Generally speaking, the Accounting Department is in charge of computing and reporting your company’s financial status. Since there are lesser costs incurred in the day to day activities of administrative sectors of the business like the Accounting Department, which includes payroll and employee benefits, equipment and furniture, computer softwares and office supplies, than the operating sectors who incur a majority of the company’s expenses like operating and production expenses, as well as research and development costs, it could be easy to say that the Accounting Department does not play a major role in saving company costs.
But that is not true at all.
Maintaining accounting records is a labor-intensive process. Setting up your Accounting Department requires hiring the right and most competent people for the job, as well as all the best equipment and technology.
Sometimes, some company is eager to spend a LOT—and I mean thousands of millions— for their accounting department thinking that more expenses mean better performance.
Which is not always the case.
Before deciding how much to spend on your Accounting Department, ask yourself the following questions:
- How big is my business?
- How many people do I need?
- Is hiring or outsourcing a better option?
You will be surprised that asking these questions will help you reduce costs in your accounting department and make you realize that higher costs do not always equate to efficiency and effectiveness.
Here we have lined up a few tips on how to reduce your accounting department expenses, from hiring the right people to getting the most efficient accounting software,—fast and easy.
Remember the 5S Analysis
The 5S of lean production can be closely associated with a systematic technique in running a manufacturing or service operation. But did you know we can apply the 5S principle to reduce our accounting costs as well?
The 5S of lean production helps a company’s productivity and improves waste reduction through an organized, clean, uncluttered and safe environment.
The 5S, originally derived from five Japanese words starting with the letter S, are as follows:
- Sort. Sorting means separating necessary and unnecessary materials to improve workplace efficiency. Decide what is necessary in your work area and keep the essential items in place. You should remove whatever is not needed from the work area.
- Set in order. Organization is an important tool for an effective and efficient workplace. For an office like the Accounting Department which deals with so many paperwork, back end files, historical accounting data, etc., we must always ensure that equipment, files and supplies are well placed based on need. Placing things in their designated areas where employees can easily access them helps in improving the department’s task completion.
- Shine. Keeping the workplace clean by routinely dusting, mopping, etc. can ensure that the employees are effectively working in a well-maintained work environment—thus improving productivity.
- Standardize. Create a standard. Make a set of rules to follow to streamline an effective and efficient work environment for employees.
- Sustain. Summing up all the previous S’s, sustaining the new practices and making sure they are implemented and practiced will instill a sense of self-discipline among the employees.
Now, how does 5S’ help in reducing Accounting costs?
By sorting and setting things in order, we are allowing our office to properly identify items needed for daily operations like accessibility of frequently used office supplies for report generation. Necessary items being kept and unnecessary items are discarded will help in identifying which items we should and should not spend on.
Shining, standardizing and sustaining activities consequently help in boosting employee morale, efficiency and effectiveness which will eventually be detrimental to employee performance and payroll.
These activities, when sustained, will affect overall employee performance: from data accuracy and recording to making compelling presentations on their reports for the company.
Save on paper and other office supplies
As we have previously mentioned, Accounting offices tend to keep historical numerical data. Although many accounting and bookkeeping programs nowadays allow the retention of data years back, the use of paper trail cannot be avoided. These include financial reports, vouchers, invoices, and official receipts.
The use of paper seems like a minimal issue, but using reams of paper in one day for how many employees in a year can add up to one of the Accounting office’s bigger costs.
While printing on paper is unavoidable, there are various ways you can save paper and other office supplies while still keeping historical data intact.
Make use of scratch papers. Scratch papers should be considered the holy grail of all offices. When you need to write out or print out a document for your eyes, or just for your colleagues use, ask if you can use scratch paper rather than clean, new ones.
When communicating internally, the printing voucher attachments for record-keeping, process documentation, and other data keeping activities that are meant to be locked up in file storage, using scratch papers can not only tremendously help you save in your office supplies—but also the trees.
Invest in Technology and Accounting Softwares
Improving accounting functions is one of the most widely spread dilemmas of so many accounting offices right now. Believe it or not, some accounting departments are still stuck to manual ledgers and journal vouchers. Not only are they prone to loss and damage, but they’re also easy to tamper with as well.
You may ask, is bookkeeping hard?
Without the right tools to do it, it can be complicated and entail a lot of work.
Cost and efficiency should be considered when deciding what kind of technology to invest in. You must make sure that the ones you’re choosing can benefit you in the long run especially in terms of data keeping, report generation, the accuracy of reports and making the right report formats and cost savings.
Why invest in something that you aren’t able to reap something from in the long run?
So what kind of technology investments can you go about in the Accounting Department?
- Accounting and bookkeeping software. No matter how big or small your business is, having good accounting and bookkeeping software is detrimental not only to record-keeping but also to cost-saving. While the perfect accounting software for your business will keep your data safe and stored for a long time, training the right number of people to use this software properly will induce reduced costs in hiring additional manpower that will otherwise be caused by manual accounting. There are so many accounting and bookkeeping software out and available for small and medium-sized entities. One of the most widely known and used is Quickbooks. There are also a couple of Quickbooks alternatives like NetSuite, FreshBooks, Wave Accounting and many more. At the same time, there are organizations whose payroll functions are integrated into their accounting department, so choosing the best payroll software that best fits your business needs is also important.
- Computer and Equipment. Some accounting and bookkeeping software might need more additional equipment to run and automate their new accounting software. These could include a new computer unit and a few servers, but these are necessary investments to maximize the benefits of your accounting software. There are a lot of stores that offer buy now pay later programs, especially on big purchases, so you can take advantage of them when you have a chance to stretch your cash flow.
Outsourcing and contractors
Deciding whether to hire people or outsource or seek a contractor service is an important decision to make for top management when it comes to saving accounting department costs.
You see, in the accounting process, various services may or may not be needed depending on the scale of your business.
Take for example a full-time CPA. If you are a small business, you might not need the services of a Certified Public Accountant throughout the year—enough for you to hire one. Small businesses tend to have lower sales than most medium to large-sized entities and most of the time do not need to send reports that need a CPA’s signature.
However, when you do need their services, don’t you think outsourcing a CPA for a one-time service (or once a month, depending on your need) is better than hiring one? This way you’d save on a LOT of overhead costs most especially a full salary and employee benefits.
Invest in people
Continuing the discussion on outsourcing and contracting, investing in people is one of the major— if not the major— cuts in an Accounting Department’s expenses.
Considering the Accounting Department is a service-based leg of a business, hiring and investing in the right kind and amount of people is very important.
Hiring an employee is very costly— from the full monthly payroll, company benefits, office supplies, space and furniture and equipment, there are a lot of costs involved in employee onboarding.
However, we must identify the difference between expense and investment.
The difference is that investment is shedding money for a service that will bring value to your company for the next couple of years.
This means that investing in the right people for your accounting department— and making them stay— is not an expense but a cost-saving method.
Hiring the right employees that are perfect for the job reduces the need for you to hire more people in the future. When an employee grows and takes on more responsibilities in proportion to his or her abilities, it is only justifiable to raise their salaries, but still less costly than hiring another few employees when you have an incompetent employee.
Hiring the wrong employee for the job can cause wasted payroll and wasted time for training and development.
Work Your Budget
Properly identifying and planning out your budget before the start of the year is detrimental in saving and reducing costs.
First, identify your necessary and concurring expenses like payroll and office supplies and set a forecasted expense on them. There should be no problem when there are no huge changes in your organizational structure, but when there is, remember to increase or decrease your budget accordingly.
Second, identify forecasted activities, like equipment repair or purchase of new equipment or software.
Third, avoid purchasing or spending outside of the budget— unless it’s necessary.
Practicing the habit of budgeting—and sticking to it— is an important financial skill that all kinds of organizations must follow through. Setting budgets can help improve management decision and forecasting skills, and at the same time, reduce expenses by avoiding unnecessary purchases within the calendar year.Business & Finance Articles on Business 2 Community