Creating an Admin/Accountancy Process (BN2)
Most successful companies benefit from the wisdom of a chartered accountant.
The problem is that the chartered accountants advice can only be as good as the information that is supplied too them.
If the receipts, invoices, wages, expenses, stock values or one of several hundred other variables within the accountancy software is wrong, then the companies management accounts will be wrong, and the advice and decisions based on them will be wrong.
The importance of creating an accurate administrative process is best understood when one considers that most businesses that have gone into liquidation have had “trouble with their management accounts.”
What makes things doubly sad is that these businesses are often managed by some of the most exceptionally gifted individuals within their field. It seems that some of individuals devote too much time to their area of expertise, rather than focus on its numerical outcomes.
So, what is the solution
From my experience the method for creating an accurate administrative and accountancy process stems from a simple six step programs. This starts with the pre-accountancy phase.
The Pre Accountancy Phase
Main Accountancy Phase
The first step is to accept that every act and decision that occurs within a business has a financial consequence. In general, an act or decision either costs the business money or makes the business money.
So the decision to make a product; hire a new member of staff, attend an exhibition or invest in machinery has a numerical value.
We know that our acts and decisions can affect the financial viability of the business and we know that we can measure some of those decisions; so the third step is to decide what it is that you want to measure.
Of course whether you wish to know what a given value is, is entirely your decision. And in many ways your decision is what defines some of us as exceptional business leaders.
I will cover this in a future video but in general you simply need someone to walk the business; to talk to people and draw up a list of measurables. People includes all staff, all directors, shareholder and your chartered accountant and can include customers and suppliers.
The fourth step is to accept that the true monetary value of an act or decision may not be reflected accurately within the management accounts. Mistakes happen; on the shop floor, in the offices and whilst data is being punched into computers, and as hard as this might seem; computers and software also make mistakes.
It is therefore sensible to have a set of rules or give guidance on how things should be done. Guidance can be given in a written or video format and re enforced through meetings and emails. How effective you are in this will affect the accuracy of the data.
You will have noticed that the first 5 considerations come before any data is physically tapped into the accountancy software. We call these first four steps the pre-accountancy phase.
Most of the pre-accountancy works can be undertaken by your internal management team; although we at business Nirvana can assist you with this.
The administrative / accountancy team must use the accountancy software as intended.
But now things become a little more difficult. Because we are conditioned to believe that computers and accountancy software doesn’t make mistakes. Well I am afraid that they do; sometimes humans are the cause and sometimes conflicting software is the cause.
If the numbers within your accountancy software do not reflect the actuality of the business, then you have a major problem.
Lets just remind ourselves that the importance of creating an accurate administrative process is best understood when one considers that most businesses that have gone into liquidation have had “trouble with their management accounts.”
Another interesting perspective is that the top 100 FTSE companies have a 99% understanding of their accountancy software, they are usually of course healthy and profitable.
It is not known how much or how little small and medium-sized businesses understand about their software, but one suspects that is significantly less than a FTSE 100 company. I would guess that some businesses have a 30% to 40% gap in their accountancy software knowledge; either due to upgrades, training issues or staff changes.
By improving the knowledge of your accountancy software you will be aligning your company with the best businesses in the land.
This is great news; as the act of learning to use software correctly is relatively easy and this forms the basis of creating an accurate administrative process.
We suggest to our clients to approach this topic with the adage of I don’t know what I don’t know, as by opening your mind to new features and functions there is very good chance that you will.
There is one important footnote here.
The financial services sector is heavily regulated and chartered accountants will have demonstrated that they can provide genuine expertise within their field. The same does not apply to those that teach computerised accountancy.
Business Nirvana therefore urges anyone seeking to achieve a greater understanding of the features and functions of their accountancy software to seek an expert in their field.
We advise that a specialist consultant in accountancy software should have an outstanding business and accountancy pedigree; not to give accountancy advice per se; (that is the role of your chartered accountant) but to have absolute knowledge of the accountancy, administrative and software process as someone who has full competancey can help a business attain the same.
Such a person should therefore:
Needless to say several partners within Business Nirvana hold such credentials, and can assist chartered accountants and business leaders create an accurate administrative and accountancy processes.
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