Digital Technology, Performance And Liquidity Indicators: How To Boost Your Company’s Performance

Is it possible to boost your company’s performance just by using the appropriate technology and methodology for digital accounting finance? The answer is YES!

Many CEO’s focus their energy and resources solely on marketing and sales plans. However, a solid marketing plan will drive the company only halfway to the end of the race. How can you transform a sunk cost such as finance into a tool providing you the competitive edge you are looking for? Is it easy? Certainly not, as it requires a lot of effort, energy, and experience from the finance executives.

Can it be applied at every industry under all occasions? As a rule, digital transformation of the accounting and finance function is a process that can be applied to every industry. However, every company faces its own challenges, therefore the application of such a tool can only be unique. Nevertheless, this multi-step guide may prove to be a helpful roadmap.

How To Boost Your Company’s Performance: The Roadmap

It is absolutely possible to boost your company’s performance just by using the appropriate technology and methodology for digital accounting finance. Here’s how to do achieve that:

#1 Continuous closing: Starting from the basics, the accounting and finance function is a supporting function. Nevertheless, it ought to be organized and well managed. This holds especially from the CEO perspective who expect from the finance officers to act as business partners. Continuous closing is a clear-cut mindset. The accounting department needs to be well organized and oriented in closing each working day. Cheques payable, bank balances, sales, costs, expenses, customer balances, must be always in order and properly updated throughout the year, not just for the period when the company is under tax audit or preparing for financial reporting. Documentation for each journal entry should be readily available.

#2 Monthly market validation: Who can argue that the balance sheet of the company is accurate without checking whether or not all elements are presented at market value? This may be an expensive and time-consuming process, when done from industry experts. Alternatively, it might be inexpensive and fast, when done informally, by the personnel within the company. The critical point is to use rules that are relevant for the line of business. These same rules must be always applied throughout the reporting periods, regardless of the economic cycle or the company’s financial performance.

#3 Validate your data: Avoid making entries that are not easily justifiable. Instead, use solid validations for your entries. Make sure that you have enough evidence to validate your assumptions and provisions. When audited you will be asked to provide evidence for all major journal entries. Unfortunately, trying to remember how you calculated each amount will not keep you safe. If you are based on third party data, then keep a copy of the files you used. Use every circumstance to leverage the authenticity of your work.

#4 Digital technology: Choose to invest in the activities that add value. Digital accounting is the key in minimizing effort in tasks that do not add value. As a matter of fact, the proper application of digital accounting may lead to devoting resources on critical areas. Moreover, digital accounting makes the process of restructuring the entire accounting and finance function, with a customer centric approach not only feasible, but also more effectively applied.

#5 Management reporting: It does not matter what type of reporting you prefer. What really matters is to devote enough company’s resources into building a mindset of controllers throughout the company. However, cultivating such a mindset is not enough to produce the desired results on profitability and cash flow level. We strongly suggest using the standardized format of reporting. Then, focus on educating the executive team of the company in interpreting the key indicators. More important is to discuss with them the actions that affect these indicators. Build a roadmap of proactive tactics that when implemented, then the profitability and liquidity indicators will be considerably and positively affected.

#6 Continuous improving: The process of improving accounting and finance area procedures and processes is an ongoing matter. You might find it helpful to reach a more effective level than the one you are currently at. Nevertheless, you should never forget that 8% annual improvement is considered to get you just where competition is. If you want to beat competition and gain advantage, then you should target for improvements that drive you at least 10%. How does this relate to a supporting function such as finance? Although accounting is a supporting function, it produces an output with quantitative and qualitative characteristics. Thus, this output can be measured and controlled. Furthermore, the management may align the output goals of the function with the company’s goals.

How To Boost Your Company’s Performance: Our 2 Cents

The process to work on throughout the accounting and finance function is quite straightforward.

Start from the basics and apply continuous closing.

Be ambitious about your goals, and change the department’s procedures or even mindset in meeting those goals.

Move one step forward to update monthly the market value of balance sheet items.

Book all relevant gains or losses from market revaluation as soon as you spot them.

Always validate your data.

Work on your documentation process of all journal entries.

Keep a copy of the calculations, if necessary, for ease of reference.

Spread the controller’s mindset throughout the company! Regardless of hierarchy level, openly discuss with the colleagues from other departments the thinking and criteria of a controller when deciding on operating expenses, capital investments or purchasing merchandise. Remember to explain to the company’s executives the actions that have a positive impact on the company’s performance and liquidity indicators.

Having discussed the key steps to an optimum performance of the accounting and finance function, and how you can boost your company’s performance, we will proceed into analyzing all major steps involved. Send us an email at info@aethairion.com with your comments, ideas or challenges you face and how we can help you.