Since I assume nowadays that most blog articles have at least received help from ChatGPT, I figured why not lean in, and take ChatGPT’s raw response to “How would a small or medium-sized business implement valuable accounting processes to achieve the most key benefits?” and respond directly to it. Here is the “dialogue”, aka my response as a Controller to ChatGPT AI (I realize the leap of faith required to assume that ChatCPT hasn’t created ALL of the content below):
ChatGPT: Define Accounting Policies and Procedures: Start by documenting clear accounting policies and procedures tailored to your business. This includes guidelines for recording transactions, financial reporting, budgeting, and internal controls. Ensure these policies align with relevant accounting standards and regulations.
My response: this can be a daunting undertaking, but documenting your existing accounting process, even on a high level, is incredibly valuable to find areas of improvement. We provide a process document with contact info and procedures in our engagements, as it also has many other advantages.
ChatGPT: Establish a Chart of Accounts: Develop a well-structured chart of accounts that categorizes your business’s financial transactions. This will provide a framework for organizing and tracking income, expenses, assets, liabilities, and equity. It should be flexible enough to accommodate future growth and changes in your business operations.
My response: once again, this is a key area of my expertise to provide guidance based on each business’s situation/needs. However, I believe the tendency is to try to create too many accounts, especially around Profit and Loss Reports, so focus on keeping the revenue/expense chart of accounts streamlined to only those categories that you care about and will help you make better decisions
ChatGPT: Implement a Reliable Accounting System: Choose an appropriate accounting software or system that suits the needs of your business. Cloud-based solutions like QuickBooks, Xero, or Zoho Books are often popular choices for small and medium-sized businesses. Set up the system, configure the chart of accounts, and integrate it with other relevant systems (e.g., CRM, payroll).
My response: agreed, keep the setup process as streamlined and simple as needed. When it comes to payroll integrations, I would recommend seeking the help of an expert accountant to at least advise on the initial setup, as there is the biggest potential for linking to incorrect accounts, which will compound mistaken categorizations with each payroll cycle
ChatGPT: Hire Competent Accounting Staff or Outsource: Determine whether you need to hire dedicated accounting staff or outsource the accounting function to a reliable third-party provider. Consider the complexity of your business operations, volume of transactions, and budget constraints. Ensure that the individuals responsible for accounting have the necessary skills and qualifications.
My response: ChatGPT really knows its stuff :). As an outsource solution, we are so valuable to clients because we can bring CFO/Controller level expertise AND day-to-day Accounting/bookkeeping support in a flexible engagement that is often more fitting of a business’s cost budget compared to full-time staff. We also effectively augment current accounting staff by adding our specific knowledge and management expertise
ChatGPT: Streamline Financial Processes: Identify and streamline your financial processes to improve efficiency and accuracy. This includes establishing workflows for accounts payable, accounts receivable, payroll processing, expense management, and bank reconciliations. Automate repetitive tasks wherever possible to reduce manual errors and save time.
My response: I hope no disagreement on this point!
ChatGPT: Implement Internal Controls: Establish internal controls to safeguard assets, prevent fraud, and ensure compliance. This may involve segregation of duties, periodic reconciliations, authorization procedures, and regular internal audits. Document the controls and educate employees about their responsibilities.
My response: I believe it is so essential for fraud prevention to have a 3rd party reconcile the books, segregated from the person/team that is handling payables, and receivables. That way, any internal fraud would be much more likely to be caught immediately (and would be less likely to be attempted) because a separate person/team (who ideally does NOT have the ability to pay bills or create invoices) is verifying monthly bank and credit card transactions match what is shown in the accounting file
ChatGPT: Regular Financial Reporting and Analysis (FP&A): Implement a regular reporting schedule for financial statements such as income statements, balance sheets, and cash flow statements. Monitor key performance indicators (KPIs) relevant to your business and analyze the financial data to gain insights for decision-making and strategic planning.
My response: this is so critical to realizing a positive return on your accounting/financial function. In other words, regular FP&A allows better, more profitable decisions to be made and turns your accounting department from a cost to a profit center.
ChatGPT: Continuously Improve and Adapt: Regularly review and refine your accounting processes based on feedback, changing business needs, and technological advancements. Stay informed about industry trends, regulations, and compliance requirements to ensure your accounting practices remain up to date.
My response: this is where an outsourced accounting/financial function can be very valuable in terms of incentive alignment, as an outsourced person/team must stay at the forefront of technological advancement or risk being made obsolete by their market competitors.
ChatGPT: Remember that the specific implementation process will vary depending on your business’s unique characteristics and requirements. Consulting with accounting professionals or seeking guidance from business advisors can also be beneficial.
My response: I couldn’t have said it better myself
