Step-by-Step Guide to Designing an Effective Accounting Processes Flowchart

Every business operation requires an effective accounting process flowchart that provides a visual representation and documentation of financial statements' key steps and processes for accounting workflows. This is necessary as accounting processes involve complex processes which are prone to human error. Thus, having the accounting processes flowchart is invaluable in visualizing the steps involved since it is easy, transparent, and efficient to follow.

What is an Accounting Processes Flowchart?

An accounting processes flowchart is more like a roadmap or step process that guides how a task should be undertaken from start to finish. It is more like instructions with visualizing aspects such as errors and diagrams that form a flowchart of where to go. From an accounting perspective, the accounting processes such as accounts payables, income statements, month-end processes, account receivables, inventory management, and payroll processes can be included in the flowchart as part of the directions for determining the financial health of a business. This is a user-friendly way of documenting accounting processes to clients or other stakeholders, and it is an efficient human intervention that can be used for education and informational purposes.

This blog will provide a step-by-step guide to designing effective accounting process flowcharts. However, before going through the steps, let's elaborate on why the flowchart is needed.

Key Benefits for Accounting Departments:

• Visual Representation: Visual images catch the attention of many compared to written materials, which can be tiresome to go through, and many people might not read through all the information. Additionally, despite reading through the written materials, it does not guarantee the other person's ability to understand the information contained. However, flowcharts provide a clear visual representation (tools for diagramming) of complex processes, making them easier to understand and follow. Even if one is not knowledgeable on the topic, the diagrams give them an idea, and with an informed person explaining, it can be easy to grasp the important points.
• Process Improvement: They help identify inefficiencies, redundancies, and bottlenecks in existing processes, paving the way for optimization. This is especially beneficial for conducting internal audits, can help solve accounting process issues, and offers firm growth tips.
• Training and Onboarding: When it comes to the recruitment process, efficient training and onboarding of the new recruits ensures that everyone is on board with company regulations and understands their roles and responsibilities. The use of a flow chart to direct the recruits about their roles and responsibilities is an effective way, as the flowchart is detailed in explaining their stations, the tasks expected of them, and who they need to report to. From an accounting perspective, flowcharts serve as excellent tool training materials for new employees, helping them quickly grasp accounting procedures with little manual effort.
• Documentation and Auditing: They provide valuable documentation for internal controls, audits, and compliance purposes. This creates an audit trail on financial statements, balance sheets, and accounts payable, where stakeholders can track accounting processes. Hence, flowcharts are responsible for detailing the workflow process of all the employees under the different departments.
• Communication and Collaboration: They facilitate communication and collaboration between different departments and team members. The accounting teams can use the accounting flowchart to communicate with clients who might otherwise not understand complex accounting procedures and financial processes.

Key Components of an Accounting Process Flowchart

Before diving into the design process, it's important to know and understand the basic symbols used in creating an effective flowcharts:

• Oval (Start/End): This shape represents the beginning or end of a process.
• Rectangle (Process): The rectangle symbol represents a specific action or task that needs to be completed.
• Diamond (Decision): This shape represents a decision point with multiple possible outcomes (e.g., Yes/No). Under this outcome, another diamond shape can explain the reason for the above decision.
• Arrow (Flow): The arrow connects the symbols and shows the direction of the process.
• Parallelogram (Input/Output): Represents data entering or leaving the process (e.g., receiving an invoice, generating a report).
• Document (Document): Represents a physical or electronic document.

Now let us analyze each step:

Step 1: Define the Process

The accounting team needs to determine the specific accounting process to use in the flowchart. This can be the combination of income expense accounts, account payables, month-end close, or account receivables. The purpose should be to create end-of-year financial statements that will be used to make informed decisions. This is the overall objective for having the flowchart. Clearly defining the goal will help you focus on the necessary steps and elements.

Step 2: Gathering Information

Information relevant to the flowchart needs to be collected. This information can be used to develop the flowchart components. Information can be gathered from departments, where each department's tasks are mentioned, the input and output of each task, those handling the task, the time frame of the tasks in real-time, and the documents involved.

Step 3: Identify Key Accounting Processes

It is important to list the main activities that will be involved in the accounting processes. These processes can range from payment processing, journal entries, invoice processing, bank reconciliation, financial reporting, and expense management. Each process needs to be broken down into specific tasks and in export formats. This makes it easy to share with other stakeholders related to the business.

Step 4. Determine the Flowchart Symbols or Templates to use

There are a variety of flowchart symbols and types of diagrams that can be used in the creation of the accounting process flowchart. These include ovals, which denote the start and end of processes, arrows for direction, or a parallelogram diagram that can indicate input, output, or a data entry point.

Step 5: Choosing a Suitable Flowcharting Tool

There are various flowchart tools and designs on the market. They range from payable process flowcharts to manual task input flowcharts, which the accounting team can create from Microsoft Word or PowerPoint. The accounting team might need to work with accounting software to develop flowcharts, such as Lucidchart, Microsoft Visio, and Draw.io. Some of the mentioned programs, such as Lucidchart, are cloud-based programs that can be assessed online by several users, making collaboration with stakeholders to discuss account records such as financial transactions easy.

Step 6: Mapping out the Process Flow

After identifying the key processes, the accounting team can now create a progressive flow of tasks. Start with the initial step and follow through with each task until the last step. At decision points, split the flow to show different outcomes based on accounting conditions.

Here is an example of a process flow. The accounting process is the accounts payable process.

1. Start: At this stage, the vendor invoice is received.
2. Verify: At this stage, the accounting team will need to check for details, which helps to reduce the risk of errors.
3. Decision: If the information is correct at this stage, the invoice can be approved for payment. Incorrect invoice statements are returned for correction.
4. Record: The approved invoice is logged into the accounting system.
5. Payment: Complete the payment process to the vendor. This can be done electronically, by signing a check, or in cash. It is important to state the mode of payment being used.
6. End: Close the process and get the needed confirmation that it has been completed successfully. This can be in the form of a signature. The confirmation also enhances accountability and can help when records need to be confirmed.

Step 7: Incorporate Roles and Responsibilities

Every Accounting team member has definite roles and responsibilities. Among many other roles and responsibilities, some are responsible for signing approvals for payments, those who check transactions, and those who audit a firm's activity. This aspect should be taken into consideration when developing an accounting processes flowchart. The members' roles can be indicated in the flowchart for easy identification of who is in charge and their exact roles. Indicating their roles also helps to check for accountability, determining those who are keen on their tasks and those who compromise their roles, leading to loss to the operations. Incorporating roles and responsibilities also helps develop efficient project management and meet the client's expectations.

Step 8: Where Applicable Timing and Frequency Should be Included

Time or the frequency of the accounting process should be incorporated into the flowchart to help track time changes. The frequency can be daily or monthly. Assigning time and frequency to projects also helps create timelines for every task the company does based on previous projects.

Step 9: Use Clear and Brief Language

The use of simple language that is easy to understand is important in ensuring that users can understand the information presented in the accounting processes flowchart despite understanding some of the complex terms associated with accounting.

Step 10: Endorse and Test the Flow Chart

At this juncture, the flowchart is presented to all the stakeholders involved for review. Those responsible will have the opportunity to test the flowchart and determine if every process is seamless and meets the set objectives. Logically, the process should flow smoothly, and every task involved in the accounting process should be documented. The tests will allow the accounting team to detect any inefficiencies in the process, giving them the ability to change and make corrections to the process.

Step 11: Revise and Improve

As expected of any new integration to the process, there can be positive or negative feedback. This should not be an indication that the accounting process's flowchart is a failure but rather an opportunity to improve and meet the expectations of all associated stakeholders. The analysis and review of feedback should be carried out often, depending on the need to improve the system and updates to accounting processes and procedures or changes in tasks.

Step 12: Document and Share the Flowchart

Once the flowchart has been finalized and approved by the accounting board/team and the client, it needs to be documented before any recommendations are incorporated. A centralized interface should be selected to store the flowchart. All member's purview to the data will be allowed shared access so that changes and updates can be made whenever necessary.

This concludes the step-by-step guide to designing an accounting processes flowchart. However, we should also consider the tips for creating a flowchart.

Important Tips on how to Create a Flowchart

Keep it Simple

Avoid complex flowcharts, which only create confusion. Many stakeholders might not have the time or know-how to understand the finer details of certain programs. Avoid overcrowding the chart with many details; if necessary, one can create another chart that can further elaborate on the details.

Use Color Concepts

Colors can capture people's attention and make them easy to remember. Thus, it is recommended that flowchart designers incorporate color into their designs.

Keep it Consistent

Ensure the flow moves from top to bottom or right to left for better understanding. This is related to developing simple and understandable flowcharts.

Consider all the Stakeholders

When designing an accounting processes flowchart, the team responsible should take into consideration all the stakeholders involved. Their needs, perceptions of the process, and expected goals should be considered. This will work to ensure that the overall objectives are met.

How Xenett Incorporates Accounting Processes Flowchart to its Operations

• Xenett focuses on managing accounting processes, such as the month-end close, rather than directly performing all the accounting functions. This facilitates clients' easy understanding of the process.
• Xenett's use of flowcharts ensures efficiency in workflow automation, task management, review and sign-off, and integration with accounting software.
• The flowchart highlights how Xenett helps organize and control the various steps involved in the month-end close, promoting efficiency and accuracy.

Conclusion

By following these steps and best practices, you can create effective accounting process flowcharts that will improve efficiency, communication, and control within your organization. These flowcharts become valuable tools for training, documentation, and continuous process improvement, making it easy to comprehend the accounting processes even if one is not knowledgeable in accounting.