Your Accounting Department: Looking Under the Hood

Remember when looking under the hood was a thing? Back in the olden days of my youth, owning a vehicle with less than 150,000 miles was a dream. A newer model wasn’t a glimmer of an aspiration. Old beat-up cars were the mode of travel. We learned how to keep those ugly heaps rolling.

The scene under the hood wasn’t all that complicated and more often than not, identifying and swapping out one exhausted part with a used, unbroken version of that same part was the way to go. Things have changed. The labyrinth of electronic and mechanical components now sleekly smashed together under the hood is enough to make one glaze over.

What happens when your controller accountant or bookkeeper is out for an extended period or retires? The knee-jerk reaction would just be to find a comparable replacement. Today, that would not be the optimal choice. There are process and automation alternatives to employ that may mean you do not have to hire one full time equivalent (FTE) employee to replace a departing one.  

The same age-old practice of swapping out one for another is no longer the best approach for directing your company’s accounting functions. So much has changed and improved. If you’ve been able to steward your company through the Great Recession and the COVID pandemic, it is the perfect time to rethink how the fundamental accounting processes are deployed for your company.    


Small and mid-sized businesses historically have employed bookkeepers, accountants, or a combination of both to handle accounts payable, accounts receivable, bank reconciliations and bank feeds, maintaining debt schedules and general ledger accounts, preparing financial reports – balance sheets, profit-and-loss statements, and more. In-house accountants also spend a great deal of time gathering data for various parties. They gather for tax preparers, lenders, governmental agencies, industry associations, and company owners and managers.

The accounting profession is way out of balance; many more accountants have retired and left the ranks than have been exchanged for newly-minted replacements. That means finding a qualified bookkeeper or accountant is excruciatingly difficult. Unless you work in an accounting or bookkeeping firm, finding, hiring, onboarding, training, and managing accounting personnel are activities extraneous to your company’s core mission.

The pandemic has raised our collective awareness that not everything needs to be done on site. With cloud-based servers and secure remote logins, accounting and bookkeeping functions shouldn’t occupy expensive real estate square feet.

Then there is the issue of determining whether your accounting team is using the most current software ­and processes to best serve the company’s needs. You have to assume that your competitors are leveraging their benefits. If you examine the opportunity costs of maintaining an in-house accounting department, it would reveal loads of time, money, and energy being spent on matters that are not connected to growing your business.

Another advantage to accounting outsourcing involves risk and fraud prevention. In the accounting profession, the segregation of duties is the advised approach to reduce potential exposure associated with too much concentration of cash and financial info among too few people; checks and balances are your friends. The American Institute of Certified Public Accountants and the state's Board of Accountancy, regulating bodies for CPAs, focus heavily on ethics. All licensed CPAs must earn verifiable ethics course credits every year to maintain their license. Few professions can rival the level of commitment to quality that define CPAs.

Outsourcing your company’s back-office functions to an accounting firm is more efficient. Considering the FTE's salary and ever more costly benefit expenses, vacations, time off, and even periodically having to deal with internal squabbles, all suggest the time may have come for a different approach. In most cases, offloading the work to outside professionals is less expensive, raises the level of accuracy, provides more timely reporting, and makes for a smoother hand-off to tax preparers.

Artificial Intelligence (AI)

The thought that “AI can radically transform your small business” is a refrain often repeated but seldom executed. In a research paper based on US Census 2018 survey findings and cited in Wired, “…AI is heavily skewed towards big companies: 24.8 percent of companies with more than 250 employees have invested in some form of AI. That’s more than three times the rate of firms with fewer than 10 employees—7.7 percent." Unless you are familiar with AI applications, it sounds big, expensive, complicated, and far more suited for big companies rather than small. While it may have been true early on, that is no longer the case.

According to ONLINE IT Guru, “Artificial Intelligence is the simulation of the human process by machines (computer systems). These processes include the learning, reasoning, and self-correction.” The benefits include increased efficiency, improved workflow, lowered error rates, better and more timely reporting and decision-making support, and freeing your employees of highly repetitive manual tasks – the churn. It is every leader’s responsibility to get the highest and best use of human capital resources; AI helps make that objective happen.

Streamlining processes and reducing errors, e.g., accounts receivable, accounts payable, report writing, are key motivators for giving serious consideration to applying AI elements to your accounting department. These AI applications allow you to reallocate your employees time to better realize their highest and best use.

Getting Help and Insight

You do not need to be up to speed with the latest developments in accounting processes automation, the structure of back-office outsourcing, or AI. It is the purview of your CPA business advisor to stay abreast of changes that affect how companies can best leverage available, cost-effective opportunities; your CPA should not just be viewed as the compliance expert keeping you legal. Your CPA already has a working knowledge of your business – the front and back of the house. A modest advisory engagement assessing your accounting department systems, practices, and processes will start you on the path to finding what’s best for you today and into the future.

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