With Halloween upon us, let’s talk about the differences between a good and bad (or dare I say evil) accounting department. Small business accounting can be a struggle for many business owners. If it weren’t, you wouldn’t find over 4 million results for “What do bookkeepers do?” on Google.
Finding the right fit for your accounting and finance department is critical. If your current setup is unable to address your issues, it will drag down your organization and hinder growth. There is no right setup. For some business owners, a full time, on-premise staff are needed. For others, considering part-time options such as a virtual CFO or bookkeeper makes more sense.
The “goldilocks” setup has the right mix of skills, time, and costs for your challenges. The right setup will also help your business scale. No matter the industry or business environment you are in, here are some common traits to consider for your accounting and finance function.
A good accounting department is timely. I can’t tell you how many times I hear owners talk about reviewing financial statements 20 or more days after month-end. The information isn’t relevant then. There is no reason month-end close and review of financial statements can’t be done in the first ten days of each month. A bad accounting department provides numbers when they are way past their relevance.
A good accounting department fills multiple functions. In baseball, some teams spend less money than others. However, you don’t see those teams only sign pitchers because they don’t think they can afford the rest of the infield. The virtual CFO and bookkeeping services set up works so well for businesses. An owner can right-size each of the functions they need. Too many businesses try to rely on a bookkeeper to do the functions of a controller and CFO. A bad accounting department puts people in positions they don’t possess the experience or skills for.
A good accounting department organizes the company. One skill finance and accounting professionals master is organization. Why should this pertain only to the accounting department? For example, we act as the coordinator of strategy across departments when providing virtual CFO services. A bad accounting department solely sticks to its numbers and doesn’t bother with what is going on in other departments.
A good accounting department looks ahead. Most financial statements are concerned with the past. Forecasting and budgeting should be done regularly so that companies can make better decisions going forward. A bad accounting department might budget once a year and doesn’t forecast changes throughout the year.
A good accounting department helps businesses interpret all of their data. Businesses, no matter how small, are full of data. Whether this is customer, marketing, or cost data, there is usually more than you realize. As the virtual CFO, I help companies realize how to use this data. For example, can they use their marketing and customer data to reach their target audience? With a career in numbers, I understand them better than most. A bad accounting department isn’t creative to come up with ways to interpret the data differently to help the business grow.
A good accounting department understands and is fluent in the operational and technical accounting concepts relevant to the business. At many smaller companies or those that rely on bookkeepers, this is an issue. A good accounting department will be fluent in the basic concepts, so they know when to ask additional questions or flag issues. The bad accounting department sticks to its “silo.” They will utilize only basic accounting and finance knowledge to complete their function.
A good accounting department stays relevant to current issues. I have spoken with many bookkeepers these past few months who have basic questions about the Paycheck Protection Program. It is apparent they haven’t read any of the literature from authorities on the program. Instead, they are relying on others. New issues and regulations will always present themselves. If an accounting department isn’t staying up to date, they won’t know the best strategy to pursue. A bad accounting department doesn’t keep up to date with current trends or issues in their industry.
A good accounting department has costs inline with the business. Businesses can’t get away spending zero on their accounting department, but they also shouldn’t spend too much. Growing businesses can’t afford to waste money. That is why small companies should benchmark their accounting costs at 1-3% of revenue (not including tax prep). A bad accounting department isn’t right-sized for the business.
A good accounting department is accurate. Business owners depend on their financial statements to make decisions. For instance, if the return on investment in marketing is too low, a business may adjust its strategy. But what happens if the calculation is wrong? Will they stop a successful marketing program? A bad accounting department struggles with accuracy and is continually revising financial statements months later.
A good accounting department is unafraid to challenge and engage with others in the organization. The last person a business owner needs is someone who will agree with them all of the time. Even worse is an accounting department that doesn’t bring relevant issues to the table. A good accounting department is not afraid to bring challenging issues to the table. Issues must be discussed even if they are uncomfortable. A bad accounting department fails to bring issues to anyone’s attention. A bad accounting department is afraid the messenger will be killed.
About Krieger Analytics
My name is Matt Krieger, and I am the founder of Krieger Analytics. We are a virtual CFO and bookkeeping services partner for small businesses and franchisors. Our goal is to completely outsource your accounting department from bookkeeping to victual CFO services. I am also the owner and franchisor of a concept called Monkey Bizness, in Denver, Colorado. I know what running a business entails.
As a small business owner with a background in finance and strategy, I realized the benefits that a virtual CFO could bring to smaller organizations. Most franchisors and small business owners don’t have a need (or budget) for a full-time CFO or bookkeeper. To better fit my clients, Krieger Analytics is a part-time resource. While most think of CFO’s being involved in finance and accounting (we are), we are also involved in much more. We partner with clients by coaching, giving them clarity into their business, and creating growth strategies. Conversations are free, so don’t hesitate to reach out to me at [email protected].