Signs of Finance Department Dysfunction — And What to Do About It

Throughout my career, I’ve worked with finance departments ranging from one to one hundred people. Regardless of size or industry, five themes pop up over and over again. Focus on these five areas to help transform the value your finance team brings to your organization.

1. Evaluate the design of your team

Your back office accounting team may have all of the right components, but roles and responsibilities evolve over time. This can leave you with illogical division of duties, inefficient reporting structures, and vastly uneven capacity.

As an example, one of our clients had ongoing challenges with the budget process. The accounting manager who led the budget also had oversight of A/P and A/R transactions and staff. When the client stepped back, it became clear that this mix of duties was part of the cause. The individual leading it had absorbed the duties after another employee left and was not plugged into the strategic priorities of each department.

Many of our clients are left similarly vulnerable when a team member unexpectedly leaves. Without a true understanding of that person’s specific duties, those who remain end up spending significant time trying to figure out what that person did and how they did it.

You can help solve this issue by documenting roles and processes and cross-training staff. Without it, your department becomes more vulnerable every time a position turns over. Plus it forces leaders to spend energy on operations instead of more strategic work.

2. Fix the general ledger setup

You know the old saying “garbage in, garbage out?” In a finance department, a more precise analogy might be sorted versus single sorted recycling. While all of your information is (or should be) getting into your general ledger (GL) system, the real issue we see is that the GL system isn’t set up to sort and track items the way you need them.

Some take the “single sort” approach, throwing all of the data together without a way to distinguish which location spent what, or whether an expense is for an event or a product. Even more common is having way too many accounts (many of which aren’t used).

Our current record is a $5M budget client that had 1800 general ledger accounts. (Please, please, please, don’t try to beat that record!) Take time to build appropriate data architecture on the front end, or consider “refreshing” your chart of accounts every three to five years to ensure you track data in a meaningful way.

3. Use technology to make processes more efficient

The most common opportunity we see to enhance efficiency is to throw the accounts payable process out the window and start over (or figure out how to leverage your current system to its full functionality).

You would be surprised at the number of innovative, large organizations that are still submitting paper check request forms with stapled receipts. These forms are then signed off one or more times before circulating back to accounting. They then get manually entered into the payables module in order to cut the hard copy checks. The checks still need to be reviewed, signed, and stuck in the mail. When you truly add the steps together, most A/P processes are 12 – 20 steps long and require significant resources.

Technology prices have come down enough that our clients of all sizes can add on systems to make great strides in automating accounts payable. Technologies like bill.com and Expensify automate the accounts payable process, eliminate paper, and strengthen controls.

While these systems stop the boondoggle for your finance team (and your auditors will love it), many clients tell us that employees outside the department are the biggest fans because it saves them time. Cross-functional handoffs are smoother because people can review, code, and approve expenses from anywhere.

4. Get out of manual reporting

The number of companies that conduct reporting by dumping a trial balance into Excel and massaging the data still astounds me. While many have made the process more efficient over time by using formulas and macros, a manual process is never as fast as we think it will be, and leaves so much room for human error.

One recent client thought its reporting process was fine, but, in digging further, we found that one of its strongest team members was spending 25 percent of her time building financial reports for various audiences. How much more value could she add to the organization if she had 20 percent of her time back? Building out reporting in general ledger systems can be cumbersome at the outset, but, with a good system, good data structure (see #2), and a little elbow grease up front, the rewards can be significant.

5. Align your priorities

What are the primary goals of your finance function? Who are your most important “customers?” If your number one goal is to get a clean audit (and we at CLA love a clean audit), but your management team never sees financials and has to fly blind to make decisions, the priorities of the team may not be fully aligned with organizational goals.

Define your goals and objectives as a full finance and accounting team, and share those with your colleagues. Get their insight into how your team can best partner with them to help them do their jobs better. Don’t forget compliance, but don’t be so focused on it that you lose sight of the real reason an organization has a finance department: to enable the company or nonprofit to fulfill its purpose.

How we can help

I’m so passionate about helping clients realize the full strategic potential of the department that I’ve refocused my career on developing and scaling a new service: finance department assessments (FDA).

Our national assessment team can help you uncover your sticking points, prioritize improvements, and tap into the talents of your employees. The finance and accounting team plays such a vital role in the overall health of a business and we help hundreds of clients a year assess and transform their finance and accounting functions. Contact us today for an FDA.