You can have the best accounting system in the world but it won’t mean a darn thing if the data you input is bad. I can’t say it enough, “garbage in, garbage out.” It is the responsibility of accounting department personnel to make sure that transactions are valid and supported by audit trails. There is nothing worse than presenting financial statements that have errors in them to your management team and board of directors.
After you have selected the right accounting system for your business (that is scalable for growth) and you have chosen a reliable payroll service, it’s time to implement controls that ensure your financial statements are accurate and abide by Generally Accepted Accounting Principles (GAAP). For those of you interested in knowing more about GAAP, there is a good reference manual published by Wiley that can help you understand and implement these principles.
Control procedures start with competent personnel and a rotation of duties. For many of you who read Axcient blogs or follow our CEO, Justin Moore, in the press, you know that Axcient goes through an extensive hiring process in selecting great employees. The success of our company – and yours – depends upon these hiring decisions. Once you bring on board a new accounting employee, it is your responsibility to ensure that they are adequately trained and supervised to perform their job. It is also important that these employees have the opportunity to rotate within in the department to broaden their understanding of the system and the overall processes.
At Axcient, we implemented our first major shift in responsibilities after hiring another accounting staff member earlier this year. Our senior staff accountant relinquished customer billing responsibilities to take charge of accounts payable and one of our staff accountants took over the role of lead in customer billings. One of the benefits in the shift of responsibilities is that it allows for vacations (yes!), as well as sick time, unexpected absences and those days when you just need “me” time.
Speaking of vacations…they can be viewed as an important tool in maintaining checks and balances within an accounting department. When accounting staff members took time off in the past, they would return to an inbox that was out of control (never mind about email catch-up). I can’t tell you how many times this has happened to me personally when our department was much smaller. The rotation of duties allows us to take time off while ensuring that daily transactions are posted and that no ‘one’ individual has complete control over all areas of transaction processing.
A few other comments about controls…
I can’t stress this one enough. It is extremely important that all businesses have written policies and procedures. I’m not just talking about the employee handbook here – especially since ALL businesses should have that in place from the get-go. The policies and procedures I’m talking about are related to the transactions we process on a daily basis within the accounting department. For example: there should be written documentation about processing accounts payable invoices along with one that details cash disbursements. Additionally, there has to be one for processing payroll, accounts receivable (including cash receipts) along with a sound credit and collections policy. Of course, there are many more.
For accounting departments everywhere, a final check and major acknowledgement of how well we do our job in accounting is the annual report presented to the Audit Committee by outside auditors. Do I take this report personally? You bet I do!