As technology has continued to develop over the past two decades, companies have struggled to adapt to the new options available to them. Part of this is due to a reluctant workforce unwilling to accept new ways of doing things.
This reluctance may be caused by a variety of different factors, such as discomfort with learning advanced technologies. Others may be afraid that adopting the change may lead to the loss of jobs.
A Reluctance for Change
With this reluctance to adapt, companies are losing the opportunity to act with greater agility. Nowhere is this more pronounced than in finance and accounting functions.
For years, companies have operated around a periodic closing schedule, only recognizing monthly income when the accounting ledger is closed. This approach leads to severely delayed decision-making. After all, if it takes three weeks to report financial details for the prior month, how will management know what has occurred since then?
The way to improve financial decision-making is by shortening the monthly closing process through the adoption of better processes and software.
Rather than using the monthly close to record transactions that occurred during the prior month, more time should be spent on analyzing data and reviewing variances. Ideally, a monthly close should be no longer than five business days.
Delayed Reporting Leads to Missed Opportunities
Aside from the monthly close process, technology exists that allows companies to continuously record transactions as they occur throughout the month.
Realistically there is no reason to record a payment transaction that occurred at the beginning of the month during month-end close. It could easily be put into the ledger on the day that it occurred. Similarly, when cash is collected from a customer, it should be posted immediately within the accounting system.
This approach prevents the accounts receivable department from wasting time chasing down payments from customers who have already paid. It also gives better insight to managers who want to know how much money they can expect to receive in the coming weeks.
Clearly, improvements are needed within finance and accounting departments to adapt to new changes and give managers better information with which to make important decisions.
The best way to do that is by encouraging current employees to expand their skillsets. When positions open, controllers can seek to hire new employees with the skills required to adopt new processes.
Skills Required to Succeed in the Future
In a recent survey, 40% of C-suite managers indicated that they do not believe their finance and accounting departments have the skills required to digitally transform as quickly as their competitors.
That number is astounding — almost half of the companies surveyed admitted that they realize their financial teams don’t have the skills required to adapt to a new work environment. When probed further, they noted several skills in particular that were lacking.
Ability to Understand and Analyze Financial Data
This skill is highly important, and students who graduate with a Finance or Accounting degree should be expected to know how to analyze financial data.
However, many companies find that their employees struggle with this very basic ability. This struggle indicates that there is a mismatch between what is taught to university students and what is expected in the office.
There are a variety of reasons why employees may have difficulty understanding financial results. They may include:
- Lack of understanding of the company’s products or services
- Not knowing what services vendors provide and what they are used for
- Operating in silos and not knowing each department’s functions
- Seeing analysis of results as an academic numbers exercise but not relating it to the activities of the company itself
If a controller sees that their team underperforms in the analysis of financial data, efforts should be undertaken to teach them. This teaching may be done through one-on-one coaching or by asking an employee to undergo appropriate training.
Understanding Financial Best Practices
Knowing how to properly handle financial transactions is another key skill that should be taught at the university level.
While most colleges include accounting and internal financial controls as a course in their syllabus, employers find that these skills are lacking in the workplace. Again, there appears to be a mismatch between academics and the work environment.
The best way to resolve this issue is by implementing strict policies that accountants and finance professionals are expected to follow when recording transactions, reconciling data and reviewing variances. If the procedures are followed and updated as new best practices are established, better control of financial data will occur.
Working Towards the Future
Acknowledging that problems exist in the finance and accounting workforce is the first step in resolving the issue. It may take time and effort to put together a team that is focused on adapting to changing workforce needs, but doing so can establish a solid set of company values.
For more information on the accounting and finance skills of the future, review this analysis and study.