Accounting can't save your production

A tale of the tail wagging the dog

Recently, I have worked with various language service companies to improve their billing operations. Standard stuff–trying to make accounts receivable and payable more efficient. Managing business administration costs is one of the easiest paths to greater profits. Of course, billing customers and paying vendors is an administrative task that will never go away.

Perhaps, since accounts receivable and payable are merely a cost to doing business, owners invent new ways for them to provide more value to the revenue generating side of the business–in this case, translation production. From my perspective, billing projects quickly and efficiently with as little back-and-forth with the production team is the goal of an effective accounts receivable effort. The same goes for accounts payable–happy vendors are a translation project manager’s dream! So, let’s be sure to pay everyone on time (which in a cashflow business like translation, means accounts receivable must be efficient)!

Another way I have observed accounting departments’ activities in some LSCs is as the “last set of eyes”. This means that the accounting department is the last chance to catch errors in how order/project activity is logged and billed. Of course this is appropriate, we do not want to send incorrect invoices to our customers or wrong payments to our vendors. But if your accounting team is catching lots of these errors (let’s say more frequently than a handful of orders a quarter) then you have a much bigger problem on your hands.

Healing the symptoms

If accounting is catching errors in how prices are applied and tracked for services billed to a client or which rates are being used to pay vendors, this means that transactions have already occurred that impact clients and vendors. If accounting is checking after the fact then this is “quality checking”. What you really want is “quality assurance”–checks that occur earlier in the process and avoid errors prior to project completion. If you have an accounting team that is attentive and raises invoicing issues with your production team, that’s great and should be lauded.

However, relying on this feedback loop to correct issues in production is a dangerous crutch for your production team. If your project managers start taking this feedback for granted and begin to rely on it then you will quickly lose accountability with your production team. In general, whenever someone can say, “No problem, if something slips by, accounting will catch it,” then your production team will stop sweating the details. Details matter a lot in project management. “Attention to detail” appears in most job postings for project managers.

Address the symptoms

So, what is the best way to address these issues when they are caught after the fact. As with most systemic challenges, the answer is “continuous improvement”. Take the symptoms seriously, but don’t just address the symptoms and move on. Be sure to take a close look at root causes. For example, if incorrect rates are being applied, ensure that the configuration of your management system is correct, so that project managers do not have to rely on their recall for rate information. Nor should they rely on uncontrolled information like Word docs or Excel files that reside outside of your management system. Rate information must be centrally and tightly controlled by management.

If incorrect billing information is being used or a purchase order number is required and an invoice was issued without one, be sure that invoicing information is kept separate from general production information in your management system, so that it is easier for project managers to find that information and confirm it prior to invoicing.

Accounting has better things to do

You might think that having accounting catch errors adds value to your operations, but the opposite is true. Accounting has much more important work to do:

Monitoring receivables and payables to ensure consistent, smooth cash flow
Report consistently on the financial performance of the company
Ensure that invoices are sent in the shortest possible time to your customers
Maintaining healthy books to help drive accurate reporting and tax preparation
Using analytics to improve profitability

These are the core activities of your accounting team, fixing problems in production is not where they can add the most value. It is important for all employees to understand the basics of what your company produces, but your accounting team does not need in-depth knowledge of how your production team does its work. Just like you do not expect your project managers to do accounting.

Listen closely to what accounting might be communicating back to production. If that feedback is weekly. Fix the source of the problems. The best way to help your company to perform to its best potential and to grow is to drive your internal teams to be experts in their assigned roles.

If you need help clarifying your teams roles and how they can do their best work feel free to reach out to LocFluent Consulting for a no-obligation initial consultation.