Inefficiency is the downward slope that can take an organization from the top of its game to a place where employees are frustrated, unhappy, and the organizations goals are more challenging to achieve. Turning around an inefficient environment requires change. Change is often difficult, which is why inefficiency is frequently ignored. Employees are usually comfortable with the status quo, but what if employees could work in an environment where tasks were clearly defined, proper training occurred, redundancy was eliminated, excellence was applauded, and meaningful goals were achieved?
Creating such an environment requires thoughtful change. To successfully implement change, acceptance from those who will be affected is imperative. The size of your finance or accounting department will drive the number of employees who need to be involved in the details of evaluating inefficiency.
The following areas address the most common issues we see clients face when it comes to running the finance or accounting department. In fact, many of these areas are problems in other departments too, and the same core thoughts can be applied throughout your company to improve efficiency.
1. Define Your Role
Consider for a moment all of the activity that goes on in the department in a day, week, month and year. It’s overwhelming at times. Employees have likely spent years “doing more with less.” Collectively consider: What should be accomplished within the department during these time periods? What tasks are being completed that should be taken on by another department? What added value could be produced if the department took on other responsibilities? Once the core functions of the department have been determined, the details can be evaluated.
2. Document Processes
If the accounts payable clerk unexpectedly quit, would anyone know how to get vendors paid? Processes are not always documented at small to mid-size businesses, but they should be. Employees should document their processes to perform key functions. A good place to start is accounts payable, cash receipting, and payroll. The documentation should include step-by-step instructions on how to accomplish a task. Information related to the use of technology, what forms of approval are required from others, and an approximate timeline should be included. A separate employee should perform a test run of the documentation to determine if the task can be completed by simply following the written process. Employees should question their current process during this phase to determine if it could be more efficient. Questions to consider:
- Can a step be automated?
- Is a procedure redundant?
- What road blocks are regularly faced?
3. Cross Training
Properly documenting processes also aides in the ability to cross train employees. When an employee is sick, on vacation, or leaves without notice, organizations with cross-trained employees experience lower levels of disruption because another employee can step in to temporarily handle the tasks. We recommend to identify the functions that would benefit most from a cross-trained employee, and then determine which employees to cross train. Cross-trained employees should periodically switch roles to keep the process fresh in their mind even if the need doesn’t exist.
While considering the three areas above, organizations typically identify areas where either the department as a whole is weak, or an employee lacks training. An appropriate training plan should be developed to ensure employees are properly trained in the areas in which they are working. Training can take on many forms from external conferences, in-house seminars, one-on-one time spent with an external trainer or time spent training one another. Resources spent on proper training benefit the organization through greater employee satisfaction, fewer mistakes, and less time spent on tasks.
Accounting and general ledger software have more capabilities than ever before. Taking advantage of existing technology is crucial to eliminating inefficiency. Here are some questions to ask:
- Has the software been properly set up to eliminate manual entry of duplicate information?
- Is the chart of accounts in alignment with the recommended chart of accounts?
- Is the chart of accounts unnecessarily complex?
- Have the vendor and payroll data files been reviewed, and old vendors or old employees properly removed?
- Does the software have the ability to do bank reconciliations and is the department utilizing this function?
Some software vendors provide user training. Consider if such training would benefit employees.
6. Communicate Expectations
Communicating concise expectations to employees up front reduces the amount of guesswork required to perform their functions. Deadlines should be clear. Work quality issues should be addressed throughout the year. Praise should be given when expectations are met or exceeded. Follow up should be done when expectations are not met, and a defined plan set forth with how expectations will be met in the future.
Inefficiency does not have to define an organization. Great strides can be made when the six areas defined above are addressed. Also, remember to empower employees within the organization to take ownership of eliminating inefficiency.