Are you using your accounting system correctly?

In the October 2018 edition of Financial Management magazine, I read an article called 7 Ways Companies Misuse Their Accounting Systems written by J. Carlton Collins. After reading the article, I thought I’d put together a brief summary because I think its valuable information that many of business leaders do not always consider – we’re generally focused on generating the next sale, how to control our costs, and get maximum production in our company, whether that production is generated from our people, equipment, or something else.

Mr. Collins notes in his article the following 7 ways accounting systems are misused:

  1. Failure to recognize a flawed system
  2. Failure to rally the troops
  3. Lack of implementation training
  4. Replacing a system when it’s a personnel problem
  5. Failure to convert mistakes into teaching points
  6. Ignoring your system’s advanced features
  7. Failure to keep your accounting system current.

In this summary, we’ll tackle the first four points above.

Let’s start with number 1, Failure to Recognize a Flawed system. This is relatively simple. If your software package does not produce accurate financial statements and reports on a timely basis, then you absolutely need to shop for a superior software package. Be careful not to confuse the system with number 4 – as a leader, one of your many responsibilities is to evaluate if you have the right people in the right positions.

Number 2, Failure to Rally the Troops, in my opinion this is a company culture issue. We could spend hours discussing corporate culture, and that is not the purpose of this particular article. However, if your culture is one of unity, teamwork, positivity, and achievement, it is going to be very difficult to secure buy-in and commitment to properly implementing a new software package (or even successful use of your existing package).

Moving on to number 3, Lack of Implementation Training… this may be the single biggest issue that we see as public accountants. All too often, management will decide to upgrade their accounting system and will make sure that the basics are handled. The basics include installing the program files, configuring settings, carrying over beginning balances, and assigning user rights. However, there is a rather major piece of the puzzle missing in those basics – how do we use the new system? Use of the new system could include a multitude of processes and procedures including how do I run reports that I needed from the old system if I need them, and how do I run similar reports in the new system, data input, and the most crucial of all – How do I run the financial statement reports and analysis reports that I need to make informed decisions?

The final way that we will cover is number 4, Replacing a system when it’s a personnel problem, and this is a management level judgement and evaluation issue. In many cases, a business owner that is not particularly strong in accounting, but is very strong in their specialty (sales of widgets, manufacturing and producing widgets, etc.) does not necessarily know if it’s a personnel problem, or a software issue. It’s easy to blame the software package if you are trying to keep yourself employed. In this section, it is imperative for the leader to rely on peers, professional service providers (their independent accountant, consultants, etc.) and other within the entity in order to evaluate the personnel in their finance or accounting department – in many small businesses this is simply one person. Most often, it is more efficient and cost effective to attempt to fix your current system or personnel, as opposed to replacing the system completely.

We have covered the first four of the seven ways most companies misuse their accounting software. I would highly recommend reading the full article, and if you are unsure if you are one of the company’s misusing your software package, call your accountant (or us).

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