What Does Process Improvement Mean in Accounting?

What Does Process Improvement in Accounting Mean?There are plenty of methods and reasons for the overall strategy known as "process improvement" - is there an easy way of explaining the overall goal and when the term is not simply a buzzword to get thrown around at management meetings?

Several aspects of the accounting department are controlled by what are referred to as processes. Typically, this involves a set of rules that govern a series of tasks incorporating one or more employees.

For example, most accounting and accounts payable departments will have an amount-based approval process for payments - if under a certain amount, just pay; if over a certain amount, get approval from manager/department head/executive etc. This is a common and relatively simple example.

So the process might include steps like "Receive invoice; match with packing slip or delivery notice; enter into spreadsheets; gain proper approval for amount of check to be paid; log approval; produce and send check; confirm receipt;"

For a simple process, there are quite a few steps, and several of which involve other people in the company. The order of operations listed above is from the perspective of the accounts payable clerk, or whoever else in the AP department might be taking lead on a task like this.

With any process, from simple to complex, it is easy to tell when process improvement is necessary. Critical problems to look for that will signal process improvement should begin can include:

  • Simple tasks take too long to complete
  • Too much time is spent validating data
  • Employees in accounting are constantly complaining
  • Too much paper is being used
  • Moderate to extensive backlogs exist
  • There is a significant amount of manual keying and rekeying data
  • Information is not easily accessible
  • Senior management information requests result in constant fire drills
  • System workarounds exist as more than the rare exception, and renegade processes exist in the system
  • Excessive use of spreadsheets
  • External databases and/or data warehouses supplement the accounting system

After seeing these issues it may be tempting to try and address them singularly - in a way that will be beneficial to the individual problem - without engaging in an overall strategy to solve the root cause of the problem which, most often, is bad processes and procedures, or a lack of infrastructure to support them.

The key to resolving process issues like those mentioned above is to address the end-to-end process - find ways to improve it as a whole, starting with the business rules themselves.

It's important to review rules, policies, and procedures that are in place - after all, they may have been implemented before new workers were added, or new tasks were required, or even before a technology shift occurred in the company. It's important to remember that rules were made for a reason, and sometimes rules should be changed for equally as valid reasons.

Once policies have been revisited from end-to-end, think about how they interact with each other, and how the work will actually be done. The parts of the process that can be eliminated have already been addressed, so now we look to the parts that can be automated.

Automating aspects of a process not only decreases the individual work load of every team member involved, but it allows them to focus on value-adding activity or, at the very least, to be more efficient in the activities that are not necessarily value-adding to the customer, but are required and necessary as a means of business.

For example, no company looks forward to an audit as a value-adding activity, but it can certainly detract from value in other areas if it's not prepared for in advance with proper record keeping and storage.

Reducing inaccuracy, duplicate work, and repetitive tasks is one of the overall goals of process improvement and process automation software - this is where leveraging technology becomes crucial to the accounting department.

If the accounting and accounts payable section of the company is destined to ever be more than a frustrating time sink, it's imperative to start making process improvement a priority.

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