Keeping Your Finance Department Credible (And What Happens if You Don’t!)

Your Finance Department has many roles. But one of the most crucial roles is to maintain your organization’s official accounting records. This also gives it a unique opportunity to provide relevant information and assistance to other departments. However, the role of financial accountants requires deep technical knowledge and skills, and there’s added pressure as many of their tasks have strict deadlines. Therefore, questions from operating departments are sometimes seen as distractions to accountants rather than as part of their key job responsibilities.  
 
Operating departments frequently come to the Finance Department with technical questions intended to help them better operate their programs or spend money more cost-effectively. These questions may range from simple (“Has this invoice been paid?”, or “How do I log into the financial system?”) to the complex (“Can you help us determine whether the fees we are charging for our services are fair?”).
 
The Finance Department also provides monthly or quarterly budgeted vs. actual revenues and expenditures financial reports to departments, as well as financial information to elected officials, senior management, the public, granting agencies, regulatory bodies, bondholders, and others. Some of this information is used in evaluating the performance of operating departments.
 
Accordingly, operating departments expect financial information coming from Finance to be accurate, complete, and timely. If Finance does not meet this expectation, it will lose credibility in the organization. When this happens, dire consequences can follow. Departments have to guess at what to do instead of asking, leading to more errors.

​Take, as an example, this story:

A Bay Area City had a weak accounting department for several years. The department head was an Administrative Services Director over IT, Finance, and HR, but had no accounting background. The ranking accounting professional was an accounting manager who had been with the City for 20+ years but had little enthusiasm for the job. The other Finance Department employees were new and had no formal training. Getting information from the Finance Department was slow and accuracy was spotty. The Public Works Department (PW) got frustrated with the inconsistent and inaccurate accounting information coming from Finance that was needed to manage its grants and prepare grant reimbursement requests. Therefore, they started keeping their own grant accounting records. This was a bad idea for many reasons:
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1. The PW records were not maintained by trained accountants, so errors were frequent.
2. The PW records were not reconciled to official accounting records.
3. The PW records did not have the built-in controls of the ERP system (e.g., access and security, backup, dual entry bookkeeping).
4. There was no easy ability to share or oversee the information maintained in the PW Department.

Here are 5 common ways that Finance Departments lose credibility:

1. Monthly/quarterly financial reports are hard to understand. Examples are
   • They aren’t provided at the level of each manager having budgetary responsibility.
   • They are different in format or basis of accounting from other internal financial reports.
   • The report titles and column headings are not clear and precise.
2. Questions are not answered thoroughly or accurately. Or worse, the internal customer is referred to others in the Finance Department instead of getting the answer for them. Also, if the Finance Department doesn’t take time to fully understand the department’s question and circumstances, the department may not believe the answer, even if it is correct. A best practice is for the Finance employee first asked the question to either answer it or get the answer. It is easier for a Finance employee to know where to go and who to talk to about a finance question.
3. Questions are not answered timely. Even worse is when a phone call or email is not responded to at all. A best practice is to acknowledge the question and commit to a date when the answer will be provided.
4. Information requested by the Finance Department from operating departments is not clear, such as when requests are made for budget detail, budget vs actual variance explanations or year-end accruals.
5. Inadequate training is provided on Finance policies, procedures, and controls. Frequently, departments don’t understand the need for the strict procedures Finance calls for and therefore view them as unnecessary make-work. Even worse is when the Finance Department processes a transaction that is not in compliance with procedures and other times sends it back for correction.

​The credibility of the Finance Department throughout the organization is important to its success, and indeed, to the success of the government itself. This credibility needs to be nurtured through good relations with other departments. The good news is that it is not difficult.
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You can build credibility in your Finance Department by:

• Answering operating department questions thoroughly, accurately, and timely.
• Providing easy-to-understand monthly/quarterly financial reports.
• Providing training on finance policies, procedures, and controls.
• Assuring departments have appropriate access to online information (i.e., provide read-only access unless there are clear reasons not to).
• Being consistent on enforcement of compliance with policies and procedures. 

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If you have more questions on how to manage or improve your Finance Department's credibility, feel free to reach out to Kevin directly:
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Kevin Harper, CPA
[email protected]
(510) 593-503