How to improve workflow to achieve operational excellence

In today’s busy finance departments, the majority of resources often are gobbled up by transactional tasks.

Without an optimized workflow, finance staff members spend a lot of their time performing data entry and basic compliance duties. But organizations that achieve operational excellence spend more time analyzing data, looking at trends, and contemplating strategy based on financial and nonfinancial indicators.

“The ability to allocate more time to interpreting data, thereby enabling real-time decision-making, is one of the cornerstones of operational excellence,” said Amy West, CPA, CGMA.

West is CFO of AHRC New York City, which supports people with developmental disabilities. She co-presented a session on operational excellence in the finance function Monday at the AICPA Not-for-Profit Industry Conference near Washington, D.C. West and Hilda Polanco, CPA, CGMA, said organizations can improve their operational excellence by effectively utilizing their people, technology, and workflow.

With regard to workflow, they identified three main areas — cash disbursements, payroll, and receipts —with high potential to enable the finance staff to perform more value-added activities.

Cash disbursements

An organization’s bank often can help with processes that drive efficiency in cash disbursement practices, as well as risk reduction.

“I encourage you to think of your bank as your partner,” said Polanco, the founder and CEO of not-for-profit financial consulting organization FMA.

Best-practice processes for cash disbursements include:

• Positive pay. This process involves providing the bank with a list of checks that have been issued and are authorized to be paid. This helps reduce fraud risk by ensuring that funds can be paid only for verified checks.

• ACH block and filters. Blocking or filters for Automated Clearing House (ACH) transactions safeguard an organization from unauthorized payments.

• Electronic transfers. Reducing the need for issuing checks eliminates a time-consuming process that also carries risks of fraud.

• Using purchase cards. These prepaid cards differ from credit cards because they carry a preloaded amount of cash and can be used only with certain vendors. This allows organizations to decrease their reliance on petty cash processes that are labor-intensive and susceptible to fraud. “Cash is something we definitely want to work on reducing,” Polanco said.

• Automated check-writing services. These are less common at not-for-profits but can provide numerous efficiencies, including automated invoice approval that can be accessed with any computer or mobile device, integration with accounting software, elimination of the manual process of writing and mailing checks, and a simplified deposit process.

“This is a real game-changer for accounting departments, and what we see is that a bookkeeper can now be trained to do more analysis, more Excel work,” Polanco said.

Effective handling of travel and expense reports also is a key part of any effective cash disbursement process. The ideal workflow, Polanco said, has a web-based platform with mobile access that allows users to scan or photograph their receipts and documentation of expenses paid.

Travel and expense workflow can be optimized with electronic approval routing and direct connections to credit cards, payroll, and the accounting system, which also enables an electronic audit trail. Optimizing this process can improve employee morale.

“This is people’s money that they’ve put out to be reimbursed by the organization,” Polanco said. “We can’t get that wrong if we want to have happy staff. We want them to be pleased with the results of the finance office.”

Payroll

Integration with other processes is important for smooth payroll workflow, Polanco said.

The best systems connect payroll with other human resources systems, such as time and attendance and travel and expense, according to Polanco.

“Think about the system you’re using and whether it is, in fact, what you need,” she said.

She said some smaller not-for-profits are experiencing success in this area by using professional employer organizations (PEOs) that provide outsourced services for employee management tasks such as payroll.

Using a PEO enables smaller organizations to band together with other organizations to improve their purchasing power for benefits and also gives them the ability to provide a greater variety of benefit package options to their employees.

Cash receipts

This is an area where technology can make it easy and convenient for donors to give while also driving operational efficiencies.

“The connection between fundraising and finance, this is an area where I see lots of opportunities for partnership,” Polanco said.

New technologies can enable donations via text message, mobile bidding at auctions, and mobile payment by donors.

Ultimately, the most successful workflow efficiencies will link the accounting software system with online giving platforms, merchant accounts, donor databases, and the organization’s bank accounts.

“Understand how this flows from one system to the other to the other … so you can automate the process as much as possible,” Polanco said. “No one really wants to write a check any longer.”

The pursuit of process improvements and operational excellence may encounter hurdles. Implementation requires breaking through cross-functional silos and willingness to change the way things always have been done. But if this enables the finance staff to provide more value to the organization and improves efficiency, the effort may be worth it.

—Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.