How flaws in internal accounting department processes affect company health

The demand for high-quality accountants is surging, but in today’s hiring environment, the supply is constrained. That’s led to struggles in many companies’ accounting departments.

“They’re getting behind in the day-to-day functions,” says Jeff Pavelschak, a Shareholder at Clark Schaefer Consulting. “Tasks are getting dropped, which leads to organizations getting behind on their AP, their aging, their reconciliations.”

Further, as senior staffers increasingly leave or retire, they’re taking with them a significant amount of tacit, often undocumented, company knowledge.

“So, even if you can find somebody to replace them, the training curve is longer and can create more failures in the process,” says Joe Brown, a Managing Director at Clark Schaefer Consulting. “That creates a disruptive ripple effect as accounting

processes feed transactions throughout an organization.”

Smart Business spoke with Pavelschak and Brown about why internal accounting department process improvement is critical for organizational health.

What is lost when accounting departments struggle?

It’s about speed to decision making. Accounting departments qualify, organize and make actionable information from myriad data inputs that result in value creation. When an accounting department is well-run, management gets that data quickly so that decisions can be made faster.

When an accounting department gets behind on core tasks, it can cause cash-flow constraints. Intercompany AR and AP can be negatively impacted, which affects the cash conversion cycle, hurting metrics such as days to pay or days sales outstanding.

While people on the frontlines might feel the effects of a flawed process in accounting, unless they can articulate what specifically is causing the pain and mobilize the resources with leadership, it’s unlikely to get fixed.

How might these issues lead to organizational problems?

A company could get behind on paying its bills because their accounting processes are so slow or deteriorated that they can’t get the bills paid on time. Collections could lag because accounting is not getting sales records updated quickly enough. They also could be slow to get payments into a lockbox and process them so they know when customers are actually paying their bills, or they’re not quickly getting the cash from the lockbox for payments.

Some companies have multiple ERP systems that aren’t working with each other, which can create time-consuming manual processes to compensate for that flaw. There have recently been many technology updates, and services moving into the cloud. That has brought with it system and process changes that can be tough for a department that is already challenged to effectively manage.

How can companies identify and address accounting issues?

One method to better understand the accounting environment and its issues is to outline the current state of its processes and then define the ideal outcomes of those processes. For instance, that could mean the organization expects a process to push through all the transactions in X days. Where that’s not happening, they identify the specific transactions that failed to meet that criteria and look for the most detrimental defects in that time sequence.

It’s also important, as part of this process, to identify the benefit to the organization of fixing the issue. Using data to highlight the issue, its impact and the benefit of addressing it creates a better business case to mobilize resources and make a change.

A third-party consultant can identify specific issues within an accounting department and then guide what are often frustrated senior leaders through problem-solving to get their department where it needs to be. They can identify gaps in their current state, benchmarking against best practices, while also looking for governance around processes, such as compliance for regulatory requirements and documented interim controls. Ultimately, they can develop a roadmap to optimize departmental processes.

Bringing in a third party to review accounting practices can give a company a fresh perspective on the state of their department without putting any value in doing things just because that’s how they’ve always been done. ●

INSIGHTS Accounting is brought to you by Clark Schaefer Hackett

Jeff Pavelschak



Joe Brown

Managing Director


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