The Hidden Costs of Outdated Accounting Processes
When was the last time you evaluated your accounting workflows and processes? If your answer is never, then you are not alone. Many firms believe, erroneously, that there is no need to evaluate their processes and workflows concerning their accounting department. After all, accounting fundamentals have been around for a very long time and rarely change, so why would operations need to change? But with the rapid evolution of technology, even if you have updated processes in the last couple of years, they may already be considered outdated.
Over the last several years, technology has given us the capability to improve efficiency and streamline processes like never before. Automated approvals, electronic payments, and paperless workflows are not only becoming more and more prevalent; they are critical for overall operational efficiency. Many clients and vendors are now requiring electronic delivery of invoices and are moving towards ACH and Credit Card payments. Those firms who rely on antiquated processes may find themselves ill-equipped to handle these requests and incur costs such as slower invoice payments or lost discounts. That can quickly impact cash flow and profitability for a business.
In addition to the more obvious costs, you may be susceptible to additional resource costs hidden behind bad processes. These not only include hard costs such as interest and fees but also lost time and productivity of staff. Examples related to billing include lost time charges, delayed approvals, missed invoicing deadlines, or incomplete backup. All these can contribute to delayed cash flow and potentially higher borrowing on lines of credit or bank loans. Implementing a paperless billing process or leveraging ERP solutions can overcome these types of billing bottlenecks and challenges.
Hidden costs related to vendor payables may include missed early pay discounts, late fees, paying inaccurate amounts, and incorrect accounts charged. The implementation of a paperless approval process and online invoice backup can significantly improve these financial headaches and position your firm on a more future-driven path.
The costs listed above are examples where expenses are higher, but a poor accounting process can also cost you in revenue. Many potential clients ask for a financial package to view the economic health and viability of a firm before awarding jobs. If there are errors in your reports or you are unable to provide the requested information, you may not win those projects even if your firm is highly qualified.
What can you do to avoid these challenges?
Evaluating your current processes is where everything starts. Make sure to assess the entire process from start to finish and talk to individuals who are involved day in, day out. Once you have a full understanding, you can identify weaknesses and areas of concern. From there you have many options for leveraging technology and automated workflows to turn those problem areas into ones that pay off for your firm.
With updated processes, you can experience real-time visibility into the financial performance of your firm. It also allows you to benchmark your firm’s performance to industry averages found in reports like Deltek’s Clarity or PSMJ’s Quarterly Market Forecast. Doing so provides you with powerful opportunities to move the needle on your margins and maximize profits.
Are you interested in learning how to improve your accounting process or maximizing the advantages of new financial management technology you may have purchased recently?
Join our webinar, “Accounting Processes: Working For You or Against You?”, to learn how to evaluate your processes today and find opportunities to leverage the new financial management tools available on the market.