Accounting and Business
Accounting departments have long suffered from being considered as serving a lower-priority function and playing a subsidiary role to other departments in any business—i.e., a “non-value creating” activity. Many business owners and top managers consider accounting as government mandated and a pretty much useless function. They also view accountants as boring bean counters whose only role is to prepare a few insipid reports a year, and who are known for their constant irritating interventions to “more valuable” departments with unclear (for most personnel) requirements and standards that others have to maintain for reasons unknown. And I wouldn’t be surprised if all top managers secretly dreamt of ridding themselves of those annoying accounting people and finally doing whatever they want, without looking back at the “weird” needs of the bookkeeping department. Or at least outsource them as much as possible to minimize their involvement, cut expenses to nearly nothing, and forget about them—all the more so, as information technology (IT) allows for performing such outsourcing nowadays.
However, accounting and financial activities, and the people who carry them out, definitely deserve to be better regarded by others.
Contrary to popular belief, accounting and financial activities are not geared to maintaining financial measurements and preparing accounting reports, although those tasks are an inherent and large part of accounting responsibilities. Well established, smartly arranged, and wisely explicated accounting figures and reports allow management folk not only to better understand their reality, but also to help them predict future trends, estimate planning business changes, and eventually make the best business decisions.
Similarly, a top-notch financial manager is responsible for not only generating accurate financial information within the company, but also for sharing his/her experience, prudence, and strategic vision with other colleagues in order to make better business decisions.
Besides the timely and accurate collection of financial information, accounting serves other less visible yet more important roles for any business:
Accounting and Enterprise Software
A similar general bias is certainly reflected in the enterprise software industry as well. The vast majority of business software packages, such as enterprise resource planning (ERP), for example, offer lots of accounting features and functions; however, once the system is purchased and installed, customer support to fix issues and bugs and to make appropriate enhancements in the accounting area is not a top priority for both internal IT departments and vendors. Unless the problem is severe enough to jeopardize the whole system’s functioning, financial and accounting issues will most likely be the last thing to be resolved—after manufacturing, purchasing, sales, customer relationship management (CRM), inventory, and other bugs are fixed. After talking to practicing accountants and financial managers, I can vouch that they fully confirm this tendency.
Fully understanding the root cause of such practices, I still don’t think this is a fair and reasonable way to treat the accounting and financial side of a business. As I have shown above, insufficient attention to the accounting issues of a software package may lead to irreconcilable losses and wrong business decisions, which may in turn impact the company’s entire operations.
If organizations keep ignoring financial and accounting issues and relegating them to the last slot on the priority list, perhaps the best thing for the financial manager to do is to think of a new financial system as a stand-alone best-of-breed financial application, rather than a module of a larger ERP package. For organizations using such a stand-alone financial application, all the issues that emerge will be related to accounting, by default, thus increasing the speed with which they are addressed.
Well put - accounting issues should be top priority in any business, no matter what the size. Thank you for posting this.
Thanks for your great analysis. You pointed a real problem.
But wouldn’t you be creating a new set of problems using a stand-alone financial application? Apparently your problems are solved but what about interfaces with your business activity? Would you rely on information (reports) retrieved from the old system? Would you collect information manually? Wouldn’t those problems be back when you need to implement new accounting rules?
Part of the responsibility is from accounting people. Very often they trend to paint the “dark beast” darker then it really is. In my point of view, there is a communication problem between IT professionals and accountants.
I wished I was wrong.
I agree with Benito a stand alone financial application will create more issues than resolve issues for the accountant. The Accountant may however look at stand-alones for some very specialised activity such as consolidation where data may be spread over multiple systems.
The accountant analyst gets a lot of advantage from the rest of the data on ERP. He will be able to look at trends in sync with operational data which is where the value add happens
I am an IT Consultant and I spend a great deal of time working with Finance Departments.
I was speaking to an FD of a large company once about the whole subject efficiency and an IT departments attitude to ‘efficiency’ in the finance department.
He discussed this with his senior staff and asked them what they they felt was their primary duty.
The answer - ‘to protect the assets of the business’.
This is something I was taught in the first year of my degree, but simply forgot.
It is not enough to know what a client does, you must also ask why. There is normally a very good reason, but it isn’t always obvious.
can business really do without the accountants role in budgeting, budgetary control, financial planning/modelling and other key functional areas that constitutes an accountant’s role in enterprise? good piece.