In the current economic and social climate, turnover is inevitable. Talented people land different jobs, move away, or retire. When turnover happens in your accounting department, most organizations experience some uncertainty and concern over the accounting function. You may wonder “how will we produce our financial reports next month?” or “how can we do this without this person?”. Addressing the need for accurate information for making decisions is vital to the health of an organization.
Three main options are available in dealing with the tough situation of turnover in a key accounting position:
- Absorb the work
- Hire a replacement
Absorb the Work
With tight budgets and a competitive job market, it’s often difficult to replace someone at the same compensation level. Not replacing the person would give an extra boost to the financial results for the year by reducing personnel costs. This strategy can be useful if you can distribute the accountant’s essential duties and automate as much as possible. Absorbing the work can be a viable option for larger organizations (with multiple employees in the accounting/finance department) with the available capacity to absorb the work.
In smaller organizations, this option may not be viable as a long-term solution. Employees tasked with performing additional accounting functions may not be qualified to complete the work, or worse, may get burnt out and leave. Reducing headcount could also lead to issues and lapses in internal controls. Any of these negative impacts can compromise the integrity of your information and even lead to vulnerabilities for fraud. As a result, it’s important to carefully weigh the ramifications of absorbing the work of a departed accountant. For the majority of nonprofits, the other options are the most viable.
Hire a Replacement
This is often the default option when employees terminate. Searching, hiring, and training a replacement offers the promise of maintaining your accounting procedures and processes. In certain organizations, the accountant often makes significant operational decisions that can’t be passed on to another employee or outsourced. In these instances, hiring a replacement can be the best alternative. However, hiring and training an accountant can be a time-intensive and difficult process, and a new hire may not have the capabilities of the previous accountant. Compensation may need to be increased, and the new accountant would likely be eligible for benefits. As a result, there are significant costs and risks to maintaining the status quo by hiring a replacement.
Outsource Key Functions
A third option to cover the duties of a departed accountant is to outsource certain accounting functions to a third party. Outsourcing can be the option that least disrupts your organization and provides you with the best information for making decisions. By choosing to outsource, you can gain a level of expertise that would be difficult to achieve with a new hire. A third party can perform essential accounting and management duties. By outsourcing, a team of experts is available to help you achieve the financial results you seek. Rather than hiring one full-time person, outsourcing gives you access to resources in several different disciplines. Many firms offer bookkeeping, tax, or consulting services, and some organizations contract with more than one firm to outsource their accounting functions. Outsourcing isn’t the right solution for everyone, but in many cases, organizations can get better information and helpful insights for making timely decisions.
Navigating your options of how to replace the duties of an accountant is complicated and usually isn’t quite as simple as choosing from the three options above. Many organizations opt for a hybrid of the options above to meet their needs (for example, replacing an accountant who performed bookkeeping and CFO duties with a bookkeeper, coupled with advisory services from a firm like TDT to handle CFO duties).
There’s a lot to think through as you evaluate your options for meeting your accounting and reporting needs when an accountant leaves. At Forge Financial and Management Consulting we are available to talk through your options and partner with you in implementing the best solution for your organization. Our teams are available to assist you in managing your accounting, reporting, and tax responsibilities that focus on your unique challenges and requirements.