If you ask some business owners why they do things a certain way, they might answer, “Because we’ve always done it that way.” But with all the changes that have taken place in the financial and accounting realm, doing things the way you’ve always done them could be costing your business in terms of lost efficiency and profits. Here are four considerations to help modernize your accounting processes and systems.

1. Automate payables

If you’re using traditional paper-based processes to manage accounts payable, you could be wasting time and money. Automation technology solutions can help you streamline the payables process. The result is greater efficiency, lower cost, more security and the ability to capture early payment discounts that may be available.

With most AP systems, invoices are scanned in and posted automatically to the system based on the purchase or invoice number. The person responsible for reviewing the invoice (for example, the payables clerk) makes sure everything matches and approves it for payment if it does. The invoice is then paid electronically based on the payment terms negotiated with the vendor.

2. Accelerate monthly accounting tasks

There’s no reason to wait until month end to reconcile bank accounts. Daily reconciliation provides several benefits, such as catching payments in transit that have been cashed but not recorded. It also can help speed up monthly closings by eliminating the reconciliation “crush” at month end. Consider purchasing software that can read bank records daily, automatically match outstanding checks that have cleared and update the payables check file.

In addition, you don’t have to wait for standard monthly entries that remain the same, such as depreciation, prepaid expenses, and property tax or insurance accruals. Integrated software can shorten the monthly closing lag by feeding subsystems (such as accounts payable) into the general ledger. Starting your month-end closing process sooner puts less pressure on your accounting staff and improves the accuracy and timeliness of your financial statements.

3. Use corporate purchase cards

Corporate purchase cards (or p-cards) can be issued to at least one employee in each department to cover small items — say, those under $100 — as well as travel and entertainment expenses. This enables accounting to make a single payment for multiple small items, instead of processing a lot of small-dollar checks. As an added benefit, most p-cards offer points and cash-back rewards that can be used to pay expenses.

4. Go paperless

Many businesses have largely converted their paper processes to digital to help lower expenses, increase efficiency, meet compliance regulations and be more eco-friendly. Using an electronic document management system could save up to 50% of physical and digital storage space and up to 40% on document handling. It could also reduce the time needed to create and modify documents by up to 90%, according to Gartner, Inc., a research and advisory firm.

While it might not be possible to completely eliminate paper, plenty of documents can be digitized. These include contracts, invoices, payables, payroll documents and employee records. Several off-the-shelf document management solutions are available to help you convert from paper to digital.

Ready to update?

Just because you’ve always done things a certain way doesn’t mean it’s the best way. Talk with your management team about which accounting processes and systems might be due for a makeover. We can also do a complete assessment on the effectiveness of your accounting system and how you’re using it. Contact us for more information.

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A leadership departure in your accounting department can create turmoil, at least temporarily. However, it also provides an opportunity to assess the department’s performance and create a vision for how it should perform in the future. Here are four questions to address if your CFO or controller leaves.

1. Is the job description up to date? During the prior leader’s tenure, the needs of your organization may have changed. Take the time to scrutinize the existing job description and the predecessor’s resume. Then, identify the skills and experience that are essential for the role today.

For example, if you’ve recently taken on debt and need to satisfy lending covenants, make sure that’s a requirement detailed in the job description. Also, if you’ve expanded substantially, you may have outgrown the previous department head. For instance, you might need to replace a bookkeeper with a CPA who has the experience and skills to manage a larger accounting team.

2. Were you happy with your previous level of service? The accounting department is critical to the success of your organization. The department should provide accurate, relevant reports in a timely manner. If not, you may need to consider upgrading your in-house accounting staff and training any remaining employees on the latest tax and accounting rules.

3. Does the department’s technology align with your current needs? Sometimes, organizations can rely less on a key internal person and more on accounting software and their external CPA. If this is the case, ensure you have the latest-and-greatest technology to support your accounting functions and in-house personnel.

Also consider whether you’re maximizing the functionality of your current accounting software. Set up a meeting with a vendor rep to discuss what’s working and what’s not and see how they respond. A worthy provider will address issues, provide training and offer ongoing customer support. If your vendor doesn’t provide adequate support, we can also do a complete assessment on the effectiveness of your accounting system and how you’re using it.

4. How will the demands on the department change in the next two to five years? In-house personnel will need to adapt to new challenges as your organization grows and evolves. For example, if your department intends to acquire or merge with a competitor — or pursue another major strategic investment opportunity — your new CFO or controller will need to have sufficient knowledge to support the effort. Streamlining the department’s policies and procedures can also help to improve its performance and position it for the future.

Finding skilled accounting and finance professionals is difficult for many organizations, especially smaller ones. An interim or outsourced CFO can provide an objective, flexible, and cost-effective approach to running the accounting department on a temporary or permanent basis. With the right professional in place, you can ensure that your accounting department continues to operate at a high level, despite the challenges posed by a leadership change. Contact us for more information.

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Financial reporting isn’t all about profits. Not-for-profit entities can also benefit from implementing formal accounting processes. From preparing budgets and monitoring financial results to paying invoices and handling payroll tax, there’s a lot that falls under the accounting umbrella. Are these tasks, and others, being managed as efficiently at your organization as they could be?

Start with invoicing

A good first step toward accounting function improvement is creating policies and procedures for the monthly cutoff of recording vendor invoices and expenses. For instance, you could require all invoices to be submitted to the accounting department within one week after the end of each month. Too many adjustments — or waiting for employees or departments to weigh in — can waste time and delay the completion of your financial statements.

Another tip about invoices: It’s generally best not to enter only one invoice or cut only one check at a time. Set aside a block of time to do the job when you have multiple items to process.

You also may be able to save time at the end of the year by reconciling your balance sheet accounts each month. It’s a lot easier to correct errors when you catch them early. Also, reconcile accounts payable and accounts receivable subsidiary ledgers to your statements of financial position.

Think through data collection

Designing a coding cover sheet or stamp is another way to boost efficiency. An accounting clerk or bookkeeper needs a variety of information to enter vendor bills and donor gifts into your accounting system. You can speed up the process by collecting all the information on the invoice or donor check copy using a stamp. Route invoices for approval in a folder that lists your not-for-profit’s general ledger account numbers so that the employee entering data doesn’t have to look them up each time.

The cover sheet or stamp also should provide a place for the appropriate person to approve the invoice for payment. Use multiple-choice boxes to indicate which cost centers the amounts should be allocated to. Documentation of the invoice’s payment should also be recorded for reference. And your development staff should provide the details for any donor gifts prior to your staff recording them in the accounting system.

Optimize accounting software

Many organizations underuse the accounting software package they’ve purchased because they haven’t invested enough time to learn its full functionality. If needed, hire a trainer to review the software’s basic functions with staff and teach time-saving tricks and shortcuts.

Standardize the financial reports coming from your accounting software to meet your needs with no modification. This not only will reduce input errors but also will provide helpful financial information at any point, not just at month’s end.

Consider performing standard journal entries and payroll allocations automatically within your accounting software. Many systems have the ability to automate, for example, payroll allocations to various programs or vacation accrual reports. But review any estimates against actual figures periodically, and always adjust to the actual amount before closing your books at year end.

Ongoing review

Accounting processes can become inefficient over time if they aren’t monitored. Look for labor-intensive steps that could be automated or steps that don’t add value and could be eliminated. Also make sure that the individual or group that’s responsible for the organization’s financial oversight (for example, your CFO, treasurer or finance committee) promptly reviews monthly bank statements and financial statements for obvious errors or unexpected amounts. Contact us for more tips on how to improve the accounting function at your nonprofit.

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