Delivering quality accounting services: are your accounting services giving maximum help to your...

Most of an organization's accounting resources usually are devoted to providing services to other members of the organization. Managers and other employees throughout the firm rely on accounting as their primary source of information services. Management accounting service providers, however,

in order to provide the right services to their customers, need to understand whether their perspectives on accounting services differ from the users' perspectives and, if so, how. By asking accounting service providers and users a few simple questions, management can learn a great deal about the satisfaction level of accounting's internal customers and how accounting services might be improved.

Successful companies place customer satisfaction at the top of their list of priorities. Customers expect value, high quality, and low cost, and suppliers strive to provide customers with what they want. Organizations can apply a customer service focus to the delivery of internal services, such as accounting, to great benefit.

Unfortunately, the work of management accountants remains a mystery to most of its customers. The efficiency and effectiveness of accounting services, as well as customer satisfaction, are largely unknown in most organizations except for the occasional word-of-mouth communication. Few top managers are familiar with the range of accounting services provided by their organization and, as a result, the accountant's work may not be closely scrutinized. Top management tends to focus on the legal and regulatory requirements of accounting, so if problems are not brought to management's attention, there is little motivation for management to analyze the accounting function more closely. This state of affairs may mean that the information needs of accounting's internal customers are not being met.

In order to obtain objective views about the quality of accounting services, accounting management may use external consultants or independent internal evaluations. By following the steps described in this article, firms can improve management accounting services and achieve a number of benefits, including improved management of the accounting function, more effective allocation of accounting resources, improved communications between providers and users, and higher service quality and customer satisfaction levels.

QUALITY ACCOUNTING SERVICES AND THE ACCOUNTING SERVICE DELIVERY GAP

Value, fitness for use, and excellence are all accepted definitions of quality. Traditionally, these definitions are associated with tangible products, while accounting is primarily an information service. The quality of information may be measured by accuracy, completeness, relevance, and timeliness. Service industry commentators and scholars judge the only appropriate definition of quality as meeting or exceeding the expectations of customers.

Quality accounting services are those that customers use frequently and consider important in carrying out their work. The result of quality service delivery is a high level of customer satisfaction. In turn, satisfied information customers are likely to view quality information as important and frequently used. If providers and users are on the same page so that there is a good match between the delivered service and internal customers' expectations, decision making will be timelier and more accurate. This congruence can result in significant strategic advantages to the organization.

To date, we know very little about the level of agreement on service quality between accounting service providers and users. It is important to examine both perspectives for several reasons. First, the quality of any service, although ultimately determined by the customer, is the product of provider efforts based on perceptions of user expectations. Second, accounting service outputs are frequently based on technical concepts and techniques that users may not completely understand, which may influence the users' perceptions of quality and satisfaction. Finally, perceptions of accounting service quality are likely influenced by both informal factors (the accounting function's status and reputation within the organization) and objective criteria (e.g., the education, experience, and professional certification of accounting service providers).

Customers of accounting services form their opinions about accounting from a number of sources, such as word of mouth, familiarity with the accounting function, and past experience. Although accounting services should be designed to meet customer requirements, the lack of a mutual understanding of provider capabilities vs. user needs, along with poor communication, may hinder these efforts. The result may be a gap between providers' and users' definitions and expectations of accounting service quality. Figure 1 illustrates this "provider-user gap."

[FIGURE 1 OMITTED]

HOW TO EVALUATE THE QUALITY OF YOUR ACCOUNTING SERVICES

We conducted a study of the accounting services in a large electricity production company at management's request. Management wanted to evaluate the efficiency and effectiveness of the accounting function. In order to accomplish this task, we established with management two primary objectives, which were investigated in two stages. The first objective was to review the resources used in accounting. In this step we detailed the activities of accounting and the personnel time allocated to each activity. The second objective was to assess the effectiveness of accounting activities by collecting information from both accountants and user groups concerning the frequency, importance, and satisfaction with the delivery (providers) and use (users) of specific services provided by the accounting group.

The company employs approximately 2,300 individuals organized into four divisions of 400-600 workers. An additional 200 individuals work at corporate headquarters. Headquarters is responsible for coordinating corporate reporting activities, planning, and providing advice to the four divisions. A partial organization structure of the company appears in Figure 2. Staff at all locations are organized into four support functions: operations, accounting, human resources, and engineering. At the corporate headquarters office, a corporate support director (CSD) heads each function and reports to the general manager. Support personnel have a direct reporting relationship to the division managers and dotted-line responsibility to the CSD. The general manager and other top-level executives, including the controller and vice president-finance, report to the CEO.

[FIGURE 2 OMITTED]

The company employs approximately 85 individuals in the accounting function at the four divisions and corporate headquarters. Figure 3 shows the organization structure of the accounting function.

[FIGURE 3 OMITTED]

The first step in the review was to compile a comprehensive list of accounting services. We interviewed a wide range of managers and staff in order to identify the functions and terminology common to the organization. Based on these interviews, we compiled a list of 11 specific accounting activities within the organization. Members of the organization reviewed the list for completeness and accuracy. This review also ensured that there was consistency in the definition and scope of accounting services between providers and users across all locations.

Using a list of services, we developed a questionnaire for accounting users and providers. We circulated the questionnaire to all budget managers (users of accounting services) and all accounting personnel. We asked respondents to indicate:

* The frequency of provision/use of the top five of the 11 major categories of accounting services;

* The relative importance of the top five accounting services provided/used;

* The level of satisfaction with the selected accounting services, measured on a five-point scale (1 = "very unsatisfied" to 5 = "very satisfied");

* Other specific accounting services with which they were very satisfied or unsatisfied, and the reason(s) for their (dis)satisfaction;

* Their perceptions of how efficiently accounting services were conducted; and

* Any additional services that they believed accounting should provide.

Accounting management also asked all accounting staff to estimate how much time they had spent during the past year on each function. Some accounting groups maintained time records as a matter of course, thus improving the results of this exercise. This enabled us to analyze time spent on accounting functions by members of the accounting organization. This list, along with corresponding accumulated time allocations of accounting personnel, appears in Table 1.

For the final phase of the study, we interviewed 159 employees individually or in small groups. These interviews represented a cross-section of providers and users of accounting services. Five interviewees were from corporate headquarters, 46 were providers of accounting services, and 108 were users of accounting services. We sent questionnaires to each interviewee in advance of the interview session to focus their thinking on accounting services.

QUESTIONNAIRE RESULTS

Table 2 compares user and provider responses to the question of the most important accounting services. Users and providers differed significantly in their rankings of the most important accounting service. Users believed planning was more important than providers did but rated routine accounting, systems and support, and accounting management as less important compared to providers.

A summary of the frequency rankings appears in Table 3. Users and providers differed significantly in their rankings for the first and fifth most frequently used accounting services. Users of accounting services ranked routine accounting, training, systems and support, and accounting management services significantly lower in perceived frequency of use compared to providers.

Table 4 summarizes responses to the question on satisfaction with accounting services. For 10 of the 11 services, users indicated lower satisfaction levels than providers. These differences were statistically significant for five services: planning, routine accounting, management reporting, training, and systems support.

We also compared the importance and frequency rankings of staff employees with supervisors for both providers and users. Among the results based on level, we found:

* Accounting staff ranked the importance and frequency of planning and management reporting services lower than users.

* Accounting staff believed that routine accounting and other accounting services were provided more frequently compared to the views of users.

* Accounting managers ranked the importance and frequency of accounting management services higher compared to users and accounting staff.

* Accounting managers believed training services were provided more frequently than user perceptions.

INTERVIEWS IDENTIFY DIFFERENCES

The questionnaire results provided a starting point to identify areas where the views of accountants and their customers differ. These differences were explored in greater depth through the interview process.

Management at this company learned useful information from the interviews that supported the results of the questionnaire and led to improvements in the services provided by management accountants. First, the interviews revealed that accountants and budget managers had very different understandings about the budget as it relates to measuring performance. Budget managers generally viewed budgets--based on how accounting carried out the process and the resulting reports received during the year--as an end rather than a means to achieve organizational objectives. In particular, budget managers felt they had incentives to spend the full budget in order to avoid the need to explain variances, whether favorable or unfavorable.

A significant number of interviewees expressed strong concerns over the organization of the budgeting process, its timing, coordination of budgets to achieve goal congruence in the organization, and a lack of medium-term budgets. In addition, budget managers felt that budgets lacked flexibility to serve as a good management tool for planning and achieving desired outcomes.

Upper-level managers were generally satisfied with management accounting reports, but there was a widespread belief among lower-level managers that the format of budget reports were intended primarily for those at higher levels. There was a strong perception that reports did not focus on the information that would assist managers in making better decisions at each level. While budget managers felt strong ownership of their budgets, this feeling did not extend to the content of management reports containing the budget.

A majority of users felt that part of the chart of accounts had little relevance for lower-level managers. Lower-level managers believed that codes designed to track the costs of certain activities were in place to satisfy managers one or two levels above them. The codes were not viewed as useful for monitoring or controlling expenditures, nor were they aligned well with activities for business planning or achievement of personal objectives.

The interviews revealed an urgent need to provide accounting and systems training to nonaccountants. Many budget managers had been promoted through the ranks of technicians and engineers, and these managers reported feeling overwhelmed by accounting terminology, budgeting procedures, and accounting processes. They also lacked a good understanding of the accounting system and procedures for investigating accounting-related questions in reports. Line managers at different levels also expressed a strong desire to receive training to improve their knowledge about the company's accounting system.

Finally, some important problems were uncovered with accounting management. From the perspective of accountants, not enough time was spent on the management of personnel. Accounting management efforts in planning and monitoring performance, resolving personnel conflicts, and identifying areas for improvement were inconsistent. In some places, appraisals were behind schedule. Some members of accounting management were spending too much time as technical specialists to the detriment of team building. Communication was found to be an area of concern between accounting management and both accounting staff and nonaccounting customers. In both relationships, management needed to devote more effort to explaining why in addition to how activities are conducted. A more consultative approach, rather than dictatorial, was suggested by some line managers. The level of support and advice given by accounting management to budget managers varied extensively, while budget managers spoke of the need for accounting managers to make more time available to help them establish objectives, plan, make better decisions, and "know the customers' business better."

ACTIONS TAKEN TO IMPROVE ACCOUNTING SERVICE QUALITY

The company and accounting department took several actions in response to the outcomes of this investigation. Management realized several benefits that improved the quality of accounting services and the deployment of accounting resources, including:

1. Allocation of more resources to management accounting functions. Financial accounting activities that were not benefiting lower-level management were reduced or eliminated.

2. Implementation of new training programs for budget managers and systems training for accounting staff.

3. Revision of the budgeting process to shorten the budget preparation cycle, improve communication of business planning parameters and targets in advance of annual planning, and increase coordination with longer-term business plans.

4. Development of a new portfolio of company performance indicators designed to have maximum relevance to each level of management.

5. Revision of the chart of accounts to eliminate codes that were no longer relevant and introduction of an annual process to introduce codes that correspond to objectives and performance measures contained in the current business plan.

6. Reorientation of power station manager reports from an individual station view to a group-wide view.

7. Modification of the focus on resource consumption to emphasize net contribution for their areas of responsibility.

8. Launching of mandatory training for accounting function managers focused on developing personnel management skills and planning for the accounting function.

9. Introduction of training programs to improve user understanding of accounting services available.

ASK YOUR CUSTOMERS ABOUT YOUR SERVICES

The key to a successful management accounting function is high service quality, i.e., knowing what your customers need and delivering services that meet or exceed those needs. These results indicate that there may be differences in the viewpoints of accountants and accounting managers, suggesting a need to change certain aspects of accounting service delivery. The only way to find out what your customers think about the quality of your services is to ask them. A good way to get answers is by having an independent party ask objective questions and hold discussions with both accounting service providers and users. Such an exercise is likely to uncover misunderstandings and misperceptions that can lead to improved service quality. Improving quality may require action ranging from simple changes in communication methods to changes in resource commitments to selected services.

The results of our study conducted to evaluate the delivery of management accounting services suggest that while there were many areas of agreement between management accountants and users concerning the relative importance and satisfaction with accounting services, several areas of disagreement were identified. As a result of the differences of opinion that surfaced between management accountants and users, actions were initiated that led to higher quality management accounting services and more satisfied customers.

BY KENTON WALKER, PH.D., AND ERIC JOHNSON, PH.D., CMA, CPA, CISA

Kenton Walker, Ph.D., is professor of accounting, University of Wyoming, Laramie, Wyo. Kenton may be reached at (307) 766-3154 or kbwalk@uwyo.edu.

Eric Johnson, Ph.D., CMA, CPA, CISA, is associate professor of accounting, Kelley School of Business, Indiana University, Indianapolis, Ind. He may be contacted at (317) 274-5695 or erijohns@iu.edu.

Table 1: Accounting Time and Employee Resource Allocation

                                                 FULL-TIME
                                     AVERAGE     EQUIVALENT
                                    PERCENTAGE   EMPLOYEES
                                       TIME        (FTES)

Planning                               6.9          5.5
Routine Accounting                     48.2         38.4
Management Reporting                   13.0         10.4
Training                               3.9          3.1
Audit/Internal Control                 3.0          2.4
Accounting Systems and Support         3.1          2.6
Project Analysis/Special Studies       1.2          1.0
Land and Property Administration       3.0          2.4
Fixed Asset Management                 4.1          3.3
Other Services                         6.2          5.0
Accounting Management                  7.4          5.9
TOTAL                                 100.0%     80.0 FTEs

Table 2: Perceived Importance of Use/Provision of Accounting Services

RANK                                 1ST                    2ND

                              USERS     PROVIDERS   USERS     PROVIDERS
SERVICE                      (N = 97)   (N = 44)    (N = 91)   (N = 40)

 1.   Planning                  20          8          25          4
 2.   Routine Accounting        15         19          18          7
 3.   Management Reporting      43         10          33         15
 4.   Training                  6          --          2           2
 5.   Audit/Internal            --         --          2           3
        Control
 6.   Accounting Systems        --         --          1          --
        and Support
 7.   Project Analysis          --          2          1           1
 8.   Land and Property         1           1          2          --
        Administration
 9.   Fixed Asset               1           1          3           1
        Management
10.   Other Services            2          --          1           3
11.   Accounting                1          --          1           3
        Management
      No response               16          5          16          7
      Chi-square                    22.722                  15.882
      df                               9                      11
      P-value                         .007                   .146

RANK                                 3RD                    4TH

                             USERS     PROVIDERS    USERS     PROVIDERS
SERVICE                      (N = 82)   (N = 36)    (N = 60)   (N = 33)

 1.   Planning                  14          5          7           5
 2.   Routine Accounting        16          5          5           3
 3.   Management Reporting      19          7          5           3
 4.   Training                  6           2          5           4
 5.   Audit/Internal            3           3          8           4
        Control
 6.   Accounting Systems        1          --          --         --
        and Support
 7.   Project Analysis          2           2          2           3
 8.   Land and Property         6           1          5           1
        Administration
 9.   Fixed Asset               2           2          6           2
        Management
10.   Other Services            8           2          8           2
11.   Accounting                2           1          3           1
        Management
      No response               26         16          51         18
      Chi-square                   10.773                  4.911
      df                              11                     10
      P-value                        .462                   .897

RANK                                 5TH

                              USERS     PROVIDERS
SERVICE                      (N = 16)   (N = 19)

 1.   Planning                  1           1
 2.   Routine Accounting        1           1
 3.   Management Reporting      2          --
 4.   Training                  4           9
 5.   Audit/Internal            1           2
        Control
 6.   Accounting Systems        --         --
        and Support
 7.   Project Analysis          1          --
 8.   Land and Property         2          --
        Administration
 9.   Fixed Asset               --          2
        Management
10.   Other Services            3           2
11.   Accounting                1          --
        Management
      No response               89         29
      Chi-square                   12.290
      df                              10
      P-value                        .266

Table 3: Perceived Importance of Use/Provision of Accounting Services

RANK                                 1ST                    2ND

                             USERS      PROVIDERS   USERS     PROVIDERS
SERVICE                      (N = 97)   (N = 46)    (N = 91)   (N = 43)

 1.   Planning                  12          6          18          7
 2.   Routine Accounting        22         23          23          9
 3.   Management Reporting      51          8          31         13
 4.   Training                  --         --          --          1
 5.   Audit/Internal            --         --          3           -
        Control
 6.   Accounting Systems        --         --          --         --
        and Support
 7.   Project Analysis          --          3          1           1
 8.   Land and Property         --          1          3          --
        Administration
 9.   Fixed Asset               1           1          2           3
10.     Management
11.   Other Services            2          --          4           2
      Accounting                4          --          1           5
        Management
      No response               8           4          19          5
      Chi-square                    28.968                 14.860
      df                               8                      10
      P-value                        <.001                   .137

RANK                                 3RD                    4TH

                             USERS      PROVIDERS   USERS     PROVIDERS
SERVICE                      (N = 75)   (N = 39)    (N = 53)   (N = 33)

 1.   Planning                  13          3          7           3
 2.   Routine Accounting        13          5          3           6
 3.   Management Reporting      17         13          6           4
 4.   Training                  3           2          6           6
 5.   Audit/Internal            3           4          3           5
        Control
 6.   Accounting Systems        --         --          --         --
        and Support
 7.   Project Analysis          6           3          1           2
 8.   Land and Property         5          --          4           1
        Administration
 9.   Fixed Asset               4           1          6           1
10.     Management
11.   Other Services            5           3          9          --
      Accounting                3           2          3           1
        Management
      No response               33         10          57         17
      Chi-square                    8.679                  15.503
      df                              10                      10
      P-value                        .563                    .115

RANK                                 5TH

                              USERS     PROVIDERS
SERVICE                       (N = 8)    (N = 24)

 1.   Planning                  2           1
 2.   Routine Accounting        1           1
 3.   Management Reporting      3           8
 4.   Training                  --         --
 5.   Audit/Internal            --         --
        Control
 6.   Accounting Systems        --         --
        and Support
 7.   Project Analysis          --          2
 8.   Land and Property         1           1
        Administration
 9.   Fixed Asset               --          4
10.     Management
11.   Other Services            1           5
      Accounting                --         --
        Management
      No response               97         24
      Chi-square                   18.222
      df                              8
      P-value                        .020

Table 4: Mean Rankings of Average Perceived Satisfaction by Service
Type

                            MEAN (SD)

SERVICE                USERS    PROVIDERS   DIFF.     t     SIG. OF t

 1.   Planning          3.01      3.61
                       (1.14)    (0.94)
                       n = 66    n = 23     -0.60   -2.26    .026

 2.   Routine           3.59      4.11
      Accounting       (0.66)    (0.55)
                       n = 60    n = 37     -0.51   -3.34    .001

 3.   Management        3.22      3.85
      Reporting        (1.07)    (0.82)
                       n = 88    n = 34     -0.63   -3.51    .001

 4.   Training          2.31      3.13
                       (1.18)    (0.81)
                       n = 24    n = 19     -0.82   -2.69    .010

 5.   Audit/Internal    3.5       3.55
      Control          (1.02)    (1.13)
                       n = 16    n = 11     -0.05   -0.11    .914

 6.   Accounting        2.33      3.73
      Systems and      (1.00)    (0.79)
      Support          n = 9     n = 11     -1.40   -3.49    .003

 7.   Project           2.88      3.33
      Analysis         (0.79)    (0.58)
                       n = 20     n = 3     -0.45   -0.96    .350

 8.   Land and          3.49      3.71
      Property         (0.77)    (0.81)
      Administration   n = 12    n = 12     -0.22   -0.69    .498

 9.   Fixed Asset       3.31      3.68
      Management       (1.04)    (0.96)
                       n = 30    n = 11     -0.37   -1.02    .315

10.   Other Services    4.23      4.14
                       (0.78)    (0.63)
                       n = 10     n = 7     0.09    0.25     .803

11.   Accounting        3.29      3.50
      Management       (1.07)    (0.94)
                       n = 19    n = 18     -0.21   -0.63    .530