It is no secret that internal accountants are not perfect. Just like all other humans, internal accountants make mistakes. The problem is that those mistakes tend to be very costly.
So what mistakes could your internal accountant be making? Discover the top 20 common mistakes internal accountants make with their clients.
Relying on Excel
Bill Gates did not know he created a monster when he first started selling Microsoft Excel. Since then, Excel has become the backbone of many internal accountants' revenue and forecasting operations, but the truth is, Excel just wasn’t made for that.
In fact, research shows that for every 150 rows, 90 percent of the time, there will be a logic error. Still, internal accountants tend to rely on Excel, which means there are often many mistakes in their calculations that they may not be aware of.
Some internal accountants are glued to their emails. They tend to focus on emails and forget everything else for the remainder of the day. Having the constant connection to email can be distracting, and it often occupies more time than it is worth.
As a business owner, where does an email from your accountant sit on your priority list?
Being late on month-end reporting
The last few days of the month are always hectic for everyone, but your finance team needs to have your budgets and reconciliations under control and ready to go at the end of each month. That means internal accountants need to be on time and not struggling for last minute information. Late information stalls any financial decisions that must be made in the next month.
Having useless daily/weekly decision-based reports
The information sent out in daily and weekly reports should be beneficial one way or another. If it contains no information about critical success factors, then what good will the report be? You are paying internal accountants for basically doing nothing and wasting everyone else’s time.
Giving budget holders too much of an annual entitlement
When your internal accountant gives out annual entitlements to budget holders, they probably give them a set budget and move on, but is this budget actually reflective of what the holder needs? Are they getting too much and spending the extra money on frivolous things? This method tends to waste money that could better be spent on other parts of the company.
Too many line items on the Profit and Loss Report
Some account charts have more than 300 expense account codes in the General Ledger, and some can even have up to 30 accounts for repairs and maintenance. These accounts need to be prepared to be both easy to understand and pleasing to the eye. If they look like a mess, decision maker’s eyes will glaze over, and they may not be able to do a good job assessing what the numbers actually mean for your company
Giving the unnecessary information
Monthly finance reports should be looked over by management, but some internal accountants tend to give unnecessary or useless information to their teams. While nice to know, this information does not help anyone plan budget or adjust the way they do business. They often deter productive discussions about finances because people do not understand the reports.
Creating endless monthly management reports
When expense reports top 20, 30 and even 50 pages, you can almost guarantee that no one will read them, which means no one will benefit from the information. Readers will spend extra time combing through the document just trying to find the information they want, which wastes their time and energies.
Promoting or selling a change with logic
Emotion sells, not logic. Sure, we do not need that sunroof in the new car, but wouldn’t it feel great to feel the warm sun coming in or the cool breeze?
Internal accountants will often display facts and figures to persuade people to budget a certain way or save money, but this tactic often fails. Other people in your company will feel less inclined to agree with internal accountants or understand why they want to make changes. This misunderstanding often stops productivity and positive changes in the company because people do not understand why the changes are necessary.
They forecast year-end every month
Most internal accountants will forecast the year-end totals after each month, but this works against you in several ways. For example, one bad month does not mean your whole year will be bad. While you may lose a major customer in April, you may pick up one or two more over the course of the year. Therefore, it does not make sense to change your whole yearly plan after just one month. You need more data to show a legitimate problem or trend.
Spending way too much time on annual reporting
Reporting needs to be quick and dynamic. Delivered in a way that can help decision makers act quickly to the information presented to them.
Over-investing in the accounting system
Having great accounting software is a must for all accountants, but do you need to purchase the latest (and most expensive) edition of a software and do you really need to keep updating it? Unnecessary updates can be costly, and you may be spending more than you need. Instead, these funds could be spent elsewhere on something more beneficial or necessary.
Copying last year's annual plan
At the end of the year, the lazy internal accountant will copy last year’s plan, change a few numbers and present it as a new plan. This is not a new plan, and it will not suffice for your business. Your business changes every year, and what worked last year might not work well this year. It might even hurt your business rather than help it.
Not balancing accounts payable
Your accounts payable team keeps track of everything for you. Without them, you will have no sense of your liabilities or how much your budget holders should be spending, which means they might end up overspending. Paper invoices can get lost, which means money will go unaccounted for or never collected. You might be losing more money than you know if you are not keeping track properly.
Not considering purchase cards
Credit cards often charge companies large amounts for every transaction they receive. Purchase cards usually attract less fees and provide the same payment convenience.
Not celebrating success
When a company has a strong month, it is important that everyone knows it and gets to celebrate it. After all, it was a joint effort. There is no reason not to celebrate success as this keeps morale up and employees, including accountants, happy.
Relying on activity based costing/activity based management
Activity based costing tends to cost more money than it is worth in SME’s, and it is also costly to maintain. The information is not always of the best quality, and you rarely need the information 24/7, making most of its function useless. Once again, you are paying for something that you do not need, and it is costing your business big time.
If your internal accountant or book keeper is not working out as well as you would like, it might be time to try other alternatives such as virtual CFOs. You do not have to keep an internal accountant forever. Explore other options and see what will work best.