The Cost of General Accounting

CFO.com published an article about the costs of general accounting. It is in English, so head over, have a look. The gist of the article is this: "Unlike the lower-performing companies, the leaders don’t have paper-clogged workflows and armies of people performing manual tasks."

Two interesting metrics are given in the article related to the cost of general accounting:

1. top-performing 224 organizations out of a sample of 896 companies spend 47 cents or less per $1,000 in revenue.
2. bottom 224 performers spend $1.98 or more per $1,000 in revenue.

This differece is a staggering 400%. The performance level here is defined as how well the accounting processes are designed and implemented across these general accounting tasks:

• Maintain chart of accounts.
• Process journal entries.
• Process allocations.
• Process period-end adjustments.
• Post and reconcile intercompany transactions.
• Reconcile general ledger accounts.
• Perform consolidations and process eliminations.
• Prepare trial balance.
• Prepare and post management adjustments.

The difference, the article's author finds, is mainly due to two critical factors: "...[top-performers] keep manual processing down to a minimum" and "simplify the basic process model".

We decided to intersperse our running theme with this post to show that our imaginary client's accounting system may benefit from a real optmization of processes reducing the manual work.