In pursuit of maintaining high delivery quality in accounting, accounting firm leaders often forget a very important aspect of the business – crisis management. When things are proceeding as expected, nobody really thinks of preparing for the worst. When a crisis occurs, all of that changes. They often happen faster than teams are ready for. Unless you have a crisis management strategy, it will be extremely difficult to capture accurate, actionable information.
While this is a problem for most industries, it is a striking problem in the accounting industry. Poor data management leads to messy, error-prone, and unreliable insights. Using this for any accounting function is difficult. But crisis only worsens it. Accounting teams struggling with these issues wind up in the dark and businesses make decisions that hurt at all levels. Accounting firms must maintain high data management standards to ensure that the leadership can guide the company in making impeccable financial decisions while maintaining compliance with regulations.
A crisis requires businesses to see the unseen and often take a different route. The stress is high when a crisis attacks and it only numbs the ability to make rational decisions. That is why firms make mistakes during such times. The ask to be adequate and accurate enables businesses to make decisions they won’t regret.
Top Mistakes to Avoid in Crisis Management
When a crisis is fast approaching, it is easy to lose track of what is important and what needs to be addressed first. But with the right strategy, things can be better. If you want your accounting business to stay prepared for a crisis, here are the top mistakes that you should avoid:
Waiting until the crisis hit:
As the saying goes, it’s better to be safe than sorry. Once a crisis hits, businesses face a desperate situation. It’s often an all-hands-on-the-deck situation and the chances of missing out on important details are pretty high. Practicing with a mock crisis can be a great way to assess your strategy much before the actual crisis hits.
Not setting a benchmark:
When a crisis hits a firm, it is not just the leaders who are affected – it is everyone in the business. They might not always understand the degree of damage or what they should be doing to manage the situation. Having a benchmark of “not that bad” or “worse than that” can help teammates understand the intensity without the management having to explain all the steps in detail.
Forgetting about your audience:
Even in case of a crisis, it might not hit all audiences equally. This means a broad listing of programs might not always be effective. Categorizing your target audience and understanding how each of them is affected, can be helpful.
Different kinds of crises and how data can help manage them
In accounting businesses, crises can come in many forms. Dealing with critical, financial data makes these firms susceptible to a lot of risks. Let us understand what are these risks and how data can help address them.
Risks in Financial Reporting:
The amount of inaccuracies is directly proportional to the misstatements in the financial reporting. This can happen due to multiple reasons – the most important of them being the lack of accurate and real-time data. Inaccurate financial reporting can often lead to regulatory penalties, loss of confidence among investors and other stakeholders, and incorrect business decisions.
How can data help?
Implementing robust data validation and reconciliation processes ensures the accuracy of financial data. Real-time data systems are widely acceptable to accounting business owners and they should be used for continuous monitoring and identification of discrepancies. By using automated audit tools, firms can spot the frauds, chances of frauds and discrepancies, and the chances of errors. By analyzing historical data, accountants can spot anomalies and make wise decisions in forecasting and reporting.
Risks of frauds
As modern-day tools and technology continue to become smarter, so do the fraudsters. From phishing to impersonation – there is so much that can go wrong. As they deal with critical financial information, accounting firms attract a lot of attention from fraudsters. Fraud in accounting leads to intentional misrepresentation and theft, and results in financial losses and that of the organization’s reputation.
How can data help?
Data analytics tools can detect unusual patterns and transactions that may indicate fraud. Segregating roles based on the available data like what was the point of fraud previously, who is more prone to be accessible to fraudsters, or the kind of information that needs more protection than others can help reduce internal fraud. Continuous data monitoring systems can identify and flag suspicious activities in real time. Analyzing historical data can help understand common fraud patterns and implement better controls.
Risks in Operations
Operational risks are one of the most critical forms of risk. They are difficult to assess and analyze. These risks arise from internal processes, systems, or manual human errors that disrupt business operations and impact the business’s overall financial performance.
How can data help?
Continuous data analytics can identify inefficiencies in operational processes, leading to improvements and reduced chances of error. Tracking the KPIs of all team members is an effective way to detect operational issues early on. This also helps analyze where each of the team members stands. Data from operational systems can help predict the need for new tools, new team members, training and guidance, etc. Automating routine tasks using data-driven systems helps reduce the risk of human errors. Data also helps analyze past incidents to understand the root causes of operational failures and measures to control and prevent them.
Risks in the market:
The volatility of the accounting firm is high. The market conditions change at a rapid pace. These changes affect business industry-wide and internally, it is impossible to address and solve them.
How can data help?
Continuous data analytics provides insights into market trends and conditions. It helps in better risk assessment of the market and enhances decision-making. Data-driven financial models help in developing effective hedging strategies to mitigate market risks. Scenario analysis for data helps understand the potential impact of different market conditions. Real-time data on investments and market movements helps make timely adjustments to an individual’s investment portfolio. It is also important to test the success or failure of a marketing strategy. It is the data from a certain experiment that helps analyze how effective it is.
Using data for crisis management in accounting – End Note
In a niche field like accounting, it is difficult to take charge of all crises. But being prepared is an important aspect of it. No matter what aspect you are looking at, you can never go wrong when you constantly survey all data and talk to your customers regularly. Keeping in touch with market trends and analyzing historical data to analyze the success or failure of a business is key to ensuring you are prepared. Crisis management is not easy, but every crisis has a mode of recovery as long as you have a logical, data-driven management plan in place.
By outsourcing your accounting practice, you can get access to experts who can help manage your routine activities, while leaving you with ample time to face crises head-on. To know more about outsourcing, write to us at connect@finsmartaccounting.com.
Director Growth Strategy & Alliance
Maanoj Shah is a finance and outsourcing expert with strong Business Strategy and Scaling-up experience. Over the last 20 years, he has incubated multiple businesses and helped build global enterprises in verticals as diversified as hospitality, technology, and healthcare.
