Red Flags in An Accounting Department

Red Flags in An Accounting Department

by Karl Neset

Sound finances are the foundation of your business. So, how are things going with your accounting department?

As owner or CEO, you may simply have a feeling that things arenโ€™t going as smoothly as they should. Usually, though, there are telltale signs that warn of existing or unfolding accounting problems. The first step toward resolving these problems is recognizing them for what they areโ€”barriers to business success and growth.

 

Watch for These Accounting Warnings 

Youโ€™ll know your department is struggling ifโ€ฆ

Your accounting staffโ€”maybe even you as owner or CEOโ€”is spending too much time on bookkeeping. 

  • There is a lot of reconciling to do
  • It takes a long time to close the books
  • The numbers are inaccurate (or misallocated), so reports are misleading

Overall, you just donโ€™t feel confident in the numbers.

Functional accounting problems can develop when processes are not properly set up, staff are under-trained or theyโ€™re using outdated tools. But, often, the fundamental issue is the controller (or whoever oversees your accounting department).

  • Your controller never takes a vacation because they are constantly โ€œswampedโ€
  • They are unwilling to delegate (or unable to do so effectively)
  • Turnover is high within the accounting group/administrative group

Ineffective leadership in any department commonly leads to confusion, poor work quality, and low morale, which in turn promotes high turnover. Repeatedly having to replace staff is not only expensive, it virtually ensures you will never have adequate insight into your companyโ€™s finances.

Successful business decision-making requires reliably prompt, complete, and accurate financial data, the ability to look back at history to identify trends, and the ability to forecast effectively. If red flag issues are allowed to continue, the problems will only get worse. You could lose employees, not to mention marketplace agility and competitive position.

A Fractional CFO Can Turn Red Flags Into Green Lights 

Not all businesses need a chief financial officer, especially a full-time CFO. But you still need strong financial processes and reporting to understand the status of your business and plan for the future. A fractional CFO comes in for a limited engagement for a specific purpose. You get independent, professional expertise to help evaluate and correct problems.

The point is not to โ€œclean house,โ€ find fraud committers or otherwise police your accounting department. Instead, the CFOโ€™s role is entirely positive and forward-focused. As a fellow accounting professional, they can relate to your controller or department head as an experienced peer. So the emphasis is on improvement, whether that involves processes or people who need additional training. And that could be the controller or the whole team.

Bringing in a fractional CFO will ensure that:

  • Accounting processes are set up properly
  • Staff have the latest technology and other tools to work quickly and accurately
  • Reports are generated close to month-end for timely analysis and better risk management

In other words, a fraction CFO is there to help right your ship and get it headed in the right direction.

Greater operational efficiencies reduce costs by saving time and eliminating mistakes. And an environment that makes it easy to work efficiently and do a good job fosters retention rather than encouraging turnover.

A CFO Can Also Bring Proactive Improvement

A fractional CFO can be more than a problem-solver. While their assignment may focus on addressing specific problems within your accounting department, they can also add value in other finance or general business areas. For example, a CFO can advise on strategic development, rapid growth management, tactics to boost profitability or find the best capital or financing. And in the future, if you have your eye on a merger, acquisition, or going public, you will certainly want a CFO by your side.

But first, you need to resolve those red flags.


download the financial checklist for business leaders at this link

Karl Neset

Karl Neset

Karl Neset is an accomplished professional offering over 20 years of expertise in improving organizational finance and operational processes. He serves as a solid foundation and knowledgeable advisor and manager, utilizing excellent leadership and communication skills to provide guidance and direction to executive leaders, governing boards, staff, and business partners. Karl effectively analyzes financial data, recommends improvements, executes financial tools, systems, and accounting measures that drive profitable performance, limits costs, and significantly improve overall profit margins and cash flow. He has been with Redpath and Company as Business Development Manager and Fractional CFO since 2022.