Habits of Successful Accountants #5 – Upgrading

Personal professional development is very important for accountants, but have you noticed how often the accounting system languishes, still at the version that was installed years ago?  As an implementation consultant, I would talk to clients about features they were missing because they were on an old version of the software.  The answer was often that they didn’t have the budget for an upgrade.

Budgeting For Success

Finding the money to invest in your system can be problematic, particularly in these days of economic uncertainty.  At the same time, it is often an excuse.  There’s no money in the budget for system upgrades because nobody budgeted for a system upgrade.  It can turn into a vicious circle!

Yes, a complete system upgrade can be expensive, but who says you have to take on everything at once?

Making a List

Remember back to when you installed your current accounting system.  What features made you decide on the one you chose?  What cool stuff were you looking forward to?  Chances are, the cool stuff never got fully implemented.  Why?  Because of the time and expense involved in just getting the basic system going.  Accounting systems are complex and the process of converting the data from an old system to a new one often takes a lot longer than expected.  As the deadline to go live approaches, optional features are deferred so that the team can focus on the basics.  And the cool stuff is often optional.  The sad thing is that the deferred features are often never implemented.

So, make yourself a little list of what you want in your system.  It doesn’t have to be all accounting software.  If your accounting department is like many of the ones I see, it can get pretty cramped.  Imagine how spacious it would be if half of the filing cabinets were removed and the paper scanned instead of filed.

New Year’s Resolution

What about adding this to your new year’s resolutions?  “I will improve my system every year.”  Accounting software packages tend to have at least one major upgrade per year, and they encourage their customers to stay on the current version.  What we used to advise clients was to upgrade every other year, unless there was a feature in the new version that they particularly liked.  This kept them reasonably up to date at a reasonable cost.  What I would add to that advice is to do the next item on your list in the years that you don’t do a software upgrade.  That way, you are always getting better!

Reprinted with the kind permission of Idatix Inc:  http://www.idatix.com/insider-perspective-habits-of-very-successful-accountants-upgrading-annually/

Budgeting Blues

The Division Manager looked at me.  “Don’t ask me why we didn’t meet budget.  Those budget numbers aren’t mine.  They’re way too high.  I never agreed to that.”  If you are a financial analyst, that quote might be very familiar to you.  It should be so simple, right?  The division budgeted $X million in sales.  The year is half over, so they should have reached 50% of $X million, but they’re actually less than that.  All you want is a reasonable explanation.  Instead, you get an argument about the budget.

Sometimes, it’s a stalling tactic, but sometimes the person really doesn’t remember or doesn’t know where the budget numbers came from.  Budgeting is more of an art than a science.  In theory it’s easy.  Every division does some crystal ball gazing and submits their best forecast for the coming year.  The numbers are assembled for the whole company and after a negotiation about who gets what share of the available resources, the budget is set.

In reality, it can get a lot more complicated.  The negotiations can go back and forth.  Numbers get adjusted.  To understand the final number, you have to understand the history.  The problem with spreadsheets is that when you change a cell, whatever was there before is lost.  So there may be nothing to tell you that the final sales number was increased due to a sales promotion that actually never happened.

Some budgeting systems solve this by allowing you to enter a series of budget adjustments instead of changing the cells directly, but if you’re like most of us, still using spreadsheets, having a system that locks in previous versions of a spreadsheet can save you a lot of hassle later on.  If you have locked in versions of the budget, not only will you understand what’s in the numbers, you’ll be able to prove it.

Scaling the Document Mountain

We were standing in “The Archives”, looking at twelve-foot high shelves mounted on rollers so that they could be crammed together.  Each one was filled with row after row of filing boxes.  I had just asked the silly question of whether all of the documents could be scanned to save money on storage.  The Archivist informed me that scanning to Archive Standards would take 37 person-years.  Now, most people aren’t interested in preserving historical documents for future generations of scholars.  All we really want is access to the information on the documents.  Still, staring at row after row of filing cabinets can give you that unpleasant sinking feeling in your stomach.

When you’re faced with a mountain of documents, what do you do?  Here are five practical suggestions:

1. Clean House First – Some documents are more valuable than others.  If there’s anything that can be easily weeded out, start there.  Make sure you have a document retention / destruction policy.
2. Draw a Line in the Sand – Start now.  Maybe scanning all the history is too much work or too expensive right now.  You can still contain the problem by setting a date after which all documentation will be scanned.  Later, as you get to know the system, you can selectively go back into history and scan the most important documents.
3. Different Documents Different Strategies – Some documents are easier than others.  If you have standard forms, for example, where the same information appears in the same place, scanning can actually capture important information, such as company names, as text, as well as creating an image of the document.  That way, you can build a database as well as a library of scanned images.  You may also find that some documents don’t need to be scanned at all because you already have electronic versions that can be transferred, instead of being printed and scanned.
4. Pick the Low Hanging Fruit – Some departments’ documents are more easily scanned than others.  Accounting is usually well organized, with documents filed for later retrieval and an annual transfer of old documents to storage.  Start there and gain some experience.  Don’t take on the whole challenge at once.
5. Look for Golden Opportunities – You may actually get the most bang for your buck from the creative side of the business, which may have the most chaotic filing system.  Being able to browse through work done for previous customers can be a fertile source of new ideas for designers and salespeople.

Bottom line:  get someone who knows scanning in to take a look at your situation.  This is a growing area with lots of new ideas and fresh approaches.  When someone says, “It can’t be done,” don’t just take their word.  Do the research.

What Keeps You Up at Night? Accounts Payable

Early in my consulting career, an Accounts Payable (AP) Supervisor set me straight.  She told me that AP is all about routine.  Expense reimbursements go out on Monday.  Domestic vendors on Tuesday.  International on Wednesday.  If this new system that I was training them on was going to work, it had to make it easier for them to keep on track.   That changed my view about AP.  It’s not just AR with the credits and debits reversed.  If there’s one thing that keeps an AP Supervisor up at night, it’s the sudden question that forces them to drop everything and go searching through the files, because vendors get cranky when their payments don’t come through.

So, what questions can cause AP to go scurrying to the files?  Well, anything that the computer system doesn’t capture, like:

• Who authorized this payment?  Someone may have exceeded their limit.  Someone may have authorized a payment without knowing all the facts.  There might have been a dispute with the vendor AP was unaware of at the time.
• Why did we do this?  Sometimes the simplest questions can be the hardest to answer.  Staff have to look at the invoice.  Maybe there’s a comment there.  Or maybe the Purchase Order has more detail.  Wasn’t there an email discussion about this, maybe six months ago?  You get the picture.
• Tax (or anything to do with the government).  Governments have an annoying habit of changing their minds.  What used to work has suddenly changed.  And guess what?  The change is retroactive to this time last year.  You have to pull all of the affected invoices and rework them using the new rules.  Good luck!
• Litigation.  Lawyers like to go fishing, hoping to catch something to their advantage.  When a requirement to produce documentation is received, not only do you have to pull and make copies of all of the documentation, but you also need to review it yourself to determine the impact of what you find.  I hope nobody had plans for the weekend.

You get the idea.  You need a central repository that will capture electronically everything at the time the transaction is done, including email exchanges, purchasing documentation, contracts and, of course, the approved invoice itself.  And for those people who can’t remember if they submitted this or that expense, wouldn’t it be cool to send them a link and say, “Feel free to browse the transactions yourself.”  Then your AP department will get a good night’s sleep and all your vendors will get paid on time.

Reposted with the kind permission of iDatix:  http://www.idatix.com/insider-perspective-what-keeps-you-up-at-night-in-accounts-payable/

Changing Accounting Standards

What are some of the biggest headaches in accounting?  I’m sure you have your favorites, but let me tell you about Doug.  I called him last week to see if he wanted to go for a drink, but he was still in the office late on a Friday evening.  It turns out his company adopted some of the new International Financial Reporting Standards, so he has to go back and restate the numbers, right back to his opening balance sheet at the end of 2009, and then carry the results forward using the new rules.

“As if that wasn’t enough,” he said.  “We’ve got a bunch of contracts that go back ten years or more.  The auditors now want proof of existence.  They never asked for that before and they don’t accept the fact that we get payments each month.  They want to see the actual paper.  I mean, I know we have them.  They’re piled up on skids at the back of the plant.  But it’s really dirty back there and it’s going to take days to find all the ones the auditors want to see.”

When rules change, they never get simpler.  So often you have to go back to the original transaction and interpret it in light of the new rules.  And it’s not like you can plan for the change.  I can’t tell you the number of times I have wished I had had the original documentation about a transaction so I could see who signed it and ask them what they were thinking at the time.  Or, better yet, if I could have the emails or memos that led up to the deal, so I could understand the intentions of the parties.

Wouldn’t it be nice if you could click a button and see the documentation?  Or what if charities and universities could track the trust documents and bequests in their endowments.  I know a church that wanted to consolidate its endowments because many of them were tiny.  The $5,000 that was a significant gift in 1960 was now almost more trouble than it was worth.  It would have been helpful to have all the original documentation, so that they could approach the surviving families and/or the public trustee.

Honestly, I don’t know which is Doug’s biggest headache, the changing rules or auditors’ demands, but I’ll let you know after we finally go for that drink.  What is your biggest accounting headache?  I’d be happy to feature some in future blogs.

Reposted with the kind permission of iDatix:  http://www.idatix.com/insider-perspective-changing-accounting-standards/