Banking & Finance

Benchmarking the finance department

October 30, 2015
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How efficient is your accounting and finance department? Benchmarking is often used to compare operating results against industry peers to isolate areas for improvement, but what about your accounting and finance department — how are they doing compared to their peers?

The Financial Executives Research Foundation (FERF) and Robert Half have released their 2015 benchmark report providing useful metrics to help answer this question.

The benchmarks, based on the survey of 1,400 companies in the United States and Canada from various industries, may validate your current practices or lead you to begin the process toward a more efficient and effective finance department.

One interesting topic covered by the report was a look at the size of respondents' chart of accounts and the number of accounts that are reconciled on a regular basis. 

A common reaction to the increasing complexity of compliance reporting is the expansion of your chart of accounts. The level of detail in your chart of accounts affects your ability to create reports so you need to go into enough detail so the available data meets your needs, but including too many accounts defeats the purpose of grouping transactions together.

Number of Active General Ledger Accounts by Company Size
  Revenue of less than $25M Revenue of $25M to $99M Revenue of $100M to $499M
100-500 81% 59% 42%
501-1,000 14% 21% 29%
1,001 or more 5% 20% 29%

Whether setting up a new chart of accounts or evaluating your current setup, the best place to start is with brainstorming the reports you need to access on a regular basis. Think about the information you need at the end of the month, quarter and year, and make sure that you’ll be able to get the data you want.  By understanding your information needs you’ll get a sense of how detailed to make your chart of accounts.

An important part of the financial close process is account reconciliations. Whether automated or manual, good tools and processes provide a basis for ensuring efficiency, accuracy and completeness in the reconciliation process. 

Percentage of General Ledger Accounts Reconciled at Least Quarterly
  Revenue of less than $25M Revenue of $25M to $99M Revenue of $100M to $499M
100-500 1% 3% 6%
501-1,000 93% 87% 75%
1,001 or more 6% 10% 19%

To improve your reconciliation process, consider using standard templates that provide consistency and ease of reviewing for accuracy and completeness. Each reconciliation should include a title, description of the account, documentation supporting the account balance, and procedures on how to complete the reconciliation.

As reporting requirements change and your business evolves, you should routinely review your chart of accounts and general ledger reconciliation process to identify improvements that address quality, timeliness and information needs.

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