How to achieve a lean finance department in your company

As successful companies grow over time, certain systems — particularly within the finance function — are often overlooked. As a result, multiple software applications are typically pieced together in order to extract and maintain data. Processes become redundant in order to get information into these various systems and precious time is wasted along the way.

Running a lean finance department requires stepping back and taking a fresh look every once in awhile.

“I often see software accounting packages being used to track the basic activities of the business,” says Steven E. Staugaitis, CPA, Director, Audit & Accounting at Kreischer Miller. “These packages are often accompanied by an excessive amount of spreadsheets to track various aspects of the business — from budgets and sales data to creating the monthly internal financial statements.”

Smart Business spoke with Staugaitis on the advantages of operating a lean finance department and how to accomplish it.

What do you look for in a lean finance department?

I want to observe six key elements: 1) The accuracy of the information being generated, 2) the timeliness of the information being prepared, 3) the effectiveness of the internal controls, 4) the overall quality of the reports themselves, 5) the efficiency of the technology that’s being used and 6) the overall sufficiency of the personnel within the department.

Can you provide some more detail?

The accuracy of the information has to do with the completeness of the information or, said another way, the number of adjustments that are being posted in any given period.

Timeliness involves the speed at which the department generates a set of internal financial statements. Well-run organizations will be able to close their books at the end of each month within five business days. But anywhere under two weeks is a pretty healthy indicator.

The internal control structure has a lot to do with how personnel are allocated within a department. In a smaller organization, some level of owner oversight or involvement is a good way to mitigate risk.

The quality of the reports really has to do with the type of information being provided on a monthly basis. Look for key performance indicators or other types of dashboard reporting in addition to a simple balance sheet and income statement.

The efficiency of the technology involves how well the business is using its systems and if it is making sufficient use of them.

The personnel aspect has to do with not only staffing levels, but also the overall quality of your people.

Where would you begin to improve this?

I usually suggest starting with the end users or the information recipients and understand what they need. It’s senseless to create reports no one ever uses just because that’s the way it has always been done.

Secondly, take a hard look at your existing technology to see if there are features or software modules that are not being used or are being used improperly. There may be some real opportunities to improve functionality without having to make major investments in a new system.

Lastly, take a close look at your personnel. Evaluate whether you have enough resources or need to make some changes.

What are some of the obvious places to find waste?

The area I tend to see the most waste in is often redundancy or duplication of efforts. So many businesses don’t really make effective use of their technology; specifically, I often see excessive use of spreadsheets in addition to accounting software to manage the finance side of the business.

At what point would you consider a finance department to be running lean?

I think you simply see it in the results of the business. Well-run departments are able to improve turnaround time of financial information and drive improvements throughout other aspects of the business. The only way to track improvements is to make them definable and measurable. Then you can compare your performance to yourself, your peers or other well-run companies. So where do you stand?

Insights Accounting & Consulting is brought to you by Kreischer Miller.