Many business leaders are caught unaware when the need for new technology or processes catches up with their business growth. Managers might try to use ad hoc solutions or work around the situation until the tipping point occurs. When that time comes, there is a mad rush to implement new systems on a budget. Rather than allow these problems to snowball, watch out for these five signs that indicate you have outgrown your current accounting process.
An important indicator is when your employees or managers continue with the deficiencies in the current system. If they’re talking about lack of access to data, incorrect data, insufficient time to compile reports etc. it may be time to take a look at the gaps in the current processes or technologies. While the issue may not always be in the accounts, investigating it might uncover more serious problems. Here are the red flags to watch out for:
1) Not enough time to make business decisions
A business accounting system is more than just keeping track of bills, expenses, paying employees, and running the numbers. Managers almost always need accounting information to make business decisions involving sales, marketing, revenue etc. A robust system should be able to give the numbers when needed without any delays.
Suppose a business gets a potential client who promises large order volumes in return for a 10% discount on the price. At this point, managers need information on current profitability, production costs, and other such figures to see if such an order would still be profitable for the business. But if you take too long to make the decision, the client may simply go elsewhere.
If business leaders find that they don’t have enough time to make decisions because they don’t have access to data, it indicates a shortcoming in the accounting process.
2) Paper, paper everywhere
Another telltale sign is when employees and managers are constantly printing out reports or referring to paper documents. There was a time when having papers on the desk indicated a hard worker or an important person in the office. In 2018, it is a sign of inefficiency. If your accounting department is drowning in piles of paper, it may be because of inefficient accounting workflows.
While some people are more comfortable with reading printed reports than on a computer screen, paper records are tough to deal with. With the proliferation of smartphones, tablets, and lightweight laptops, there is no reason to lug around huge binders with paper. An accounting system that allows you to access and edit data on the fly from multiple devices is not just a luxury, it’s necessary for productivity.
3) Production or service delays
Delays in production, manufacturing or services are common in any business. But is it a constant refrain of your business? Such delays can happen due to any number of reasons – employee issues, not enough supplies, a rush of new orders etc. Few people imagine that it can happen because of gaps in the accounting process. The reality is that it happens quite often.
If your accounting system cannot generate the reports or data that you need, it causes delays everywhere in the delivery chain. You may not be able to pay suppliers in time. That causes problems in inventory and production. In turn, there are delays in distribution and clients don’t get products or services on time. It might seem insignificant but the ripple effects can cripple a growing business.
If the business is dealing with delays because managers don’t have the right information when they need it, you might be due for an overhaul of the accounting process.
4) Lack of data integrity
Perhaps even more dangerous than not having data is working with inaccurate information. The accounting process in any organization has to be robust, comprehensive and maintain data integrity. If you have doubts about the calculations, reports or numbers in the system, it becomes hard to make decisions or trust that they are right.
Sometimes the situation can get to the point where employees use their own tools to constantly double-check the figures and calculations. This creates additional friction and takes time away from more important initiatives. It also has huge implications for data security. If you can’t trust the system, it may be time to get a new one.
5) Manual workflows
A robust accounting process should automate routine and administrative tasks for your team. Why should employees waste time on repetitive tasks that can be performed by software? Some people resort to creating complex Excel worksheets because the accounting program cannot generate the desired output.
But what happens an employee who created the worksheet leaves the company? No one else knows how to work with it. Something like that can bring everything to a screeching halt. Alternatively, even a small change in one of the underlying assumptions will necessitate hours of work on the spreadsheet to make it accurate. Manual workflows are another sign that you may have outgrown the existing systems.
If any of these signs seem to resemble your organization, you are not alone. These are common, and I do my best to make myself available for consultation on such matters. Business technology process needs to be on track and aligned with company mission. If you want to discuss anything from strategy to more technical aspects, let’s talk.