The Reengineering Movement the inclination to reduce costs while maintaining service and productivity, the drive for efficiency, has swept the country in recent years resulting in excellent and quick returns to shareholders. The returns have been due largely to layoffs, sometimes so massive that they reach the front pages of newspapers, news broadcasts, and talk shows. Some believe that the largest companies have completed the majority of their cutbacks and it is unlikely that we will see much more of these sudden and large layoffs. However, the desire to control costs continues and albeit, in smaller numbers, so does downsizing.
Long viewed as nonvalue adding operations and as necessary evils, accounting and finance activities have become prime targets for cost containment. The management accounting journals of the United States, England, and Canada have been peppered with articles on this topic over the past few years. They have identified the accounting functions most likely to produce cost saw ings if reengineered. They have also outlined approaches to the task of reengineering and listed or offered case studies of companies that have successfully overhauled their accounting and finance departments. While discussions of reengineering use the language of productivity, timeliness, and usefulness, the results usually reduce transactions, placing costing activities on source (production) personnel, and taking them away from the accounting department. Or, it may require sending activities and processes out of the firm entirely, through outsourcing.
While paper, ink, and computing time may be saved, substantive cost-cutting efforts in these areas will result only if personnel is reduced. Though better and more timely financial and managerial reports may improve the decision-making capability of upper level management and lead to future profits, those profits will always be greater and more immediate if productivity were so enhanced that personnel could be released. According to T. Sheridan in the April 1996 issue of Management Accounting (England): "The message to the financial people (is) unequivocally clear. Business leaders are trying to get hugely more value from the finance function while cutting down on its staff."
Depending on viewpoint, the direction this path is taking is either good or threatening. From the company's side, it is good to reduce cost while maintaining productivity. The company benefits, the stockholders benefit, and the customer may benefit as well. For the management accountant, on the other hand, this trend threatens existing jobs and for the student nearing graduation, it reduces the potential of employment. CPAs in public accounting considering corporate employment should be aware of the shrinking opportunities and be able to identify and avoid bloated accounting and finance departments that may be ripe for redesign.
How and Where to Look for Cost Savings
The CPA wanting to create value for his or her client needs to know where to look. A perfectly competent professional, having worked for a company for years, may be blinded by familiarity and unable to readily see areas of potential improvement. The following suggestions, in no particular order, may offer some guidance.
* Look for signs of operational breakdowns. Are monthly closings difficult and time consuming? Does it take too long to cut travel and entertainment reimbursement checks? Are payroll or accounts payable costs rising out of proportion to the numbers of employees or suppliers? Are the managers of other functions complaining that their informational needs are not being served?
* Obtain benchmarking studies and compare the cost of your company's finance functions to those of peer companies.
* Starting with the benchmarking studies, identify the areas where cost savings are most likely to be found and consider how to make the improvements.
Benchmarking-a Tool for Improving Service
Several studies are now available that have surveyed and measured accounting and finance functions in the U. …