Topic : Restructuring an Accounts Department
Author : James Wigmore - A2J Consultancy Ltd
A client was concerned that his Accounts Department was not performing and asked me to come in and have a look. He told me that the Department consisted of a Financial Controller, (“FC”), Head of Accounts and three clerks. On talking through his concerns it transpired that he had not had any management accounts for six months and the Accounts Department was three months behind in posting the monthly entries into the books of accounts. Only Credit Control seemed to function.
When I came in I sat down with the FC and asked him what he thought that the issues were. He stated that they had so many invoices and other transactions to cope with each month that they were falling behind. On discussing the number of sales & purchase invoices that they were processing each month, the numbers seemed within normal parameters for a £15m turnover SME and there were more than sufficient staff. On further probing it came out that the FC insisted that his staff use ‘batch processing’ to enter the data. An invoice would be coded up and put into a batch along with the other invoices and the whole batch would be processed at the month end. When this was done, he would then individually check the posting of every invoice into the books. This made the month end last forever, while during the month the accounts team was relatively unoccupied.
I suggested to the FC that his team post the invoices as and when they come in and he flick through the Nominal Ledger at the end of the month to ensure that none of the postings were significantly wrong and not to worry about minor mis-postings, ie under £100. Using this method, the team caught up with the backlog of postings within two weeks, while doing their day jobs.
On talking to the various staff members I realised that the department was in silos and that if person A was ill or on holiday, that person’s role was picked up by anyone. I therefore encouraged the FC to cross train his staff so that they could provide holiday cover. One of the clerks had the sole role of looking after Fixed Assets. As this is usually about an hour’s work per month, I was intrigued that she managed to make the task last so long. That person was made redundant as her work was absorbed by the rest of the team.
The existing cashflow model was simplified and made weekly, whilst the management accounts model was rewritten with only the key numbers being produced, (eg not showing every small line within overheads) and comparisons with Budget & Last Year made by month and Year to Date.
Happier Accounts staff and client.
Author and Financeheads Member
James Wigmore A2J Consultancy Ltd
Tel: 07896 141487 e-mail: A2JConsultancy@hotmail.co.uk
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