Streamlining Your Accounting Department for Professional Services Firms

Cory Parnell, CEO of BGM, and Brian Stueve, BGM’s Outsourcing Practice Leader, recently sat down together to discuss the whys and hows of streamlining the accounting departments of professional services firms. Here are the key questions they addressed along with a summary of their answers:

• What Are the Benefits of Streamlining Your Accounting Department?
• How Can a Professional Services Firm Determine if Its Accounting Department Is Streamlined?
• How Does BGM Assess Whether a Client’s Accounting Department Is Streamlined?
• What Tools Can Be Used to Streamline an Accounting Department?
• What Does a Well-Run, Efficient, Streamlined Accounting Department Look Like?
• How Can a Professional Services Firm’s Leadership & Accounting Staff Gain Greater Clarity Into Their Processes?
• Which Accounting-Related Key Performance Indicators (KPIs) Are Critical to Track in Professional Services Firms?
• How Can This Information Around Streamlining Help With the Current Accounting Labor Challenges?

Would you rather watch Cory and Brian talk about this topic? Watch the webinar here.

What Are the Benefits of Streamlining Your Accounting Department?

With a streamlined accounting department, you can:

• Gain insights into historical information about your company’s finances: With this information, you can validate the operational items you should be looking at and identify and analyze process areas that need improvement. This information will allow you to optimize your processes for the future.
• Set KPIs you can measure on an ongoing basis: You need to know the current health of your organization. A well-run accounting department will have set clear KPIs they can track in real time and help you establish monthly, quarterly and annual goals.
• Improve the scalability of your company by maximizing its profitability: The pricing model you choose will impact your bottom line and affect how well you can scale. For instance, moving to a deliverables-based pricing model from a time-based model could help you scale faster.

How Can a Professional Services Firm Determine if Its Accounting Department Is Streamlined?

This really comes down to whether your professional services firm has a good grasp on these three areas:

• Pre-accounting processes: These are the processes involved prior to accounting department receiving.
• Complete monthly close procedure: This involves adjusting financials from cash to accrual.
• Planning and financial performance report: Meet once a month at a minimum with company management or owners to present current and future financial performance, including KPIs.

Expense Management

A lot of small businesses think recording expense transactions based on what hits the bank is a best practice for expense management. In truth, the process of expense management starts way before then. A bank statement should be used only for reconciliation.

Pre-Accounting Processes

Pre-accounting processes are those involved in the operations of your business. Instead of simply dropping all transactions on the accounting group’s desk, businesses should look at transactions from a more holistic perspective.

Companies that have a streamlined accounting department are those that clearly define their pre-accounting processes and implement the right software to optimize the process.

How Does BGM Assess Whether a Client’s Accounting Department Is Streamlined?

At BGM, we follow a three-step process for assessing our clients’ accounting departments.

• Step One: We send a two-page questionnaire to gather information about the client’s accounting department. We include questions about accounting cycles along with high-level information. This gives us a good idea of who the client is and who we’ll be working with.
• Step Two: We then meet with the client to delve deeper into the accounting cycles. During this meeting, we gather the required information to document the current situation and complete an analysis. This supports our recommendations and roadmap to success.
• Step Three: We’ll deliver a recommendations report that includes a roadmap for success, including software recommendations. Additionally, we have a role and responsibility grid that clearly defines the responsibilities of each person/resource involved in each of the accounting processes. This includes the business, BGM and any third-party company. The grid is a powerful document that ties the entire workflow together and helps everyone understand the part they play in it.

What Tools Can Be Used to Streamline an Accounting Department?

Expense Management Tools

There are two tools we recommend as best-of-breed when it comes to expense management:

• Bill.com: This is an effective tool to use for managing accounts receivable and accounts payable. It’s cloud-based and integrates with a lot of accounting software. You can manage everything through its mobile app, making it highly convenient for busy business owners.
• Expensify: We love this tool from a pre-accounting standpoint. It allows you to manage credit card transactions, receipts and more in real-time. Plus, it’s easy to use thanks to its friendly user interface.

Core Accounting Software

We firmly believe that any accounting software you use should live in the cloud so you can access it at any time. The two pieces of software we use are:

• QuickBooks Online: Intuit’s QuickBooks is practically a household name when it comes to accounting software. While it’s relatively easy to use, it does come with several limitations. A common issue that crops up with professional services firms is access for multiple users.
• Sage Intacct: Intacct is a step above QuickBooks. Not only does it allow for multiple-user access, but it also comes with more functionality and reporting capabilities. Firms can benefit from Intacct’s unique scalable application design.

Payroll Systems

We’re agnostic when it comes to payroll systems. These vary greatly across software and industry. Our goal is to ensure that no matter what payroll software you use, it integrates seamlessly with your accounting software.

Forecasting Tools

One of the greatest tools out there for forecasting is Jirav, which can connect to accounting software such as QuickBooks Online. You can use this tool to create a rolling forecast of revenue, income statements and cash flow statements.

How to Make the Most of the Tools You Use

It’s not enough to have the right tools. You also need to ensure that you set up your tools properly. Incorrect setup can lead to frustration and issues later down the road. Create a solid implementation plan up front and you’ll find you’ll free up resources and gain efficiencies throughout your accounting processes.

What Does a Well-Run, Efficient, Streamlined Accounting Department Look Like?

There are three overarching elements to every well-run accounting department:

• Automate or optimize transaction capture and coding (pre-accounting)
• Completing month-end adjustments and changing the financial statements from measuring actual business performance (cash basis to accrual basis)
• Interpreting financial statements and advising the management team on past and projected business performance

If your department is doing all three of these well, you’re well on your way to having an efficient, effective accounting department.

How Can a Professional Services Firm’s Leadership & Accounting Staff Gain Greater Clarity Into Their Processes?

Leadership and accounting staff need to have a firm grasp on their approach to financial management. This involves tracking their production, utilization, billing rate and historical numbers to validate their performance.

They should also have a schedule for tracking tax liabilities. Moreover, leadership and accounting staff need to have ongoing conversations around operations and various components of the organization to help drive growth.

This is where outsourced accounting services can be immensely useful. It can be difficult for one person in an accounting department to possess all the different realms of expertise required for effective financial management.

Which Accounting-Related Key Performance Indicators (KPIs) Are Critical to Track in Professional Services Firms?

It’s mission-critical for professional services firms to track revenue and utilization of people. Know your average rate and understand whether that rate is tied to time and materials or if it’s project-based. Watch production and billing realization, which should include both conservable aging and WIP aging.

Professional services firms must also move away from company-driven KPIs to department-driven KPIs. This empowers teams or groups to manage their own performance and report back. It also keeps every team visible in the organization and accountable for the role they play.

How Can This Information Around Streamlining Help With the Current Accounting Labor Challenges?

One of the best ways to counteract the current labor shortage is to lean more heavily into the use of software for pre-accounting activities. And the more accounting processes you can streamline, the better off all departments in your firm will be.

For greatest success, train users during the implementation of new processes and software. Don’t ignore the importance of setting up the proper documentation at the outset to avoid missed transactions, coding errors and more.

Focus first on getting your historical numbers and processes for gathering them squared away before moving to forecasting.

Finally, make sure you have identified the ownership of roles each resource plays for every accounting cycle workflow.

Questions? Get in Touch!

The information we’ve shared comes from years of learning and practical application. If you’d like to discuss anything we’ve laid out here or if you’d like to learn how our team can help your professional services firm streamline your accounting department, reach out to our team. Call us at 952-844-2500 or send us a message today!