Steps to Streamline your Accounting Department
Streamlining accounting departments can be a daunting task and more often than not the simplest approach is overlooked. However, keeping it simple is generally the best course of action to take when trimming the fat.
In many accounting departments the day-in-day-out tasks were created a zillion years ago and have become a part of the fabric that tends to be outdated. The problem is no one asks why? If you are interested in improving efficiency and uncovering outdated or ineffective practices, consider conducting an “S.W.O.T.” analysis of your department.
The following is a list of tasks which perhaps served a purpose at some point but are now obsolete. If you have been tasked with improving the efficiency of the accounting department, take stock and ask if the assigned tasks are something your team should spend its time on. Is it adding to your bottom line or ultimately costing your company time and money?
• Saving return envelopes enclosed with invoices
For those “greener” folks go ahead and recycle these and use your own envelopes. You will waste more energy trying to file envelopes, only to couple them with bill payments.
• Stamping the received date on invoices that already have a received date
Some get a sense of satisfaction in the very act of stamping, but today we have accounting software to keep track of things like dates, so there’s no need to double-up on the task at hand.
• Requiring approvals for invoices with PO numbers
This adds a step and slows down the process. The only approval needed at this point is confirmation that the product or service has been accepted and/or completed.
• Requiring an exact three-way match
In an ideal world, the PO, the invoice and the receiving documents match dollar for dollar every time, but accounting professionals know that is not always the case. Investigating every single discrepancy without regard for the amount adds time and significant expense to the AP process. More often the time invested in the problem exceeds the amount of the discrepancy.
• Implement a variance or tolerance limit
Establish a variance limit where both AP and purchasing feel comfortable. Invoices that fail to comply with the three-way match but fall under the limit should move along in the process. , If this becomes an issue with a vendor, purchasing should contact that vendor to ensure they improve their invoicing practices.
• Requiring a review of voucher packages
Looking at the voucher package is a process that adds little to the overall AP process.
• Requiring approvals for all non-PO based invoices
This process is probably the one that causes the most headaches for the AP department. Consider establishing a “negative assurance” process for these types of invoices.
• Spending too much time tracking down approvals on every invoice
Set a dollar limit for invoices requiring approval. Email is also a great tool to get approval. Instruct managers that if you do not hear back on an approval by a certain point, the invoice will be paid.
• Requiring two signatures on checks
The two signature rule can be an effective practice, providing the signers review what they are signing. However, many organizations routinely require two signatures on far too may checks. Ask what value does this step add? Then consider excluding it or raising the dollar threshold.
• Over reporting
What people really want is the information that is relevant to them presented in a concise manner. Decide whether monthly versus weekly reporting works best and implement the most efficient reporting process for your business.
No one ever became a visionary in business by sitting back and being afraid to challenge the status quo. To streamline your process and reduce time consuming, inefficient practices ask questions and think systematically. It’s only when we step back to assess the situation that we can identify strengths and opportunities and eliminate weaknesses and threats.