Succession Planning – What Most Business Owners Miss
This article was co-authored by Stephanie Schroeder, Manager for Outsourced Accounting Services.
Missing Pieces in Succession Planning: Key Accounting Personnel
Succession planning is a necessity for any business, protecting the continuity of leadership, operations and key functions in the event of planned or unplanned transitions.
While performing outsourced accounting and financial reporting services, Windham Brannon’s Outsourced Accounting Practice has seen a dramatic uptick in the retirement of key internal accounting personnel of both our current and prospective clients.
Many of these professionals worked for their companies for multiple decades. On numerous occasions, one individual was solely responsible for the accounting and financial reporting functions of the business. Moreover, the exiting staff had not adequately transferred their expertise to document and preserve critical knowledge, leaving these businesses vulnerable to significant operational disruption.
This is to say – no succession plan is complete without preparing for the (timely and untimely) departures of accounting staff. This should involve 1) the creation of clear and comprehensive written accounting procedures that are updated regularly, and 2) the development of an effective training program on the business’s accounting procedures.
Accounting: The Often-Invisible Backbone of the Business World
Accounting plays a central role in every business as it deals with the accurate recording, summarizing and reporting of financial transactions. The integrity and accuracy of this data is paramount to the success of their business.
The key functions that accounting professionals oversee, such as payroll, accounts payable and receivable, taxation and financial reporting, must operate smoothly so that the business meets its financial obligations, manages risks and maintains legal compliance. When an experienced accounting professional is in place, these functions are executed seamlessly. Despite the crucial roles they play, the importance of this individual is often overlooked until they are no longer part of the business.
In smaller organizations where accounting responsibilities might be managed by just one or two key individuals, taking the time to develop these proper resources becomes increasingly urgent. If one person retains all the knowledge about the company’s financial systems, transactions and processes, their departure can destabilize operations. A well-prepared succession plan, involving Standard Operating Procedure (SOP) documentation, cross-training and knowledge sharing, mitigates this risk.
Knowledge Capture and Transfer: How to Get Started
The first key step is to capture the knowledge. Organize a system for thoroughly documenting and storing key processes and procedures related to accounting and reporting. A well-documented accounting system that granularly details workflows, financial reporting processes and compliance checklists substantially reduces the risk of institutional knowledge loss when personnel transitions occur.
Next, develop an approach for transferring the knowledge (more commonly referred to as “training”). As a direct result of the COVID-19 pandemic, there are more techniques of doing this than ever before. You can choose between asynchronous, synchronous, visual, text-based, audio-based, in-person, remote, etc., or a blend of these attributes. With regard to accounting and reporting, specialized knowledge about financial systems, historical transactions, reporting methodologies and industry-specific practices is invaluable. Finding ways to make this knowledge transfer as memorable and engaging as possible is key.
Finally, succession planning in accounting should focus on grooming internal talent and providing training opportunities for potential successors. This involves mentoring programs, job shadowing and rotational assignments to give future leaders exposure to various aspects of accounting and financial reporting. Having a well-prepared internal candidate who is already familiar with the company’s accounting systems, financial history and reporting structure ensures a smoother transition.
If your business is not yet at this stage, you could benefit greatly from an outsourced accounting provider like Windham Brannon.
Windham Brannon Can Help
Based on our experience, most business leaders believe they have more time to develop an exit plan and address their organization’s weaknesses in regard to properly documenting their accounting processes and implementing plans to effectively train a successor. In reality, they ended up scrambling to find a solution in order to avoid unpleasant consequences.
If you are in this position, contact Windham Brannon’s Outsourced Accounting Practice today – we are a team of diligent outsourced accounting professionals with a diverse skillset, working to address your most pressing issues. In addition to offering high-quality outsourced accounting services, we also offer interim CFO services, accounting procedural documentation and training. Whatever your accounting needs are for succession planning, we have your business covered. For more information on how we can help, contact your Windham Brannon advisor today, or reach out to Jodie Bartock.
