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Good accounting transforms numbers and data into clear information you can act on. Settling for less can cost your business. Here’s how to recognize weaknesses and take corrective action.


A Litmus Test to Help M&D Businesses Strengthen Their Accounting Services

  • 7/27/2016

Your accounting services are just as critical to your manufacturing and distribution business as your quality control, research, and shipping departments. A good accountant transforms numbers and data into clear information you can act on. It’s as straightforward as that. 

But many M&D business owners don’t give accounting the attention it merits or stay as involved in their finance department as they should, mostly because finances are foreign to them and they don’t realize how insightful that information can be. Even when you delegate these important responsibilities to someone else, they shouldn’t remain mysterious to you. 

Your business can suffer or not do as well as it otherwise might with the help of a truly capable financial team. Very often, it’s not the fault of the people already doing the job; they just need some reinforcements, and as the business owner or leader, that’s up to you. 

In my work with manufacturers and distributors, I’ve come to recognize a three-part litmus test that reveals whether or not their accounting is contributing to the success of the business on the level it could. If any (or all) of these descriptions sounds familiar, it’s probably time to take a good look at the way you regard and make use of these functions, then take corrective action or look for additional solutions that bolster your existing team. 

1. Your “accountant” is actually your office manager wearing a bookkeeper’s hat 

It’s common for employees of smaller and midsize businesses to be jacks of all trades, and many office managers or other back-office people valiantly take on a host of administrative responsibilities. While these hardworking office chameleons are indispensable in so many ways, they can’t provide the credentialed, professional-level skills and insight you need to truly manage your finances, grow your business, and be more profitable. 

Making do with what you already have is wise and scrappy in many cases, but it just doesn’t cut it in accounting. You simply can’t make good business decisions without a strong handle on your finances and all the complicated things bundled up with them, like taxes and other regulatory and compliance matters. But when you understand and control your budget, cash flow, forecasting — the full scope of your finances — you can run your manufacturing or distribution business much more capably. Bringing a financial professional on board — either by directly hiring or, more affordably, outsourcing — is genuinely in your best interest. 

2. Your CPA or accountant is perplexed by M&D inventory management and job costing systems 

Some specific manufacturing and distribution systems are truly complicated and require intense training, and even many seasoned financial professionals never get a real handle on them. If your accountant and your accounting software systems are in constant conflict, it’s almost certainly costing you. Unless your accountant has a deep understanding of the manufacturing and distribution industry, he or she will likely never use these systems to their fullest capacities — which means you could be missing out on their true value and the near-limitless insights and benefits they offer. It’s an expensive waste. 

Even if you rely on simpler or more universal systems (e.g., Excel or QuickBooks), you can still come up short on value and leave many features and benefits on the table. Adding an outsourced professional to your staff who already has industry experience can help you get the most from the critical management or rudimentary accounting systems you’re already paying for. In either case, these systems should bring you clearer visibility on your operations. 

3. Your trial balance or financial statement looks like a Rube Goldberg machine 

These should be clear as day, not total head-scratchers. Your business’s trial balance and financial statements can be profoundly effective analytical tools, providing all kinds of financial and operational metrics. They tell the story of your business, and they should read like a picture book. If these aren’t treasure troves of precise, actionable information, then you should consider adding an outsourced accountant who can “engineer” more like Leonardo da Vinci. 

How to fix the problem 

If you recognize any of these signs at your own business, there are several ways you can shore up the deficiencies and start seeing improvements in your financial information. A variety of scalable outsourced services are available to fit your specific needs and budget. Whether it makes sense to hire directly or use outsourcing to augment your team, remember that the success of your business depends on qualified people, and finances are too precise, complicated, and critical to compromise. 

A good outsourcing option should include training and education, which could be a fitting remedy in those situations where your existing accountant is a great employee who just needs some more industry exposure. With some instruction, he or she could learn to add the value you need from these services. Developing people and helping them in their career often earns their loyalty and spreads valuable knowledge more abundantly throughout the business. 

You don’t ultimately have to add a finance employee to your payroll to take advantage of CFO- or controller-level skills and insights. Any and all accounting functions can be outsourced, and in any capacity — part-time permanent, temporary full-time, long-term or short-term, whatever you need. 

Above all, look for M&D-specific financial services. That specialized industry knowledge is essential when it comes to making the right financial and operational decisions. 

How we can help 

CLA’s manufacturing and distribution industry practitioners can help you determine if you are getting real value from your existing accounting and reporting services, and work with you to identify metrics, understand financial statements, and make informed financial decisions. We can help customize an outsourcing or consulting package that precisely accommodates your specific needs, including business operations, special projects, training, and executive search.