Top 20 Mistakes Corporate Accountants

8/8/2019 Top 20 Mistakes Corporate Accountants

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Copyright 2009 BetterManagement.comVisionary perspectives for management insights

The Top 20 Mistakes Made

by Corporate AccountantsDavid ParmenterCEO, waymark solutions limited

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The Top 20 Mistakes Made

by Corporate AccountantsDavid ParmenterCEO, waymark solutions limited


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David Parmenterwaymark solutions limited

Website: www.waymark.co.nz

Blog: www.davidparmenter.com

Email: [email protected]


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Corporate accountants better practices on

www.bettermanagement.com

1. Decision based reporting

2. Quick month-endsday 3 or less

3. Quarterly rolling planning

4. A two week annual planning process the building block forquarterly rolling planning

5. 50+ ways to improve your accounts payable function

6. Winning KPIs (8 audio casts)


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#1 Having over 80 account codes for the P/L

Separate account only if they represent at least 1% orgreater of total expenses (max 40 to 60 account codes)

Separate codes only if revenues represent over 3% or

greater of total revenue (max 15 to 20 account codes)

To a stupid question ask what are they going to do with info

answer 42 or

skilled management accountant investigate 6 weeks of

expenditure and then annualize the number Appoint a hard-nosed keeper of the chart of accounts


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#2 Monthly re-forecasting of the

year-end position

Flawed on four counts:

Why should one bad month, one good monthtranslate into a change of year-end position?

The forecast is a top-top forecast with little inputand no buy-in from the budget holders

Two months before year-end managementappear to ignore the oncoming year

Management and the Board know what evernumber you have told them is wrong!


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Fast light touch quarterly rolling forecast

The x marks the month the forecast is done (2nd or

3rd week in month)

Important that the purple numbers are quick cuts as

they are fine tuned later on

Red numbers create the new benchmarks for reporting

and funding

J un J ul A u g S ep O c t N o v D e c J an F eb M a r A pr M a y J un J ul A u g S ep O c t N o v D ec J an F e b M a r A p r M a y J un J u l A u g S ep Oc t N ov D e c

X 18 m onths

X 18 m onthsX 18 m onths

X 18 m on th s

X

X Q uarterly upd ate of roll ing forecast (during 2nd wee k)

Forec ast m onthly in detai l (50% of forecast t ime sp ent gett ing it r ight)

Forecast mo nthly

Forecast in quarter ly spl its , although so me budget holders m ay wan t to do i t monthly


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#3 Investing in a complex G/L and

upgrading unnecessarily

Task of the G/L is very simple, recording the expenditure andrevenueSAP?

The midwives of these monsters are freshly minted MBAs -

no sign of accountants with grey hair

Often core services of complex G/L could be delivered by adedicated system outside G/L for a fraction of the cost

A CFO of a 500 FTE company uses MYOB, a $500 package

Too frequent upgrades - I too would be issuing upgrades every

time I wanted to improve my bottom-line

Changing the G/L writes-off some of your experienced staff for

three to five monthsand you do not get thanked


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Investing in a complex G/L and upgrading

unnecessarilycont.

You really only need to acquire a new G/L ifyour existing G/L does not support 21st century

accounts payable options

Stick with your existing system and maximize itsuse, especially all the accounts payable features

storing scanned images of purchase invoices on G/L

electronic ordering

electronic receipting of goods & services


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#4 Letting Excel dominate the finance system

Excel never was intended to be a core financial system

Need a moratorium banning any new Excel models

KPMG have said that for every 150 rows of a

spreadsheet there is a 90% chance of a logic error

Excel is great for doing a diagram, a one-off costing,

being a table of numbers

Excel has no place in reporting, forecasting, budgeting

Nor is it a tool for a NASA space program


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We need to embrace the new tools

A drill-down tool so budget holders never needto look at the G/L

A planning tool for forecasting and recording the

annual plan

A reporting tool to replace the procedure of

dumping the monthly numbers to the G/L

Balanced scorecard tools for displaying

performance measures


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#5 Doing another annual planjust like

the last one

The nightmare of three to four months arguing over

resource allocation when nobody knows the answer

The endless cut-back rounds, the game playing, the

spend-it or lose-it-mentality is not befitting the 21stcentury

Worked for Julius Caesar but certainly not for us

When was the last time you were thanked for the

annual planning process?


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The annual planning process is not

adding value, instead it is:

Undermining an efficient allocation ofresources

Encouraging dysfunctional budget holder

behavior Negating the value of monthly variance

reporting

Consuming huge amounts of time - Board,

SMT, budget holders, assistants, finance team.


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Annual planway forward

Cost out the time spent on the last annual planuse Excel!

Research alternatives

read Jeremy Hopes work Reinventing the CFO,Harvard Business School Press

www.bettermanagement.com has a quarterly rollingplanning in a web seminar and article

acquire my white papers on quarterly rollingplanning from www.davidparmenter.com

Prepare a sales pitch using emotional drivers
http://www.davidparmenter.com/http://www.davidparmenter.com/


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#6 Avoid monthly phasing

The two major mistakes of an AP process:

monthly analysis to estimate an annual figure

monthly AP estimates used as a reporting yardstick

Monthly phasing has undermined the value of

month-end reports Quarterly phasing of data adequate

Fine tune the monthly targets just before the

relevant quarter starts


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#7 Giving budget holders an annual

entitlement

Giving budget holders an annual entitlement tofunding is the worst form of management we

have ever presided over

Portioning out cake at a nine-year-olds birthday

party

J un J ul A ug S ep O c t N ov D ec J an F eb M a r A pr M ay J un J ul A u g S ep O c t N o v D ec J an F e b M a r A p r M a y J un J u l A u g S ep O ct N ov D ec

X 1 8 m onths

X 18 m o nths

X 18 m onth s

X 18 m o nths

XX Q uarterly upda te of rol ling forecast (during 2nd week)

Fo recast m onthly in detai l (50% o f foreca st t ime sp ent gett ing i t r ight)

Forecast m onthly

Fo recast in quarterly spl its, althoug h som e budget holders m ay wan t to do i t monthly


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Only funding the next quarter helps in

many ways:

Spend it or lose it can no longer work

Budget holders find it nearly impossible to hide

their reserves in the next three month period

BHs are encouraged to seek funding for newinitiatives

BHs will be weaned off from asking for annual

entitlements they do not need


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#8 Budgeting at account code level

Never needed to set targets at acct code level

Limit the categories that budget holders need to

forecast to no more than 12

Allow the budget holders to have some flexibilityin the categories to best reflect their operation

Planning tool can easily cope with mapping of

general ledger (G/L) codes to categories


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Budgeting at category level

Stationery 4,556

Uniforms 3,325

Cleaning 1,245

Miscellaneous 7,654

Consumables 2,367

Tea & coffee 2,134

kitchen utensils 14521,426 Consumables 21,400

Salaries and wages 25,567,678 Salaries and wages 27,400,000

Taxes 2,488,888 Taxes 2,900,000

Temporary staff 2,456,532 Other employment costs 4,200,000

Contract workers 2,342,345Students 234,567

33,090,010 Employment costs 34,500,000

Old detailed approach Forecasting by categories


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#9 Producing numbing monthly financial

reports

Huge cost of M/E reporting300 pages +

Locks the accounting team into being a

processing centre

Month-end reporting does not create much value(the horse has bolted)

Part of the trifecta of lost opportunities

CEOs want more advisory time In the briefcase for three days

Business unitOperating Statement for the period ending 31 January 20XX


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Business unit

P/L

(3 break-outslides)

Month $000s Year-To-Date $000s Full Year $000s

Act Bud Var Act Bud Var Budget Forecast

Revenue

1,430 1,380 50 Revenue 1 5,720 5,520 200 17,200 16,6001,430 1,380 50 Total Revenue 5,720 5,520 200 17,200 16,600

Less

267 215 -52 Commissions 1,066 860 -206 3,200 2,6001,164 1,165 -2 Gross Profit 4,654 4,660 -6 14,000 14,000

Expenses

278 262 -16 Expense 1 1,240 1,046 -194 3,300 3,100218 212 -6 Expense 2 672 848 176 2,600 2,500188 182 -6 Expense 3 752 728 -24 2,300 2,200158 152 -6 Expense 4 632 608 -24 1,900 1,800128 122 -6 Expense 5 512 488 -24 1,500 1,50051 60 9 Expense 6 673 642 -32 1,000 1,200

1,020 990 -30 Total Expenses 4,080 3,960 -120 12,200 11,900144 175 -32 Surplus/(Deficit) 574 700 -126 1,800 2,100

Major Costs

0

200

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Nov-05

Dec-05

Jan-06

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Apr-06

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Jan-07

$000s

Commissions Expense 1 Expense 2 Expense 3

highlights:

1. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxx xxxxxxxxx xxxxxxx xxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

2. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxx xxxxxxx xxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx





0

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Nov-05

Dec-05

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0

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Vis itor numbers Operational wages


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Month $000s Year-To-Date $000s Full Year $000s

Act Bud Var Act Bud Var Budget ForecastRevenue

1,430 1,380 50 Revenue 1 5,720 5,520 200 17,200 16,6001,430 1,380 50 Total Revenue 5,720 5,520 200 17,200 16,600

Less

267 215 -52 Commissions 1,066 860 -206 3,200 2,6001,164 1,165 -2 Gross Profit 4,654 4,660 -6 14,000 14,000

Expenses278 262 -16 Expense 1 1,240 1,046 -194 3,300 3,100218 212 -6 Expense 2 672 848 176 2,600 2,500188 182 -6 Expense 3 752 728 -24 2,300 2,200158 152 -6 Expense 4 632 608 -24 1,900 1,800128 122 -6 Expense 5 512 488 -24 1,500 1,50051 60 9 Expense 6 673 642 -32 1,000 1,200

1,020 990 -30 Total Expenses 4,080 3,960 -120 12,200 11,900144 175 -32 Surplus/(Deficit) 574 700 -126 1,800 2,100


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Major Costs

0

200

400

600

800

1000

Nov-05

Dec-05

Jan-06

Feb-06

Mar-06

Apr-06

May-06

Jun-06

Jul-06

Aug-06

Sep-06

Oct-06

Nov-06

Dec-06

Jan-07

$000s

Commissions Expense 1 Expense 2 Expense 3


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0

20

40

60

80

100

Nov-05

Dec-05

Jan-06

Feb-06

Mar-06

Apr-06

May-06

Jun-06

Jul-06

Aug-06

Sep-06

Oct-06

Nov-06

Dec-06

Jan-07

0

60

120

180

240

300

Visitor numbers Operational wages


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#10 Reporting on the wrong measures

Short-circuited the process Lack of understanding of what we are looking for

Lack of SMT involvement

Never established a project team Never looked for critical success factors

4 t f f


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4 types of performance measures

PIs&RIs

KRIs

peel to the core

to find the KPIs

KPIs

peel the skin tofind the PIs


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Where to start

See www.bettermanagement.com for a series of webseminars and articles -they are all free.

Purchase my white paper - www.davidparmenter.com

which includes electronic version of templates,

checklists, workshop agendas etc. Obtain my KPI book Key performance indicators

developing implementing and using winning KPIs

Read Kaplan & Nortons book Translating strategy

into action the balanced scorecard


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# 11 Selling change by logic

Car sales person analogy Emotional drivers differ:

SMT - looking a fool in front of the Board, impact on

their bonus, short term focus

management - not invented by me, will behave basedon their perception, skeptical

staffjob security, impact on existing workload,

perception of what management will do

Selling the change


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Selling the change

Collect data on impact of current performance measures (*)

Read papers on www.bettermanagement.com Prepare the sales pitch for change (*)

Pre-sell the sales pitch to the influencers

Make the sales pitch

Plan and execute a focus group workshop with oracles fromaround the organization (*)

Seek a green light for the way forward (*)

* David Parmenter web casts on bettermanagement.com

#12 Allowing month-end reporting to go


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#12 Allowing month-end reporting to go

past three working days

When I was a corporate accountant each month-endwas a disaster waiting to happen

Quick month-end reporting has been around since theearly 90s

Now day one and virtual reporting are thebenchmarks

Part of the trifecta of lost opportunities

Look at www.bettermanagement.com

For my white paper quick month-end reporting byday three or less go to www.davidparmenter.com
http://www.bettermanagement.com/http://www.davidparmenter.com/http://www.davidparmenter.com/http://www.bettermanagement.com/


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#14 Using Julius Caesars calendar as a


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#14 Using Julius Caesars calendar as a

reporting tool

Creates 12 dramas a year Why not close-off on the last or nearest

Friday/Saturday of every month?

The benefits of this include:

precise four or five-week months

comparisons more meaningful

systems are rolled over at the weekend

budget holders know what to do without instructions!

At year-end movement will be taken up in theauditors overs and unders schedule!

#15 Letting emails dominate our day


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#15 Letting emails dominate our day

Why do accountants need to see emails 24/7, at the weekend,

at a friends party, etc. Nobody dies because we have not looked at our emails

unlike a paramedic, a surgeon, an anesthetist

Looking at emails first thing in the day is the most destructive

habit you can have! Eight week challenge - Look at emails two or three times

during the working day and never before 10:30am!

Eliminate weekend business emailsthe world will still go

around!

Read my Pareto 80/20 rule for Corporate Accountants formore tips- www.davidparmenter.com

#16 Not producing enough daily/weekly


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#16 Not producing enough daily/weekly

decision-based reports

KPIs should be reported 24/7, daily , weekly yesterdays sales reported by 9am the following day

transactions with key customers reported on a weekly

basis

reporting some weekly information of key direct costs

weekly non-financial performance indicators in a

balanced scorecard

weekly reporting on late projects and late reports

#17 Not investing enough in


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g g

Accounts Payable

Use the electronic ordering system in AP Scanning of invoiceselectronic approval

Organize all major suppliers to supply electronic

invoices with GL codes! Load remittances onto your website for suppliers to

downloadpassword protected

Acquire a web based expense claim system

Introduce the purchase card for BHs


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#19 Not celebrating enough


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#19 Not celebrating enough

An accounting team who were too busy to even

organize their Xmas celebration A celebration is a great communication tool

Schedule your next celebration and make it happen: celebrate every project completion

hold a staff meeting in a caf once a month and shout the wholeteam coffees and muffins

set up a regime where birthdays are honored and celebrated

shout the team to a lunch-time visit to the cinema

for Xmas give your staff optionscinema x5 instead offunction

during team meetings ensure that at least three team membersare thanked

# 20 Getting sucked into activity based


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costing/ activity based management

Jeremy Hope of Beyond budgeting fame has pointed outthe fallacy of activity based costing

These systems cost a lot to put in and to maintain

provide information of dubious quality

run 24/7 when you only need such information infrequently If you feel ABC is necessary make sure you have sorted

out all the other areas I have mentioned first

Read Jeremy Hopes work on www.BBRT.com and his

book Reinventing the CFO ISBN 1-59139-945-9.

These books came out in 07


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These books came out in 07

Go to www.davidparmenter.com for the link to Amazon


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Thank you for participating in

this audio seminar

Please keep in touch about your progress

See www.davidparmenter.com for my speaking

engagements, white papers, etc.

Q ti & A S i
http://www.davidparmenter.com/http://www.davidparmenter.com/


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Question & Answer Session


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David Parmenter

waymark solutions limited

Website: www.waymark.co.nz

Blog: www.davidparmenter.comEmail: [email protected]


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Top 20 Mistakes Corporate Accountants