Few companies intentionally compromise on their accounting functions.
Most business are constantly seeking improvements in the operational and financial efficiency and effectiveness of the organization.
But, when it comes to companies’ decisions about their finance teams, many businesses focus only on cost-cutting, rather than investing in robust systems that can drive increases in value. Unfortunately, this method of decision-making often leads to some of the most expensive mistakes.
Sometimes, the shiniest apple is also the one that’s poisoned. Don’t be duped by the disguise—especially regarding decisions about your company’s finance team.
We’ve outlined the three most common pitfalls we see in finance teams, as well as the steps you can take to avoid them.
1. Delegating Accounting Functions to Other Team Members
In an attempt to be more cost efficient, many organizations—specifically those with a small staff—often assign ownership of accounting functions to an employee who has other administrative duties.
Because these employees often lack the requisite background and context in accounting, these employees who have been assigned accounting functions are more likely to make mistakes or errors, which may cost your business much more to remediate in the long run.
And, if an employee who is not an accountant is facilitating accounting duties in addition to other responsibilities, that employee is not utilized to the fullest potential and to your business’s advantage, which can also be an expensive danger concerning time and retention costs.
If you, as a business owner, are managing your company’s accounting functions, the hazard becomes even more alarming because you’re spending more time away from the strategic issues that affect the broader performance and growth of your business.
How to avoid this mistake: Businesses seeking efficiency, utility and innovation in their accounting department need professionals with the right expertise and experience to conduct their financial operations. It’s important to engage a skilled accountant to perform these functions.
If you don’t have the need for a full-time accountant on your team, or if you don’t have the budget, consider outsourcing your accounting and financial functions to a team of advisors. If you don’t have any team members who are already skilled in finance, outsourcing can enhance your company’s financial skill level or provide the skills that your company is missing.
Companies that outsource accounting can access a higher level of talent in a more cost effective manner, and this allows you and your team to get back to the work that will more dramatically drive up the company’s value.
An accounting consultant also can assess systems and processes to help you leverage automation of business processes. You may be able to employ artificial intelligence or other tools to your advantage, again allowing you to use your people for higher value tasks.
2. Hiring for a Title Instead of Your Company’s Needs
Companies may identify the need for more talent as a way to strengthen their accounting operations. But it’s important to evaluate the existing strengths and weaknesses of a team internally before deciding to add a new employee to join your finance team.
Many companies mistakenly hire an executive-level leader before knowing exactly what they need in their finance team.
When companies do hire a CFO, Controller or internal finance team member, many often search for someone who fits a defined salary budget and title, without considering the actual needs of the business.
While a business may only need a few functions of a controller or in-house accountant, many spend significantly more money in order to onboard a full-time CFO within their team. Or, the opposite—a business may need a full-fledged CFO, but end up recruiting a bookkeeper who may not have the expertise the company will need.
Unfortunately, it’s often only after a new employee is hired onto a business’s finance team that both parties realize that the new position isn’t commensurate with the needs that the company has.
Unemployment rates are low, talent is hard to find, and the market is expensive. So it’s important to consider if your company’s new hire is the right fit for the needs of your business.
How to Avoid this Mistake: Perform a thorough evaluation of your company’s needs. Consult advisors outside of your organization whom you can trust to help you identify your needs and consider what roles you need to fill.
Once you’ve reached conclusions about your needs, only hire a team member whose expertise and skills directly correlate with the needs of your company. Plan and act based on where you want to see your company go in the future—not just where you are now—when making decisions about potential new team members.
If you can’t justify a new full-time hire, or if you have a wide range of needs, consider outsourcing those responsibilities to an accounting firm for controller or CFO functions. Outsourcing accounting functions can provide the right expertise for your company without having to look for a new employee.
3. Placing All Accounting Functions on One Team Member
Many companies place all accounting oversight and functionality in the hands of one team member. If this key employee leaves your company, your accounting operations suddenly aren’t functional.
Putting all of your eggs in one basket by having one key employee creates an enormous concentration of risk that can result in a huge loss and significant disruption to your business if you were to lose that employee.
Even when critical accounting team members leave on amicable terms, this can create a period of difficulty as a company works to find a replacement and gain a hurried understanding of past practices in order to keep things afloat in the present.
The more your company grows without diversifying finance and accounting duties, the more responsibilities and knowledge will lie with this one person. Consequently, more will be lost if he or she leaves.
How to Avoid this Mistake: If you have a sufficiently large team, design and create a system in which no one employee has all the knowledge about your accounting and bookkeeping processes. Encourage cross-training and information sharing.
If you have a small or medium sized team or limited resources, outsourcing can mitigate the risk of having a single point of failure. If your accountant leaves, your outsourced accounting group will replace that person for you and maintain your accounting functions without disruption to your business.
Avoiding Mistakes when Making Decisions about Your Finance Team
For many businesses, outsourcing accounting functions is a sound plan for creating efficiencies, mitigating avoidable risks and coordinating a successful financial strategy.