Regardless of whether you’re a first-time founder or an experienced CEO, managing an internal accounting department can be challenging. The success of any business is measured by its financial performance. And as the leader of your business, it’s your job to track the scoreboard.
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Without the right approach to accounting, you may be looking at a scoreboard that’s either completely out of date, or in some instances, plain wrong. Developing a timely, accurate understanding of the financial performance of your business is key to making well-informed decisions that help you move forward.
Creating that financial picture demands a clear understanding of the past financial performance of your business, its current position, and its projected performance in the weeks, months, and years ahead.
To develop this understanding, business leaders need to develop a close relationship with their accounting team while also knowing how to spot signs of trouble. In this article, we explore how businesses can build stronger relationships with their accounting departments and access financial insights that can ignite growth.
What Questions Should Leaders Ask Their Accounting Team?
The first expectation that leaders should have of their accounting team is a fairly basic one: to provide them with accurate, timely financial statements. These financial packages should be completed on a monthly or quarterly basis and should include the main financial statements: an income statement, balance sheet, and cash flow statement. Leaders should also expect their accounting team to handle tasks such as processing payroll and managing accounts receivable and payable.
Beyond this, though, accounting departments should also work to develop and track additional financial KPIs and reports that allow leaders to better understand the performance of their business. Exactly what these supplemental reports might look like varies by business.
For example, an early-stage startup might be more focused on managing its cash position; in which case, it would be helpful for the accounting team to maintain a 13-week cash flow projection. In more mature companies, the focus might be on controlling costs. In that instance, reports like natural expense analyses that summarize expenses by category instead of function might be helpful to leaders.
Your accounting department shouldn’t feel like a necessary overhead expense: they should be a strategic financial partner that helps your business grow and progress. Accounting teams can provide perspective on all kinds of important matters, from understanding how a new product launch might impact your financial results to working with the marketing team to better understand the ROI of different campaigns.
Signs an Accounting Department is Dysfunctional
Providing satisfactory answers to some of the questions outlined in the previous section should be considered table stakes for any competent accounting department, but it’s an area where many businesses fall short.
A dysfunctional accounting department can have a devastating effect on a business. Without timely or reliable financial information, leaders are effectively operating in the dark. Nothing frustrates a CEO more than not understanding how their business is performing. If you’re not receiving financial statements from your accounting department on a routine basis, you should consider it a serious red flag.
An additional sign of dysfunction is the inability to perform basic tasks correctly. Errors like not invoicing and collecting payments from customers in a timely manner, failing to pay vendors on time, or repeated payroll mistakes might seem small, but they can add up to a serious impact. If your business fails to fulfill these basic requirements, it risks being put on a credit hold or having extremely high AR balances, leading to cash flow issues that can make operations near impossible.
Best Practices for Creating an Efficient Accounting Team
So, if you’re building an accounting department from the ground up, what are some best practices to keep in mind? Often, this has less to do with the technical components of accounting and finance and much more to do with how your accounting department functions.
Here are several best practices to create an efficient accounting team:
- Master the Basics: have clear roles and responsibilities for the tasks your accounting team is responsible for on a daily, weekly, and monthly basis. This is especially important for critical tasks like the month-end close: be very clear on when the close is due, what the deliverables are, and who owns each deliverable.
- Clear Communication: consider implementing daily or weekly stand-up meetings to encourage better communication between your team. This also allows leaders to spot bottlenecks before they become major issues and proactively reallocate resources to address potential issues.
- Consider the Accounting Department’s Customers: good accounting departments don’t just work on gathering and presenting historical financial information: they’re strategic partners that can help various functions tackle challenges. Outlining how different functions work with the accounting department and kicking off strategic financial initiatives elevates an accounting team from an overhead cost to an indispensable business partner.
- Compile Custom Reporting Packages and KPIs: work to develop customized reporting packages, dashboards, and metrics that are highly relevant to the success of your business. These assets should be designed to help relevant stakeholders understand business performance in the past, present, and the future.
- Hire an Experienced CFO: CFOs are the bridge between the accounting department and the leadership team, relaying financial information and helping leaders understand the insight behind performance numbers. An experienced CFO, whether that’s an in-house executive or an outsourced CFO, helps management develop a more holistic view of the business’s performance.
It’s worth noting that an accounting team isn’t necessarily something you have to build in-house. Working with an outsourced accounting service, such as the team at G-Squared Partners, is often a more effective solution for many growing and established businesses.
G-Squared Partners: Outsourced Accounting and Financial Leadership
Accounting departments are key to the success of every business, providing leaders with the financial insights they need to get their most important decisions right. With the right approach, your accounting team can be far more than just another cost center: they can be a valued strategic partner that plays an instrumental role in the growth of your business.
If you lack the capacity to build an internal accounting team, consider working with G-Squared Partners. Our outsourced accounting firm has worked with hundreds of companies at all stages of growth, from early-stage, fast-growing technology startups to well-established players in industries like manufacturing and commercial real estate. We provide a full suite of outsourced bookkeeping, accounting, and CFO services, tailored to the exact needs of your business.
To learn more about working with G-Squared Partners, contact us today.
