Those of us “able to account” typically means that we are elements of the business equation known as finance. How successful a business is depends not only on the innovative nature of its products or the number of its customers, but also about being able to account for the activities that occur within and through the boundaries of the organization.
In my over 15 years of manufacturing and service experience, I have held many financial and operational positions. I have been the operations person looking to the finance team to generate timely, reliable and relevant financial reports that I could use to run my department, and I have been the finance person working to produce those numbers. Neither role is meaningful without the other. Both the finance and operation functions are accountable for the numbers being produced.
Being able to account to others for the results generated is critical to both functions and all businesses. The way in which an organization accounts for its activities can be a significant competitive advantage. How? The organization that can successfully generate real-time or near-time information (not just data) to monitor business conditions is an organization that is perched to take advantage of every opportunity and can intercede before a situation gets critical. The numbers a business generates, when accurate, timely and relevant become the “pulse” of business health.
The ability to account for business operations is dependent upon human and technological factors. The integration of business processes and systems to collect data, consolidate the information and flow it into meaningful accounting information enables an organization to respond rapidly to significant business events. The generation of daily manufacturing cost reports that detail operations from revenues collected to purchases made and all steps in between allows an organization to ask the necessary questions close to the events.
Technology exists that enables even the smallest organization to achieve some degree of automation. It may be a basic “accounting” package that captures purchasing, inventory and accounting transactions. Or it may be an enterprise-wide system that includes tracking of all manufacturing process steps, changes in inventory, labor costs, and shipping. Whatever the system and its components, some core concepts to remember are:
- Align processes and technology
- Develop roles and procedures that create and maintain data integrity
- Minimize human error through automated data collection, system interfaces and quality control mechanisms (garbage in, garbage out)
- Design system reports or data/information exports that are user friendly, automated or semi-automated, that put the information in the proper users’ hands
- Utilize analytical tools, including custom spreadsheets and business models, to develop trends and monitor fluctuations
- Have a business and/or strategic plan and make it dynamic: Revise it and track changes through variance analysis against the b-plan, original budgets and forecasts
- Generate forecasts that incorporate the new information and significant events; be event driven for your financial reporting
- Use “time” driven reporting for comparative analysis: this year versus last year, this quarter versus last quarter
- Don’t expect technology to fix a broken business system or process; technology applied to weak or dysfunctional business processes simply automates the dysfunction
- A properly designed and utilized system can reduce the human resource element devoted to the “routine” of numbers generation and leave your organization more time for analysis and action.
In conclusion, finance is accountable for monitoring an organizations health through its reports. More importantly perhaps, finance is accounting for the success or failure of an organization’s system—and holds us all accountable.
Copyright ©2010 Lea A. Strickland