The Slow Suffocation of Over-Staffing

It’s a well-known law of nature that work expands to fill the time available. This is as true in an accounting department as anywhere else. In an over-staffed accounting department, bookkeepers will over-indulge their penchant for perfectionism, make-work projects of questionable value will abound; and staff will get bored and dissatisfied. If your department is over-staffed, there are many possible solutions.

You may have an employee who would prefer to go to part-time status, either permanently or temporarily. Or, you may have an opening elsewhere in your organization where someone could be transferred. The other options are more drastic.

If the problem results from a temporary slowdown in business, and you have a cohesive team, you could cut everyone’s hours across the board. It is important that each person in the department, including the manager, participates. It is also vital that the staff understands the situation is temporary and the action was taken to avoid having to lay anyone off. Handled skillfully, this demonstration of employer loyalty can generate a long-term improvement in employee loyalty. However, be aware that if the situation continues too long, someone will solve your problem by finding employment elsewhere; and, typically, your best employee will be the first to find a new job.

Otherwise, someone will have to go. You may have someone who has been turning in a questionable performance, making the decision easy. More commonly, you’ll be letting go a good employee in whom you’ve invested a fair amount of resources in training. However, there may be a silver lining, in that you may be able to take advantage of an opportunity to structure your department more efficiently (see below).

The Death Spiral of Under-Staffing

On the flip side, an accounting department that is under-staffed will go into a “death spiral.” Work will be partially completed in order to meet a deadline, only to be re-done later. Staff will not trust each other to provide timely and accurate information, resulting in multiple people tracking the same data. Each inefficiency results in work getting even further behind, in turn, yielding more inefficiencies. Vital management information will be reported inaccurately and behind schedule.

In order to resolve an under-staffing problem wisely, you need to understand whether the problem is really not having enough people, or just inefficiencies that can be rectified. It might be as simple as bringing someone on board temporarily to get the department caught up so personnel can work more efficiently. Or, there may be process improvements that can be put in place to allow your existing staff to work more efficiently. However, if your background is not in accounting, analyzing the problem makes about as much sense as asking your accountant to engineer a roof. Your auditor or tax accountant may be able to help; or contact us, and we’d be glad to help!

The One-Person Accounting Department

If you have a one-person accounting department, it seems pretty simple. That person does it all! However, there are dangers in this. Many organizations have been taken advantage of by one-person accounting departments with sticky fingers. Or, if your one-person accounting department leaves, you may be in a bind as far as taking care of payrolls, invoicing, and bill payments.

In this situation, it may make more sense to employ two part-time employees, or a part-time employee and a contractor. This solution allows you to ensure that two people are involved in every transaction, and provides a knowledgeable resource if one of them should leave for any reason.

Business Navigator is able to provide a contract CFO who can supervise a bookkeeper’s work and provide financial expertise on your staff. Contact us for more information!

Organizing a Small Business Accounting Department

Most small business accounting departments are organized “vertically.” For example, in an accounting department with three employees, there might be one bookkeeper in charge of receivables, another bookkeeper in charge of payables, and a full-charge bookkeeper in charge of payroll and financial reporting.

There are several problems with this structure. It minimizes segregation of duties, promoting opportunities for fraud. A vertical structure can promote “silos,” where each employee is focused only on their own domain, to the exclusion of others. It makes it difficult for employees to cover for each other during vacations or sick days. And, it results in higher payroll costs than are necessary.

Imagine an over-simplified example in which three employees have their duties divided up vertically. There is a receivables clerk responsible for collections, invoicing, and simple data entry. There is a payables clerk responsible for resolving problems with vendors, coding vendor bills to the correct accounts, and simple data entry. Finally, there is a full-charge bookkeeper preparing financial reports, preparing a weekly payroll, and entering time sheets.

If this department were structured “horizontally,” you might have the full-charge bookkeeper responsible for the most challenging aspect in each area (collections, problem resolution, and financial reporting), a bookkeeper responsible for the simpler bookkeeping tasks in each area (invoicing, coding bills, and preparing payroll), and a lower-end data entry clerk doing the data entry for each function.

As a result, you have multiple employees involved in each transaction, significantly reducing the opportunities for errors and fraud. The employees work together as a team, and understand each’s duties well enough to be able to cover for each other. And, as a bonus, one of the bookkeepers can be replaced with a less expensive data entry clerk.

Increasing Your Small Business Team’s Financial Expertise

There are many difficult transitions or milestones in an organization’s growth. Taking the step from a single-person enterprise to hiring your first employee can be daunting. Another intimidating milestone is hiring a Chief Financial Officer (CFO).

Typically, a business starts to develop a need for greater financial expertise well before it can really afford to hire a qualified CFO. There are several ways to resolve this dilemma. Some organizations will hire a qualified CFO early; but this is expensive for the organization, and is likely to result in a bored (and dissatisfied) CFO. Other organizations will assign a full-charge bookkeeper or under-qualified accountant with the CFO responsibilities. Another option is to ask your CPA firm to provide the expertise. However, this option is expensive, and public accountants tend to be swamped for 3-4 months out of the year; and if your CPA firm provides an audit or review, this could impair their independence.

Another option is to contract with a part-time CFO. Business Navigator LLC can provide your firm with a qualified CFO for anywhere from ½-day per week on up. You get year-round top-quality financial expertise, but only pay for it to the extent you need it. Additionally, independence is not an issue for a contract CFO; in fact, we make it a point not to be independent, but to be your advocate (within ethical boundaries, of course).

Contact Business Navigator LLC for a no-cost, no-obligation meeting, and see if a contract CFO would make sense for your organization!