This is a subject I have encountered a number of times through the years, most recently about a month ago.
I find that many, many business owners could use better guidance and a better understanding of what they should be looking for when seeking someone to help with their finance department’s needs.
There are essentially two types of thinking involved in a company’s finance department function, accounting and analysis. Most business owners and CEO’s think of these as one and the same, but the thinking behind how an accountant approaches the businesses finances and how an analyst approaches them are completely different.
For starters, out of necessity, good accountants see everything as black and white with very little grey. Its their job to take what has happened and ensure it is reported correctly, abiding by accounting principles, tax regulations and other regulatory reporting. A good accountant keeps everything on the straight and arrow, keeps good records and will ensure solid audit preparation. They largely work with the past and ensure it is reflected accurately.
On the other hand, an analyst will take what an accountant has prepared, slice and dice it in several ways, tie it to metrics, forecast the numbers based on their analysis, determine what “could be” with different scenarios, and come up with ways to improve profitability, efficiency, and productivity. To some degree there is creativity in thinking involved and their world is largely grey, not black and white. A good analyst largely works with the future and helps establish the direction the company may go in. Be mindful though, and this is a whole other article on its own, as with accountants and analysts, there are also different types of analysts: Financial analysts; and, Operational analysts. Operational analysts get down in the trenches and can assist with everything from bottle necks in the work or product flows, to profitable vs non-profitable items/services, customers, unnecessary expenses, investment, asset management, cash-flow, cost/benefit analysis, etc. This is the type of analyst you want.
There is a third element and that is of book-keeping. A good bookkeeper will have the same mind set as an accountant but with more of a micro-view while a good accountant needs to be able to see the picture from a macro viewpoint.
Herein is where the problem lies. Many SME’s think they can cut corners by employing a single individual to perform all three functions. I have yet to meet anyone in all my years that can do all three, at least successfully. There simply is no way to think in micro terms, then macro terms, in straight black and white, and then creatively, especially when finance departments have time crunches at the beginnings and ends of each month. Many very great accountants I have spoke to admit to this, as have many great analysts. The mindset and thinking is entirely different and rarely is it transferable.
What it comes down to is what your business needs and what is best for your situation? If your one of those owners that thinks analytically and just has a knack for what makes profit and what doesn’t, then you probably just need someone to keep the accounting straight and ensure that your not losing sleep at night. Regardless though, all businesses need at least one good bookkeeper for starters. Don’t fool yourself by thinking your bookkeeper is also your accountant or your accountant will also do the book-keeping. This doesn’t work well in practice as you’ll end up burning them out and/or getting poor results. If you’re not yet profitable enough to employ them on-site, then hire outside companies, contractors or freelancers, but keep the accounting and bookkeeping functions separate.
If you are looking for something more, someone to help with plotting your company’s direction, helping support your decision making, advising as to which products/services or customers or vendors are making you money and which dig into profit, and a whole host of other future oriented projections, you might consider hiring an analyst, either on a contract basis when needed or full time.
As such, if you follow the above in order to understand what your finance department really needs and what to look for, you will have greater luck getting the results you want. Be flexible as to employee/contractor/freelancing if your business is not scaled enough yet, as well as an inside vs outside accountant.
WE HOPE THIS ADVICE WILL GET YOU THINKING ABOUT HOW TO BEST HIRE AND MANAGE THE PEOPLE YOU NEED TO TAKE YOUR ORGANIZATION TO THE NEXT LEVEL. IF YOU’RE LOOKING FOR MORE INFORMATION ON HOW WE CAN ASSIST YOUR ORGANIZATION DO NOT HESITATE TO CONTACT US TODAY.
“Don’t fool yourself by thinking your bookkeeper is also your accountant or your accountant will also do the book-keeping”.