Regardless the industry or scale of any organization, one needn’t look too hard to discover its most inefficient, misunderstood, and least supported division than its Accounting Department. Most business owners show a lack of experience understanding the core importance of today’s accountant, a position that blends the responsibility of financial compliance and business advisor, typically leading to an unmotivated and under-utilized staff. In order to get the maximum bang for your buck, here’s how to properly structure your accounting department.
- Decide who is in charge of your business finances for the next 12 months
The business owner, by default, is in charge of the company’s finances, generally because he/she is the guarantor of all bank accounts and loans, but also because an intimate understanding of the organization’s finances will help with major business decisions. This means that the business owner is in charge of completing all tasks within the accounting cycle.
However, today most business owners (a) do not have a sufficient financial background to comfortably record journal entries, produce and analyze financial statements, or work their way through an accounting system; (b) do not have available hours throughout their day to work with customers, supervise operations, and stay late at the office to create customer invoices, pay bills, and balance bank accounts; and (c) they’re primarily interested in the development of their business product or service, leaving no desire to spend time on administrative tasks. If any of the above facts apply, only one solution is available: please delegate. Struggling to perform all financial hats unnecessarily is one of the worst mistakes a business owner can make.
- List all accounting-related tasks to take place over the next 12 months
Now’s the time to create a realistic list of every financial-oriented task your business will undergo over the next 12 months, regardless of how miniscule or great, project-based or routine the assignment. For each task, decide its difficulty and how often it must be performed. An example of such a list is as follows:
|Invoice my customers||Simple||Monthly|
|Pay my bills||Simple||Weekly|
|Reconcile bank accounts||Simple||Monthly|
|File sales tax||Somewhat Difficult||Monthly|
|Submit financials to investors||Difficult||Monthly|
From your list, highlight the tasks you wish to continue performing over the next 12 months—for most business owners, not a single one is highlighted. The remaining tasks will be delegated.
- Be realistic on the level of control you want over accounting tasks
The solution on if a business owner must hire in-house staff or outsource it to a 3rd party firm should be realistically approached. By keeping accounting tasks in-house, you are provided full-time control over how, when, and where these assignments are completed. This means a greater level of detail, availability, and customization. If you instead choose to outsource an accounting function, you are authorizing a contractor to perform duties on your behalf, to the best of their abilities, under the terms agreed upon. A business owner cannot tell the outsourced company how and when and where to perform any services, demanding a firm level of trust. Remember that you get what you pay for, especially when it relates to finances—certainly not an area to be a spendthrift—and all due diligence should be taken to ensure the legitimacy and qualification of any hired vendor. Outsourcing your accounting work is generally more affordable than funding an in-house staff. Your business will not have to increase its office space, purchase pricy equipment and software, nor add unwanted increases to your payroll outflow and tax liabilities.
- Segregate your in-house accounting staff
The most common mistake business owners make when structuring their accounting department is hiring the wrong position. For a thorough introduction on who to hire, read our article “How to Hire a Qualified Accountant”. Unless exposed beforehand to the inner workings of an accounting department, most business owners are surprised at the variety of accounting roles offered to businesses, and the hierarchy within those roles. Take a look at an organization chart of a fully-developed Accounting Department:
The Chief Financial Officer leads the entire Accounting Department and is responsible for the financial risks, planning, and reporting of the business. Vice Presidents and Directors are staffed typically by the scale and complexity of an organization, but overall, Accounting Executives provide senior-level and strategic accounting insight to an organization. Most carry MBA degrees and CPA licenses, and are typically employed by larger, multi-million companies with an executive compensation plan upwards of $200,000.
Whilst Accounting Executives are tasked with implementing strategic projects, Accounting Supervisors oversee the efficient and accurate compliance of day-to-day accounting tasks additional to completing month-end closing procedures and financial reporting. It is common for Accounting Supervisors to carry a CPA license and/or a Masters in Accounting degree. They also are typically employed by larger, multi-million companies with a compensation plan upwards of $90,000.
The Accounts Receivable Department house accountants that focus on billing customers for generated sales. Because customer invoices typically call on more complex and routine tasks, their compensation tend to range between $40,000 – $80,000.
The Accounts Payable Department house accountants that focus on managing company disbursements. Though its accountants must have attention to detail, it is not considered a complex department and their compensation tend to range between $30,000 – $60,000.
The Payroll Department house accountants that focus on payroll processing and compliance. Payroll Accountants should not be mistaken for Human Resources, individuals who manage employee documentation and welfare. Payroll Accountants perform journal entries, manage the payroll bank accounts, and comply with employee tax liabilities. Payroll can be complex and heavily compliant so it is common for Payroll Accountants to be certified, leading to a higher compensation range between $50,000 – $80,000.
The Tax Department house accountants that focus on tax preparations, strategy, and compliance. Tax accountants hold CPA licenses and are typically employed with larger companies with a compensation plan upwards of $90,000.
The Finance Department house accountants who focus on reviewing the historic trends of day-to-day transactions and translate that data into future projections. They deal heavily with investments, stock, and treasury functions. Finance Accountants typically carry MBA degrees and are employed by larger companies with a compensation range between $70,000 – $90,000.
The larger your budget, the more segregated you can afford to become. The more segregated your accounting department, the more efficient and valuable it evolves.
- Re-strategize your Accounting Department annually
It’s rather shocking how business owners always plan for exceptional growth, and yet those profits do not translate into the development of their accounting staff. Many accountants are overworked and with few promotions available. It’s important that accountants are performing procedures with upgraded technology, processes, and procedures. Always ensure that your accounting department is sufficiently staffed and that any resources they need are included into the upcoming budget.
Remember that while establishing a support department can be just as challenging as any other aspect of building a business, your accountants keep your financial affairs in order for when it’s time to seek business loans, present your financial statements to investors, complete acquisitions, stay compliant with state and federal regulations, and so much more. Utilize your accountants as the business advisors that they are, outsourced or in-house, and leverage their experience and qualifications to the benefit of your company’s development.