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How to Set SMART Goals, Targets/Objectives for Accounting Department?

Andy Tan's Profile

Smart Goals For Accounting DepartmentIn the company we are working now, it's required that Manager of each department has to set up annual targets/objectives for the department. It's quite easy for Sales or Production department to setup their targets, but for Accounting Department, all the works are routined, and we always face difficulty setting up our target which follow the rule of SMART (Specific, Measurable, Achievable, Realistic, Time bound). Please give ideas of setting targets for Accounting Department. Thanks.

Answers

Ken Stumder
Title: Finance Director / Controller
Company: Ken Stumder, CPA
(Finance Director / Controller, Ken Stumder, CPA) |

The targets you adopt for the Finance team can definitely follow SMART. If your team has responsibility for collections, you can set specific DSO targets with quantification of specific behaviors (i.e. all customers with accounts receivable aged greater than xyz days receive xyz # of emails/calls). If you are responsible for closing the books, you can say the goal is to go from a 7 day close to a 6 day close. If you want to encourage a learning environment the goal can be that every member of your team has participated in X hours of CPE annually. So many ways, I'm sure others could provide valuable suggestions as well.

Sarah Jackson
Title: Associate Editor
Company: Proformative
(Associate Editor, Proformative) |

Andy, in addition to the insights on this page, Proformative also has this very interesting discussion:

"KPIs for the Accounting Department & Finance Department"
https://www.proformative.com/questions/kpis-accounting-department-finance-department

Best... Sarah

Andy Tan
Title: Supervisor
Company: AVS System Networks
(Supervisor, AVS System Networks) |

Thanks Ken Stumder. Actually some of your suggestions have been set in the past, and such indicators are now at the level that we think it's not easy to make it better. For example, accounts closing has been shortened from 6 to 5 days, to 4, and now 3.5 days; or we don't have to worry about accounts receivable, as all the sales transactions are with related companies, accounts are settled on the scheduled date... Please suggest other indicators.

Topic Expert
Christie Jahn
Title: CFO
Company: Atlantic Wireless Communications
(CFO, Atlantic Wireless Communications) |

My metrics for our bonus program are GP to Budget, Admin payroll as a % of income, Total Company expenses as a % of income. My Accounting assistant has KPIs such as were all rebates disputed during the month (our Rebates are high dollars and if we don't dispute timely we don't get paid), Payroll Errors for the month (where one error equals a percentage off of the bonus), we have three specific KPI's for each department related to their jobs and things they have specific control over.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

How about a KPI set to the inevitable audit (whether internal/external, CPA/CIA or Bank/Insurance/Regulatory Agency). This means reports, paperwork, files are examine and placed in pristine condition.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

BTW, the company I'm acting as CFO for just finished their audit with a) minimal journal entries (maybe 10), b) on-time, c) on budget and c) with no drama or hissy fits on either side. I'd say successful, because reports, paperwork,etc were available and complete.

Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

Wayne,

Good one!

Andy,

I try to start top and bottom. For all of my reports, I *should* know what they are doing, and that certainly can be rolled into KPIs. Those can hopefully be rolled into larger target KPIs. Perhaps the Audit, or like Christine J. suggested, the % of total spend; I love this one because it is SCARY. What if giving raises puts you over the top? It really puts things into perspective, which is part of KPIs. It also forces responsiveness on your part; if revenue drops, how will you respond to cut spending to keep at your target?

The care here is to make sure that your KPIs, to the extent they affect your staff, are controllable by them. That's where the bottom-up comes in. Get that to meet the top-down, and you've found a good balance.

To your separate, implied question; I've got to take issue with that. If you hit an average close cycle of 3.5 days, that's awesome! I'll give you bonus points for taking it to 3 days, but just *maintaining* at 3.5 days is fantastic and deserves 100%. I will go as far as saying, maybe 100% is keeping it at 5 days, if that is all the business really cares about, and your KPI is telling you "stop pushing the close, start preparing for the Audit". But *keep* the KPIs that you're hitting. You don't want to lose sight of the target (for example a sub-5-day close), and to the extent that you are running a tight ship, remind your team that they are hitting their marks!

And, on that, it isn't sandbagging. It is setting the goals at business need levels so that you put in the appropriate effort.

Once your team is perfectly well oiled, smooth,etc., there are plenty more things to measure. https://www.proformative.com/users/carrie-roesner had a long list in the other conversation. Mine included things (which I'll in effect add to her list).
-Quote to cash cycle.
-Forecast accuracy (cash)
-Forecast accuracy (rev-rec)
-Forecast accuracy (book/bill)
-Field training events (like rolling out new expense reimbursement software)

It all of course depends on what you control; at the end of the day, you do have a job, and part of it is explaining your own value, which this can help greatly with.

Cheers,

KP

Anonymous
(Agent, JKS Solutions, Inc.) |

Keith,

you have a great point about setting objectives that are consistent with the last period's objectives. We have some objectives that are the same every quarter, however, we also make sure that we get some new ones on the scorecard.

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

Not sure how to measure the accuracy of any forecast. Nor would I as an accountant want to be measured on fortunetelling. Your analyst must be extremely stressed to be measured on predicting the future.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Have you looked at OKR's (Objectives and Key Results)? I am a fan of the OKR concept because it keeps pushing the goal/s forward and more personalized goal setting. It is more like a combination KPI setting and self performance review. Not sure if this concept will mesh with your organization but you can take a look at it. You can either have a mini implementation (with the help of your HR) and maybe the whole organization will find value to it.

Ahmed Okba
Title: Warehouse Manager
Company: Modern Pharmaceutical Company
(Warehouse Manager, Modern Pharmaceutical Company) |

Thanks, Emerson. Could you elaborate more on OKR?

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Ahmed, I am sure a simple Google search can be more enlightening/beneficial to you than if I "try" to explain it here. I won't be able to do the concept justice and may even be a disservicee to you.

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

There are certainly some jobs within accounting that have measurable work products. But how do you measure a M&A analyst? How do you measure a departmental assistant who makes copies and puts stamps on the mail?

Also the people who insist that every job have KPIs have difficulty in understanding the concept of Cost/Benefit. Until someone can demonstrate to me the Cost/Benefit of doing KPIs, I won't do them.

As with many things we are called to do in corporate America, the HR department is a driver of many unnecessary and costly processes. KPIs and Annual Performance Appraisals are in many instances the biggest wastes of time I have ever encountered. Neither one can actually survive a true Cost/Benefit analysis.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Scott -

I agree, you can KPI to death. I had a client that never finished high-school, but not only did very good, but was somewhat a philosopher. He believed there was a place for "high tech", but it wouldn't replace "high touch". KPI's are high tech, but how do you know what's really going on if you never talk to the person?

Wayne
http://www.sbaconsulting.com/management.html

Anonymous
(Agent, JKS Solutions, Inc.) |

Andy, we divide our accounting scorecard in 4 sections: Financial, Process Improvement, Customer, Learning and Growth. In the Financial section, we have objectives that deal with closing the books and and billing. In the Process Improvement section, we have an objective to update our revenue recognition policy to add a new product line as well as references for to support the PMs in appropriate splitting of project milestones. Our customer section includes out customers, contractors as well as governmental agencies (like the Department of Revenue). We have objectives related to paying annual property taxes or sending out the 1099s to our contractors. Out objectives in the Learning and Growth section include objectives like getting enough CEs for the staff and learning new software (e.g. PowerPivot). All of those objectives flow up into broader, company wide objectives that link to one of our company goals and perspectives. We use MyObjectives to help us with managing our objectives.

Ozan Duzgun
Title: Accounting and Controlling Manager
Company: Turkiye
(Accounting and Controlling Manager, Turkiye) |

Hello everyone. I recommend you to give educational tasks to your team. Just an example, one of your team member can prepare a presentation which shows how to reach net salary from gross salary. or how do you calculate the financial ratios and how do you take advantage of them. The personnel outside finance department will enjoy it. And it makes your beginners more educated.

Anonymous
(Accounting Manager) |

I find annual planning targets and KPI's in accounting to be process tracking exercises. The outputs (close on time, reporting and compliance fulfillment, audit ready, etc.), vary based on the activity level of the business. Timeliness, efficiency and accuracy are the underlying themes to measure and manage staff. It has it's place, but where is the fun in that? Accounting professionals need to own the process and have objectives or measurements that actually engaged them in the business.

There is no meaningful KPI if you are struggling to just get to the outputs. When an accounting organization is not sufficiently evolved and properly staffed for the level of complexity of the business or when they face major change, it's is MBO time. Determine what the outputs and KPI's should eventually look like and use SMART around people, process, and systems to get you there.

Michael Njeru
Title: Finance Manager
Company: Cleanshelf Supermarkets Ltd
(Finance Manager, Cleanshelf Supermarkets Ltd) |

Am also in the process of developing a balance score card for my accounting department (Retail industry-Chain Supermarkets).
The department is divided into for sections ; (1) Treasury - Incharge of revenue, cash & Loans accounting, (2) Payable - Processing of the business payments (3) Stock & Fixed assets - Incharge of stock and fixed assets management (4) Financial report - Incharge of tax management, budget administration and routine preparation and anlsysis of management reports.
I would appreciate any valuable information that can help me in setting up the balance scorecard.
Thank you

Michael Njeru
njerumichaelatyahoo [dot] com

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