As the volume of account reconciliations continues to surge, most corporate accounting and finance departments in the United States and Canada are still using a labor-intensive process to make sure their accounts’ balances are correct, placing a burden on employees and taking away from their ability to engage in more value-adding efforts and analysis, according to a new study.
More than half (59 percent) of US companies and two-thirds (66 percent) of Canadian businesses are still reconciling their general ledger accounts manually, according to the report, Benchmarking the Accounting & Finance Function: 2014, released on Tuesday by staffing services firm Robert Half and the Financial Executives Research Foundation (FERF), the research affiliate of Financial Executives International (FEI).
By comparison, according to last year’s report, nearly two-thirds of finance departments in US companies and one-half of Canadian companies were still using a manual accounting system.
Of the nearly 1,600 public and private companies that were surveyed for the latest report, only 16 percent – both in the United States and in Canada – use an internally developed system for account reconciliation. Twenty-four percent of US companies use third-party software for the accounting function, slightly higher than the 18 percent of Canadian companies.
The lack of account reconciliation software being used by American and Canadian companies is striking to Paul McDonald, Robert Half senior executive director, as 15 percent of US executives and 19 percent of Canadian executives reported their businesses reconcile anywhere from 501 to more than 10,000 accounts at least quarterly.
“There is a significant opportunity for these firms to streamline the close and use their resources more efficiently,” he said in a written statement.
The report noted companies that achieve a quick, smooth closing of their books may have a competitive advantage because the accounting and finance department can deploy resources toward more high-value activities, such as analytics.
“The time it takes us to produce financials has decreased,” Paul Smejkal, director of finance at Fridley, Minnesota-based Minco Products, said in the report.
The company’s finance department includes a total of eight employees, who are split between accounting and financial budgeting, planning, and analysis. When Smejkal started at Minco, he concentrated on improving the finance department’s processes, including integrating the billing systems.
“In the past two or three years, we have invested heavily in a new enterprise resource planning system, as well as web- and cloud-based technology, and it has pushed us forward with a velocity we wouldn’t have had otherwise,” he said.
Other key findings of the 2014 report included:
- Seventy-four percent of US and 67 percent of Canadian accounting and finance executives said they expect their companies’ compliance burden to rise in the coming years. Forty-eight percent and 41 percent of US and Canadian executives, respectively, also anticipate the cost of compliance will increase.
- US-based accounting and finance managers work an average of 47 hours per week, while staff-level professionals work 42 hours. In Canada, managers average 46 hours weekly, and staff-level employees work 40 hours.
- The average percentage of temporary or project staff in US finance and accounting departments is 8 percent, compared to 5 percent in Canada.
- Payroll (cited by 47 percent of respondents in both the United States and Canada) and tax (42 percent in the United States, 37 percent in Canada) are the two most outsourced functions.
“Having access to benchmarking data allows businesses to measure their staff ratios and other activities against those of similar-sized firms and establish best practices for their organizations,” FEI President and CEO Marie Hollein said in a written statement. “Financial leaders can use the insights in this report as a starting point for achieving optimal performance across their accounting and finance departments.”
About the report:
The Benchmarking the Accounting & Finance Function: 2014 report provides benchmarking data based on input from nearly 1,600 executives from finance and accounting departments at public and private companies in the United States and Canada. Executives were asked questions related to six key operational categories: workforce management, accounting operations, financial systems, sourcing, internal controls, and compliance. The results are designed to provide a framework for developing best practices and improving operational efficiencies.
About Jason Bramwell
Jason Bramwell is a staff writer and editor for AccountingWEB. He has nearly 20 years of experience in print and online media as a journalist and editor.