track performance metrics. Therefore, it is very difficult to identify where workloads are increasing, what tasks are taking up time, where additional staff are needed, where management’s focus for improvements needs to be and the cost/reward benefits of making changes. Performance metrics should be tracked to evaluate workloads, workforce needs and process improvement.
Reviews/Evaluations
Staff report that reviews have not been performed for many years, and that there is no regular or formal process for reviews. Reviews should be performed both as a process for evaluating what staff are doing well, but also as a method of encouraging staff to improve skills, knowledge, and processes.
Job Descriptions
There are no job descriptions for any positions. Every employee should have a job description so there is a clear understanding of what that person’s job entails and what are the expectations for the job.
Environment/Working Conditions
The working environment in many areas is shabby, dirty, cluttered, crowded, full of old boxes and files dating back years, in need of paint, disorganized, run down. The working environment should be improved as the work environment can significantly affect work performance and employee morale. Further, some of the improvements could be made with very little investment in resources.
IT/Technical Support
Staff complain that the high turnover in the IT group has caused problems in getting support for IT issues and that needed business machines such as printers are not operational. Effective employees need adequate support from IT and need business machines that are up-to-date and operational. Need to assess the technical needs of staff and make changes to ensure they have the tools needed to do their jobs as efficiently as possible.
Goals/Big Picture
Staff seem very focused on day-to-day tasks and activities. There are no short- or long-range goals or objectives for improving processes, increasing efficiency, and solving problems. The department should have stated goals and objectives for performance and for improvement.
Team Effort/Coordination
The staff report that department meetings and planning sessions are infrequent and/or non-existent. General problem solving, better cross functional support, cross training, and process improvements can be enhanced by regularly scheduled department-wide meetings and basic operational planning.
Paper
Clearly the trend in offices today is towards the paperless office. Numerous studies have shown that eliminating paper increases productivity. Obvious throughout the department is a proliferation of paper, which certainly must be slowing down productivity. Processes should be put into place to replace paper documents with scanned documents, and paper documents should be shredded as soon as possible after receipt.
Main Computer Operating System
The main backbone software of the company is XXX. The version of XXX that is in use has been customized many times but the people who did the customization are no longer with the company, so working with the software can be a challenge. Further, when the new company was started the accounting department did not create a new entity in XXX, so the system contains data from an old bankrupt company resulting in work arounds and problems when running reports and getting data. The XXX software is unsupported. Given the importance of inventory management and control, and properly reporting revenues, having a reliable software platform to operate the business is extremely important. Short term we should investigate alternatives to complement XXX, and long term should look at replacing it with a current version of XXX or another software platform. Also, the old company records and the new company records should be separated.
External Systems and Processes
The accounting department relies on input from stores and warehouses to produce reliable financial data. In several instances, processes that feed information into the accounting system from outside of the accounting department are weak and poorly monitored, creating additional work for accounting staff and further, possible creating unreliable accounting data. The accounting group must take an active role in working with operations people to ensure policies and procedures are followed correctly to ensure the integrity of information in the accounting system.
Employee Morale and Spirit
Despite some of the problems identified previously, employees have a favorable opinion of the company. They seem willing to roll up their sleeves and do whatever is needed to make the company successful. However, they also point out that the company does not provide some of the basics that other companies provide, such as coffee. Further, staff must come out of their own pockets for staff celebrations. A small budget for employee celebrations goes a long way to boost employee morale and spirit.
Management
The department suffers from a lack of management and direction. The weaknesses outlined above should be the focus of the department management (CFO). However, the CFO does not have the bandwidth to engage in management activities as the CFO’s time is entirely taken up with running spreadsheets, managing cash flow, and engaging in activities that should be completed by staff members. The CFO spends much of the day working with the company’s lenders, working with the company’s consignment partners, monitoring bank accounts, managing inventory, running forecasts, in meetings, putting out fires and similar activities.
Communication
Employees and management do not seem to communicate effectively with each other. Management is constantly asking the accounting department to produce more, but never discussing limitations on resources, recommendations for improvements or priorities. As one employee put it: “The path of least resistance has been adopted by people in the company. Don’t bother arguing with the CEO. Even when you think you’re right, you’re wrong with him.”
Team Players
The CFO’s ability to move the team forward will be hindered because of the makeup of the current team. Many have a long tenure with the company, yet there is no cross training so no one else can perform their jobs, and some are overpaid for their positions. It is going to be a challenge to get them to “buy in” for much of what I recommend needs to be fixed.
Recommendations
My report to this client provided a list of recommendations that are obvious based upon the results of my analysis listed above. Unfortunately, even though the CEO agreed with my report and my recommendations, there was limited support from him to make the changes necessary to fix the problems. My understanding was that very little of what I recommended was ever implemented, and the CEO who engaged me continued to have significant performance issues with his accounting department.
The one recommendation that I made, that was completely ignored, was my recommendation that the CEO hire someone to run the business, suggesting he reduce his scope of work to a few specific activities for which he had a genuine talent. He failed to connect the poor performance of his accounting department with his own management style.