Let’s set the scene: you’re driving down the highway – or in my case, sitting in Atlanta traffic. Your goal is to get to your destination as quickly and smoothly as possible. But what if your dashboard wasn’t working? No speedometer, no fuel gauge, no warning lights. Would you feel safe driving? Probably not.
Your accounting and finance functions are your business’s dashboard, giving you the critical information needed to make smart decisions and avoid trouble. But just like a dashboard needs to work properly, your accounting and finance systems need to be accurate and reliable. If they’re not, it’s time to take a closer look under the hood.
When these systems aren’t up to par, warning signs start to appear. These warning signs can point to deeper issues, so it’s important to address the root causes – not just the surface problems. Let’s expand on some of key warning signs to watch for and what this may mean for your organization.
Warning Sign #1: Unreliable Numbers
Do your financial reports feel inconsistent or incomplete? Maybe you’re questioning whether the data you’re seeing is even accurate. Unreliable numbers make it nearly impossible to make informed decisions – and they’re often a sign of deeper issues.
What This May Mean
– Your team may lack proper understanding or training on how to collect, record and/or reconcile the organizations transactions. Preparation of the financial statements may also be a pain point.
– Processes for tracking expenses, revenue, or inventory might be outdated or unclear. Additionally, if your process is subject to significant manual data entry, this could increase the risk of errors.
– Your accounting system may not be set up to capture or organize data correctly or may not be able to handle your organization’s current growth. As organizations scale, it’s important for their systems to scale with them.
Potential Solutions
Invest in Staff Training: Proper training ensures your team knows how to collect, record, reconcile, and present data accurately. With clear guidelines and a shared understanding of best practices, errors are minimized, and trust in the numbers may improve.
Standardize / Automated Processes: A consistent approach to tasks like reconciling accounts or categorizing expenses reduces confusion and creates dependable workflows. Additionally, decreasing manual data entry through automation increases the reliability of your numbers and frees up capacity for your staff.
Audit Your Systems: By reviewing your accounting software, you can fix setup issues, integrate missing features, and ensure it’s tailored to your needs, reducing the likelihood of data mismatches.
Warning Sign #2: Delayed Reports
It’s the middle of the month, and you still haven’t received last month’s financials. Your team is running behind, swamped by manual tasks and last-minute requests. You need these reports to finalize a big decision, but instead, you’re left waiting – or worse, pulling together a rough estimate on your own.
This delay creates anxiety and undermines your ability to stay proactive. Instead of planning for the future, you’re constantly reacting to what’s already happened.
What This May Mean
– Month-end processes are inefficient or lack structure. This can be because of burdensome manual reconciliations, inconsistent or incomplete transaction entries, or duplicative efforts from team members cross-checking or redoing work.
– Your team is stretched thin, overwhelmed by manual data entry or reconciliations. Seeing a theme here? Rule of thumb – if you can automate it, automate it.
– Reporting tools don’t provide the insights you need. If you’re unable to improve processes, it might be time to rethink the system you’re using and if it’s serving your organization the way you need.
Potential Solutions
Streamline Reporting Processes: Establishing a clear timeline for reporting tasks creates accountability and predictability. Everyone knows their role, deadlines are met, and you get your reports on time. Like a well-oiled machine!
Leverage Automation: By automating tasks like bank reconciliations or expense tracking, you free up your team’s time and reduce errors. This means faster, more accurate reporting.
Add Capacity: Hiring additional staff or outsourcing financial tasks ensures your team isn’t overburdened, allowing them to focus on delivering timely, high-quality reports. This can be especially helpful during those critical periods (i.e. period ends, audits, tax season, etc.).
Warning Sign #3: Cash Flow Problems
Your sales are strong, but somehow you’re always worried about cash. Payroll is coming up, and you’re not sure there’s enough in the bank. You feel like you’re constantly chasing clients for payments or scrambling to delay vendor invoices.
The stress of not knowing where your money stands takes a toll, and it makes it hard to focus on growth when you’re just trying to keep the lights on.
What This May Mean
– Inconsistent invoicing and payment follow-ups lead to delays in cash collections. It’s important to optimize your cash conversion cycle (fancy words for how long it takes you to make money) and stay on top of accounts receivable and accounts payable.
– Lack of visibility into future inflows and outflows makes it hard to plan. Implementing best practices when it comes to forecasting & budgeting can make a world of difference here.
– Mistakes in data entry or misclassification of revenue and expenses can distort cash flow statements, leading to a mismatch between the cash you see in your analyses and the cash you see in your bank.
Potential Solutions
Refine Cash Management Processes: By creating clear policies for invoicing and payment collection, you ensure money comes in on time. Automated reminders or payment systems can help enforce this.
Implement Cash Flow Forecasting: Forecasting tools allow you to see what’s coming in and going out, so you can plan for potential shortfalls and make proactive decisions. For best practices on forecasting, see our article here.
Improve Communication: Regular updates from your team ensure everyone is aligned on receivables, payables, and overall cash position, reducing surprises.
Warning Sign #4: Compliance Issues
You’re scrambling as tax deadlines approach, unsure if everything is in order. Maybe you’ve already missed a filing and had to pay a penalty, or you’re dreading an audit because you know your records aren’t where they should be. Compliance feels like a constant game of catch-up, and you’re always on edge.
What This May Mean
– Your team isn’t fully aware of the regulatory requirements that apply to your business. There is a lot of codification out there – enough to put you to sleep every night for the rest of your life.
– Records are incomplete or poorly organized, making reporting difficult. Outlining policies and procedures to align your internal team can help immensely with creating a comprehensive repository for your compliance needs.
– Your systems lack features to help track compliance deadlines or requirements. As your business grows, so will the complexity of compliance requirements.
Potential Solutions
Provide Specialized Training: Training ensures your team understands the rules and regulations specific to your industry. Knowledgeable staff are less likely to miss deadlines or make errors.
Review and Refine Procedures: Implementing checklists or workflows for compliance tasks creates structure and reduces the risk of oversight.
Consult with Experts: A CPA or financial advisor can provide clarity on complex regulations, help you organize your records, and even handle compliance tasks for you.
Warning Sign #5: Overwhelmed Staff
Your team is putting in long hours, but it never feels like enough. They’re juggling data entry, customer inquiries, and reconciliations, all while trying to close the books. Mistakes are creeping in, and morale is dropping fast.
An overworked team not only leads to burnout but also makes it harder to retain good talent. It’s clear something has to give.
What This May Mean
– Processes rely too heavily on manual input, creating unnecessary workloads. This could be exacerbated during period-end closes or busy seasons.
– Staffing levels haven’t kept pace with the complexity of your business. Often, accounting and finance are one of the last functions to grow with the organization, and it can be a significant pain for all involved.
– Employees are stretched too thin to focus on strategic, high-value work. This can lead to a deterioration in quality financial statement analysis, strategic recommendations, and ultimately reduced organizational effectiveness.
Potential Solutions
Automate Repetitive Tasks: Automation reduces the time spent on data entry or reconciliations, freeing up your team to focus on higher-priority tasks.
Hire or Outsource Support: Adding capacity allows your team to work more efficiently and avoid burnout. Outsourcing specific tasks can also bring in expertise without long-term overhead.
Re-evaluate Roles: Aligning team members with their strengths ensures they’re working on what they do best, leading to better results and higher job satisfaction.
What To Do If Your Lights Are On
If you’re seeing some of the warning lights flashing on your business’s dashboard, it may be time to take a look under the hood. Although it may seem intimidating at first diving into the numbers and nitty gritty to try and diagnose what’s going on, it’s important to remember that most accounting and finance problems can be boiled down into three buckets – people, processes, and platforms (i.e. the 3P’s… yes, another business acronym to remember). Starting your analysis here can be hugely clarifying.
Once the problem(s) have been identified, it’s time to ask whether or not investing in your accounting and finance functions is worthwhile given your business’s context. Unfortunately, there’s not a black and white answer here. However, careful analysis, weighing the pros and cons, and talking with a professional should help give your team an informed vision and a solid roadmap for success.
Looking Forward
Investing in your business’s accounting and finance functions can sometimes feel like going to the auto shop – people are telling you to buy things you don’t understand, that it’ll take longer than you’ve got time for, and it’ll be more expensive than you anticipated. In a word – uncomfortable. At Filan, we try to alleviate these pain points. We’re focused on guiding our clients on a journey of discovery, accelerating immediate impact with minimal disruption, and providing Big 4 expertise at a fraction of the cost.
If the warning lights of your business’s accounting and financial dashboard are flickering and you’ve got concerns, let’s have a chat! We’d be happy to provide a free assessment, figure out a path towards success, and get your business back on the road and driving smoothly.
