What is Accounting Transformation & How is it Changing Business?

HOST: GARRETT BUCKLESS: Welcome to the Risk and Accounting Advisory podcast. I lead the accounting transformation work at Cherry Bekaert. Today our team will demystify accounting transformation and what it means if your organization is going through transactions, adopting regulatory changes, or simply looking to mature or optimize existing operations.

HOST: GARRETT BUCKLESS: With me today are Corey York and ED SUMMERSIL in Cherry Bekaert's Accounting Transformation Advisory practice. I want to start by providing a high-level definition of accounting transformation and give an example in a business situation. Accounting transformation can be thought of as strategic initiatives focused on structuring the accounting function to align with the company's strategy and meet future business needs.

HOST: GARRETT BUCKLESS: An example would be if you're targeting growth through acquisition; your transformation should focus on creating structure around integrating these new entities. Corey and Ed, what are the key components to success around accounting transformation?

COREY YORK: Since Garrett skimmed my credentials, I will note I have 20 years of mixed industry and public experience, with a focus on policies, procedures, and inventory-related processes. The first component when we look at an accounting transformation is organizational and departmental structure. Successful organizations align themselves to match their desired future state, which requires a clear structure, defined roles and responsibilities, open communications, and change management.

COREY YORK: Continuing Garrett's merger and acquisition example, we consider the organization's current structure or, in some cases, a complete lack thereof. We assess systems used, organizational strengths and weaknesses—especially of the acquiring organization, which would theoretically be dominant culturally and procedurally.

COREY YORK: Additionally, we assess how the target entity operates, how they're structured, the systems they use, opportunities for growth both current and with theoretical synergies the acquisition would bring, and the risks to successful implementation such as intellectual capital and knowledge loss.

COREY YORK: Accounting transformation is more than organizational realignment. We often observe accounting functions that need to assess and optimize their individual accounting cycles, processes, and subprocesses. Clients often reach out with limitations and realizations, such as lengthy period-closing processes, inability to get timely data out of their systems or ERP, and the need to improve areas like inventory accounting, payroll, treasury, procure-to-pay, record-to-report, and fixed and long-lived assets.

COREY YORK: Groups come to us asking for help with those processes. Ed, you wanted to jump in as well.

ED SUMMERSILL: We also consider how mature these cycles and processes are. Cherry Bekaert has developed a maturity model to assess how mature a cycle or process is and how it can be optimized. There are five levels: initial, repeatable, defined, capable, and efficient.

ED SUMMERSILL: At the initial level the process is undocumented and performed ad hoc. At repeatable the key components are documented but may have manual components, several dependencies, and siloed knowledge. At defined all processes are documented, but management of the process is still a struggle and continuous improvement is limited.

ED SUMMERSILL: At capable the processes are updated and managed as needs change, but efficiency and data insight are still not optimized. At efficient you have best practices, forward-looking data insight, and a process capable of continuous improvement.

ED SUMMERSILL: The last component of accounting transformation is the accounting software systems. Accounting systems come in different shapes and sizes depending on the type of entity, company, and structure of the accounting staff. The big category is ERP, which integrates necessary processes across the company—examples include Oracle and SAP.

ED SUMMERSILL: ERPs include planning, purchasing, sales, marketing, finance, and human resources. There are also specialized financial close tools such as BlackLine that help manage the month-end close and ensure account balances are reconciled. Other software includes invoicing systems like Bill.com, expense tracking like Concur, payroll, CRM, and budgeting systems.

ED SUMMERSILL: Accounting systems and processes touch virtually everything. The technology is intended to support, not replace, the accounting function. The focus is on adaptability and data insight going forward.

COREY YORK: I will discuss a few insights and benefits from undergoing accounting transformation. First, you'll see reduced time on manual tasks—time back for your team. That leads to reduced risk of data entry errors through automation.

COREY YORK: You'll be provided real-time data, which allows you to make forward-focused accounting decisions. You'll gain better insights into your processes, making training and retaining employees easier, and you'll reduce the risk of external audit because processes are documented and transparent.

COREY YORK: Lastly, automating business and accounting processes leads leadership to focus on becoming a value-added part of the organization. Accounting becomes integrated into the organization and provides valuable insights beyond transactional processing.

ED SUMMERSILL: I have a quick success story. We helped a high-growth life sciences company with numerous inventory issues. Rapid growth had created an ever-changing landscape and a lack of inventory accuracy, where physical inventory did not match what the ERP reported. This was a major impediment to operations, and the month-end valuation process required an overhaul.

ED SUMMERSILL: We assessed their initial procedures and found their organization was more like a level one on the maturity model—largely ad hoc, with responsibilities not assigned and informal processes. We walked through existing processes in detail with process owners and stakeholders, examined related reports, and applied best practices to create a formalized procedural manual.

ED SUMMERSILL: The manual described preparation for a monthly count, execution of a physical count, reconciliation to book inventory, and methodologies for facility supervisors to pull information from the ERP. We created maps and schematics for inventory management and logistical planning, developed daily, weekly, and monthly trackers for management, and provided operational templates to investigate variances arising from counts.

ED SUMMERSILL: The work also allowed the client to define thresholds for what level of variance is significant enough to require additional investigation and resolution.

COREY YORK: In that case we started with the client's procedures, completed walkthroughs, examined reports, and applied best practices to formalize processes. We helped implement controls and monitoring that improved inventory accuracy and month-end valuation.

HOST: GARRETT BUCKLESS: Thank you, Corey and Ed. Our practice is focused on solutions for foundational accounting needs, optimized processes, and advanced digital controllership, all designed to increase productivity, reduce cost, and improve reporting quality.

HOST: GARRETT BUCKLESS: For more information on this topic and how you can approach accounting transformation for your organization, please visit our website cb.com. Please like, share, and subscribe to the Risk and Accounting Advisory podcast.