Conversion from fiscal to analytical accounting: a success story.
The challenge was to internalize the accounting of a company that, since its foundation, had delegated its accounting and tax management to an external consultancy firm. For years, the working method had been based on a purely fiscal approach. Accounting was geared towards tax requirements, so that only an annual closing was conducted. No periodic bank reconciliations or provisions were made. The information was sent in weekly or fortnightly batches for external recording.
However, the growth of the company and the increase in the volume of operations led the tax advisor to point out the inefficiency of the system. The firm advised management to take over the accounting internally, with little success. The volume and complexity achieved exceeded the profit margin of the traditional approach, which lacked management vision.
Initial diagnosis and obstacles to overcome.
When tackling the project, we encountered multiple challenges deeply rooted in the organization’s culture. The greatest difficulty was the lack of rigorous monitoring of accounting documents. There was no systematic control of information pending receipt, documents received, or those that were simply sent without further verification. Added to this was the unrealistic temptation to invest in a robust ERP system (at a cost of over €300,000) for a company with an annual turnover of around €3.6 million.
In addition, there were constant doubts and reservations within the management team about the real usefulness of the change. There was also widespread skepticism about the advantages of keeping accounts internally. The custom was to record only the movements required to comply with the filing of corporation tax and the deposit of annual accounts. They were underestimating the benefits of having monthly financial statements and detailed control of projects.
Actions implemented: from document review to advanced management.
The first step was to immerse ourselves in the major accounts and compare them with all the documentation generated. To obtain an accurate picture of what had been recorded. We found ourselves with a twofold need. On the one hand, to select an accounting platform appropriate to the size and real needs of the company. On the other, to create an analytical chart of accounts focused on control and monitoring by project. We reclassified the accounting entries made to date to adapt them to the new internal logic.
Together with the client, we defined a new detailed procedure for recording all future operations. This work included specific training for the team and the establishment of clear and replicable guidelines. For the daily management of accounting and financial information.
Overcoming cultural and technological limitations.
One of the greatest achievements of the process was changing the internal culture regarding the value of clear and up-to-date financial information. The initial insistence on only closing the balance sheets annually and the lack of knowledge about the analytical benefits of monthly monitoring were challenges that were overcome. Through education, showing concrete examples of how analytical accounting allows for controlling profitability by client or project. Apart from identifying deviations and making informed decisions in real time.
Avoiding the acquisition of an oversized ERP was also the result of common sense and analysis of the real context of the company. We selected a simple, scalable solution that was easy to integrate and quick to implement. We avoided a disproportionate and unnecessary investment, achieving the objective with economic efficiency.
Results achieved and skills demonstrated.
As a result of the intervention, the company was able to obtain complete financial statements updated monthly in record time. With profit and loss accounts per project. And the ability to control and analyze each relevant operation of its activity. Management control improved, allowing for more accurate pricing, identification of inefficient processes. And detection of opportunities for improvement in project profitability.
This is one of those projects that stands out for its perseverance, especially in the initial phase of accounting reconstruction. And for the soundness of the choice of technological solutions. In addition, it is worth highlighting the pedagogical ability to convey to the team the importance and usefulness of analytical accounting as a strategic management and control tool.
This case shows that the conversion from fiscal to analytical accounting provides a qualitative leap for any company.
