Thursday, 30 January 2020

Are Bad Accounting Habits Holding Your Business Back? by MATS Consulting

“Winning is a habit.  Unfortunately, so is losing.” – Vince Lomdard

In a world that is moving so fast, habits that were once good can soon become outdated and this is very apparent in finance and accounting.  A business is a living, breathing thing, and it has to constantly adapt to new technology and new legislation.
Companies will spend thousands on changing and improving the habits that seem most obvious, such as sales and marketing strategies, getting the latest software; anything that keeps them at the cutting edge so they can attract new business and retain customers.
Unfortunately this is not the case for the finance and accounts departments.
Like so many of the hidden ‘back office’ non profit making departments, finance and accounting gets the raw end of the deal and is almost a forgotten world.  With a lack of funding and resources some finance and accounting departments are forced to rely on the old habits such as using outdated systems, duplicating work and going through repetitive manual tasks.
It is not always the company that is to blame, this can be the world of the finance manager who clings to the old habits no matter how much extra work is created, simply because this is how things have always been done; this is where they feel comfortable.
In order for a business to grow, you need all parts to be working at the same level; it’s no good one part moving forward if another is static because one will always be dependent on the other and vice versa.
There is a brilliant book called ‘The Power of Habit, why we do what we do and how to change’ by Charles Duhigg which gives numerous examples where sticking to the old habits can have terrible results, in some cases resulting in fatalities.  The most successful companies are those who change their bad habits.
The book also shows that you do not have to make massive changes; ‘small wins’ can have a ripple effect, which can change the whole dynamic and culture of a company.
When Paul O’Neill was appointed as the new CEO of the Aluminium Company of America (Alcoa) in 1987, he announced to a gathering of every major investor that he “wanted to talk about worker safety.” This took everyone by surprise because they were expecting the usual ‘new CEO’ speech; he did not mention profit or taxes, just worker safety.
Finance and accounting is a secret weapon that very few companies use to their benefit.  This department gives you the most important information a company needs in order to exist, its accounts.  The numbers not only show you how well the company is performing, but it can highlight areas to save costs, which projects are actually worth doing, and much more.
The ‘Finance Health Checks’ that I offer highlight ways in which finance and accounting can be improved, and every time the changes filter through to other departments benefiting the business as a whole.  Most of the time it is about changing small habits, working smarter not harder, and best of all the financial cost of these changes is minimal if anything.
So what are you waiting for?
Ref: The Power of Habit, Why we do what we do and how to change – Charles Duhigg