How to Improve Accounting Efficiency with this Important Characteristic

As accountants, we need to have many different skills and traits to do our jobs effectively, but there is one important accountant characteristic that can really improve the efficiency of our work. It's something many people don't think about, but responsiveness can put your ability to get through work in overdrive and create more money for everyone involved, through the time value of money.

One compliment that I have received over the years is that I am extremely responsive to my clients and keepers of information which has created business cycles that are shortened in time and inevitably created more income for both the clients and myself.

Let's bring it down to a detailed level. The quicker I respond to someone, the quicker I can get a response and on and on it goes exponentially.

If you are an accountant, you understand how the lack of information, on a timely basis, slows up the accounting processes, but the opposite is also true when putting into practice responsiveness.

For example, you ask your client for bank statements so that you can get the transactions reconciled (1st step in any month end close or any restatement). The problem...there is a large potential tax penalty and interest because the client has not filed a tax return in two years.

Of course the client may want to push off this exercise because they have fear around the tax liability, but every day they wait, they are losing money because there is a counter that is keeping track of the penalties and interest that continue to grow!

Secondly, every day is another day further from being able to fiscally explain their business. Not until those past financial statements are in order, will you start to know how the company is performing now.

Both of these situations touch the time value of money concept.

The time value of money (TVM) is the concept that a sum of money is worth more now than the same sum will be at a future date due to its earnings potential in the interim. The time value of money is a core principle of finance. A sum of money in the hand has greater value than the same sum to be paid in the future.

These are both easy illustrations, but know that you could weigh the amount of interest and penalties versus how much you could get as a return on that same money, but in this example, there is no opportunity that will create more return than what would have to be paid to the Internal Revenue Service (IRS) in costs, so the amount needs to be paid.

With that said, you would want to do an analysis that showed you the cost of not paying other liabilities and/or opportunities and paying the IRS versus possibly generating a greater return by holding on to the money for a bit and setting up a payment plan.

The goal is to hold on to a dollar as long as possible.

The time value of money affects the second part of the example also. As each month passes that your business does not have accurate accounting, it is costing money.

Think about it, if you are not aware of your net asset position, how does that money get used to create more money? Not having correct accounting affects the time value of money because you literally don't know where those asset and liability dollars are currently at.

For the accountant, this is an obvious gain by having responsiveness as a characteristic.

Because the information is not being provided, it is pushing the life cycle of the accounting processes to take longer than they need to be. That time that has been burnt chasing information could have been used in creating more income from another source. Again, the dollars aren't in the accountant's pocket.

But what if, as an accountant, you put into practice this principle and stayed on top of getting the information you need?

Of course, if you work with multiple clients, sometimes a break from a specific client's work is needed, but in general, if you are reaching out and responding in a way that each little piece of information is important, you will speed up your business cycles and take advantage of the time value of money.

Furthermore, responsiveness fuels trust in to relationships with clients and employees.

Remember all those times that you were waiting for a response and not getting one? Was that a positive or negative feeling?

Being responsive to people means that you respect them enough to keep the information flowing. When people feel respected, they pay the favor back.

Last, meeting timelines is another way to show responsiveness and respect to all those involved.

If you say that you are going to deliver something on Friday at noon, why not get it done as soon as possible and move that timeline up? This moves all the dominos in a direction that will help an accountant and someone's business, take advantage of the value principle and generate what all parties are looking for...more profit.

I guess this article turned out to be a method suggestion to both an accountant and a business owner because if both are working together with this characteristic, then everything can get on track that much faster and the more cash rolls in the door!

Golden Pathway Accounting

Managing Director Golden Pathway Accounting