Page 269 - Accounting Best Practices

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General Best Practices
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and supplier invoices that have a permanent ‘‘hold” slapped on them so that they
cannot be paid. The example is only for accounts payable, but the same problem
applies to all processes. Thus, over time, all of an accounting department’s
processes will be in desperate need of a tune-up.
That tune-up is provided by a rarely used best practice in which a designated
employee is in charge of constantly reviewing process cycles. In some compa-
nies, this person is called the ‘‘process owner,” with responsibility for the flow of
information through a specific process and for any changes to it. When someone
is assigned to review process cycles, there should be a very detailed set of tasks to
be reviewed. To use the previous example, the process owner should review the
list of suppliers in the computer to see which can be deleted, check on open pur-
chase orders to see what can be closed, review the list of suppliers with early pay-
ment discounts to verify that discounts are taken, check with the receiving staff to
make sure that they receive only goods labeled with valid purchase order num-
bers, and review payment packets to verify that all payments were only for items
authorized by the purchasing department. If the process is complex enough, one
or more people may be assigned to it—otherwise, one person may be assigned
multiple cycles and rotate through a review of them all so all primary cycles
receive a tune-up several times a year.
One advantage of constantly reviewing process cycles is that few exception
transactions will occur, resulting in far less research work to correct problems.
Another factor is that employees who are involved in creating transactions will
receive constant advice from the process owner regarding how they are supposed
to be conducting their work, resulting in much better standardization of output.
Further, the process owner constantly reviews why old transactions have not yet
been completed, tracks down the reasons for the problems, and corrects them at
the source. None of these changes are major, but when taken as a whole, they rep-
resent a considerable improvement in the way a company’s key processes operate.
This work is well worth the effort.
The main disadvantage of this best practice is that the process owner is a new
position and adds to overhead. However, the number of mistakes this person finds
and corrects will frequently pay back his or her salary. For example, finding and fix-
ing a hole in the revenue cycle that lets shipments disappear from the system may
keep a company from missing billings to customers. Similarly, keeping the accounts
payable staff from making unapproved payments to suppliers will also save money.
Another problem is that this position tends to step outside the boundaries of the
accounting department since the processes being reviewed are impacted by other
departments, such as the shipping and receiving departments and the purchasing
department. Because this may be looked on as interference by the accounting
department, a process owner must be a very tactful person and strongly supported by
upper management. If these issues can be overcome, the process owner becomes a
major contributor to the smooth functioning of any company.
Cost: Installation time: