June 1, 2017
Over the course of my career, I have been called many things, some good and some bad, but I think the worst thing anyone has ever called me is “bean counter.” I guess in the world of stereotypes, that’s what accountants are—a bunch of historians who “count the beans” and report on them. Whenever there is a missed accrual, a transaction recorded in the wrong period, an estimate that is way off, or if the reporting is not timely, there is lots of finger-pointing and plenty of blame to go around. When the reporting is accurate and timely, it is simply expected. In addition to our financial reporting responsibilities, the financial managers are the de facto personnel departments, the employee benefit administrators, the paymasters, and the credit and collection department. We update the costing systems, maintain banking relations, prepare budgets, justify the capital expenses, and perform just about every other task that no one else wants to get involved with. But what about strategic leadership? What about key tactical decision-making?
In the last issue of BoxScore, I laid out the need for integrated information. The double entry accounting system that was invented in the Middle Ages and the cost accounting systems that were invented during the Industrial Revolution are insufficient tools with which to cope with the modern realities faced by converters. Financial, plant, sales, marketing, operational, logistical, and personnel data must be combined in meaningful ways to allow modern-day managers to be effective. In the last issue, I pointed out the need for the estimator to have expected “real” contribution of the order along with current plant performance data on how the order will run and real-time plant data in order to make a good decision.
The following are other examples of integrated data needs:
- Operational reporting on business segments and profit centers—in addition to the financial breakout of these key areas, machine hours, order size, setup times, throughput speeds, and overall utilization of machine hours must be included. For labor-intensive areas, the labor and labor burden must be broken out separately, as well as operational information on the number of jobs, the overall difference between estimated and actual labor, and the fixed costs that are directly part of the department.
- Shipping costs must be looked at with data that includes miles, stops, trips, and driver overtime.
- Maintenance must be broken out by machine and include information on the number of POs and a breakout between repairs and routine maintenance. In addition, the overall fixed costs associated with running the department must be broken out and not commingled with other endeavors.
- Customer service reporting should include information on the number of orders processed, the complexity, and accuracy.
- Design department reporting should include information about the number, complexity, and the timeliness of the designs worked on during the period.
- Sales reporting should include information as to new customer activity, new design activity, number of quotes, and the success rate, as well as information about the commissions earned and paid during the period.
- Reports on purchasing and procurement should include a synopsis of amounts and prices paid for all major items ordered by vendor during the period, as well as any meaningful change in suppliers.
- Reporting on products should include information on the revenue and contribution from all major product lines, along with information on the resources used to manufacture them.
In addition to the mandate to keep a proper set of records for both internal and external reporting, to create and maintain internal control systems and ensure that there is proper segregation of duties to safeguard the company’s assets, and to make certain that the company is in compliance with regulations promulgated by the various taxing authorities and other governmental agencies, your accounting department interfaces with all other departments in your organization and is involved with the collection and dissemination of most of the company’s operational data. Information is powerful if used to further the goals of the organization.
My favorite cartoon character when I was growing up was that famous oversized chicken, Foghorn Leghorn, who was known to say, “Don’t bother me with the facts, boy, I’ve already made up my mind.” As Foghorn points out, the facts can be easy to ignore, especially if those who are disseminating and reporting on them are not given a clear mandate to use them to further the goals of the company. You must charge your financial professionals with creating the reports and analyses that will change future behavior and not simply report on past results. Knowledge and information are possibly the most powerful tools that we have at our disposal. If you want to facilitate change in your organization, a good way to start is by charging your financial professionals with disseminating knowledge using integrated reporting techniques to raise the knowledge level of your managers.
I would like to remind everyone that May 22 is National Accounting Day, so please seek out an accountant and give him or her a hug and a kind word. Since everyone seems to think that accountants are humorless creatures, in closing, I leave you with some accounting humor:
- A fine is a tax for doing wrong. A tax is a fine for doing well.
- An accountant is someone who solves a problem you didn’t know you had in a way you don’t understand.
- What do you call a financial controller who always works through lunch, takes two days’ holiday every two years, is in the office every weekend, and leaves every night after 10 p.m.? Lazy.
- How can you tell when the chief accountant is getting soft? When he actually listens to marketing before saying no.
Mitch Klingher is a partner at Klingher Nadler LLP. He can be reached at 201-731-3025 or mitch@klinghernadler.com.
