BDO Club of Financial Directors revealed the secrets of effective accounting department operation

November, 17,  the Outsourcing Division of BDO in Russia held a meeting of the Club of Financial Directors “FORS” dedicated to the subject of “How to improve the efficiency of an accounting department? Outsourcing - the pros and cons.”

The meeting was opened by Dmitry Kovalenko, Director of Accounting Services of the Outsourcing Division of BDO, and Victoria Lapteva, Managing Director of Hamilton Data Services. They pointed out the main risks and challenges that financial department of each company has to face while processing employees’ expense reports.

This process often causes conflicts with other divisions of the company, as well as additional tax risks. Communication with other divisions of the company and collecting all necessary documents for the expense report takes up a lot of time. Most of the work for processing the documents ends up having to be done manually. Often, tax risks increase in the course of processing expense reports (–or the amount of expenses not included in tax accounting increases). An avalanche of paperwork grows, and it is difficult to properly monitor expenditures and their compliance with company policies.

Dmitry and Victoria presented a joint solution of BDO and Hamilton Data Service for automation and outsourcing  of expense reports processing.

This solution is available to customers on the basis of the Software as a Service (SaaS) model. It includes services for collecting, scanning and storing paper documents, as well as setting up an electronic document management system and subsequent remote storage of the client’s data. A customer support hotline is established for the employees of the customer.  This solution can significantly hasten expense reports processing, optimize the tax expenditures, as well as achieve a more accurate planning of future costs through regular analysis of current expenditures.

Lyudmila Smirnova, Vice-President of Finance for “Hearst, Shkulev, and InterMediaGroup”, one of the leading publishing houses in Russia, described her personal experience of payroll outsourcing. The total circulation of newspapers and magazines they publish (including Elle, Maxim, Marie Claire) is more than 12 million copies, and the total audience is more than 21.6 million people.

In 2007, when the amount of personnel at “Hearst, Shkulev, ad InterMediaGroup” increased significantly in a short period, the accounting department began to experience difficulties caused by “human factor.” First, one of the most experienced specialists left his job; a new accountant who had worked in this area was not able to cope with the work; it required the hiring of two more employees in order to manage all of the payments to staff. Meanwhile, there were ten days left to transfer salaries to the staff, and a delay in payment of salary could have resulted in disastrous consequences for the organization, whose main assets are people: journalists and editors.

Therefore, the Vice President of Finance of ‘Hearst Shkulev InterMediaGroup’ decided that the company will outsource payroll. Lyudmila Smirnova sought to eliminate the risks associated with staff turnover, to protect the company from liability arising from accounting errors, to make expenses more predictable for the accounting department, and to ensure the ability to estimate the expenditures on the accounting department and to ensure their scalability.

 ‘Hearst Shkulev and InterMediaGroup’s’ payroll transition to outsourcing model was completed in the shortest possible time. Ludmila particularly notes BDO outsourcing division readiness to foresee and meet all the client’s needs - the provider began to work without a contract on the basis of a letter of guarantee.

As a result, the company has achieved a significant improvement in their performance. For example, over half a million roubles were saved on the payroll for 2008. When payroll is outsourced, clear rules are established within the company relating to all accounting procedures. Thus, the quality and efficiency of  ‘Hearst Shkulev and InterMediaGroup’ accounting improved.

Oleg Sokolov, BDO Group partner, specifically addressed the evaluation of the efficiency of the financial services in his presentation.

Oleg mentioned the most frequent mistakes and inadequacies revealed during an audit of many accounting departments: low automation of business processes, improper division of labour  between members of the accounting staff, as well as between the accounting department and related services personnel, and weak regulation of the processes.

Solutions to these problems may include the re-engineering of business processes (change in the division of responsibilities and authorities), the introduction of key performance indicators and their monitoring, outsourcing (full or partial) of accounting-financial functions, as well as the automation of financial services.

“Count, if you want to succeed”, said Oleg Sokolov. “Count, count and analyse! How much time does your accountant spend on gathering information about anticipated revenue? Does he prepare statements in a timely manner? If not, why? Do all accounting staff members have a common work schedule with due dates for each stage of the preparation of documents? You can create your own ideal financial service only after answering all of these questions.”