Key performance indicators for accounting department: A discussion

Accounting / bookkeeping is a concept that has been in practice ever since the advent of industries and workforce. Indeed the function is very important: keeping track of finances ensure that the business runs as smoothly as possible.

When it first began accounting and financial management was easy and simple. However times have changed now and with the advent of technology, these functions have become more technically oriented.

In such a scenario, employing key performance indicators for accounting / bookkeeping / financial management is a way forward to embrace the technology. The most important factor to remember here is that technology may have changed certain aspects about the method, especially when it comes to calculation of figures. However, the underlying concept remains the same.

Key Performance Indicators for Accounting / Financial Management

TA suggests the following Key Performance Indicators (KPIs) for any accounting / bookkeeping / financial management function:

On a side note, we wish to bring to your notice that many finance departments have HR reporting to them. This advice doesn't necessarily apply to managing the HR function. The scope of HR can vary dramatically depending on the structure of your organization. The baseline concept would be the same however HR can cause quite a bit of internal distress if it treats employee issues as a task that needs to be completed quickly.

Steps for Developing KPIs

KPIs that are not owned and accepted by the workforce will not succeed. A very important factor in creating a successful KPI environment is to getting buy-in from key stakeholders (employees, managers, customers, etc.) Needless to say, these are the people who will be the ultimate drivers of the project's success.

A major challenge faced by companies in developing KPIs is overcoming team members' fears and uncertainties. Most employees hold a long-standing suspicion of management-led forays into performance improvement. The best way to eliminate these fears is to explain the rationale and objectives for KPIs at the very outset and include everyone in the process.

Once KPIs have been developed and people within the organization are involved in the process, the next logical step is to implement a system that places immense emphasis on regular tracking and reporting the information to key individuals (for instance, the CEO or CFO).

Usually, implementing a KPI process involves an employee in the department will be given responsibility for gathering the data, and the manager of that department will be given responsibility for achieving the target and reporting results to the CEO or CFO.

The important thing is to monitor the KPIs regularly and compare them to past performance and established targets. Review constantly and check if the desired results are being achieved or not.

Depending on this, the management must discuss what action to take. Potential actions include: taking a closer look at the problem area, revising the target, making operational corrections, or changing the company's or department's strategy.