How Utilities Companies Can Make Efficient Accounting Changes During COVID-19

A version of this article was previously published in the July 2020 issue of Northwest Public Power Association Bulletin.

In the last several months, all businesses have seen substantial change as a result of the COVID-19 pandemic. From moving to a remote work environment to assessing the impact of unexpected circumstances, people and processes have been put through the test of change.

One of the most exciting and uplifting facts is that, on a whole, utilities companies have excelled. They have maintained service to customers, done their part to keep communities healthy, and adapted with relative ease. In uncertain times, unexpected, positive outcomes can arise.

However, these uncertain times also help identify areas that could use some process considerations, specifically within accounting departments. Below, we outline specific areas that could use oversight—and steps you can take to help your organization adapt to the current climate.

Identify inefficiencies and effectiveness in the remote work environment.

The first questions posed about a remote work environment are about processes and procedures. Are there employees who need to come into the office to complete their tasks? Are these employees coming in on a daily basis? 

It’s important to spend some time identifying if any processes are difficult or impossible to complete in a remote work environment. If the answer is yes, consider including a review of those specific processes in your goals for 2020. 

For example, one of the most difficult processes during this virtual time is the accounts payable function. The process is often paper-driven relying on supporting documentation—such as invoices and receiving reports— and manual signoffs or signatures to document review. 

Institute an electronic accounts payable review process.

Making the accounts payable function an electronic process is more efficient because it enables your company to route information more quickly. However, an electronic process does come with its own challenges. 

Many accounting systems have electronic approvals available within the system, but there are security, access, and documentation considerations that must be taken into account prior to using these functions. If your accounting system doesn’t have electronic approval built-in, this doesn’t mean it’s out of the question. 

Many utilities companies use emails or other electronic means as a method of approval; most have found this method is considerably more effective and efficient than a paper-based process. 

Another paper-based example is service orders. Many utilities companies print service orders for their crews. However, moving these service orders to an electronic system often results in increased efficiencies between scheduling, field crews, and back office support staff.

As a general rule, any paper-based process is worth assessing to see if it could be replaced by a more efficient and effective electronic option. 

Documentation is key to ongoing success and avoiding auditor issues.

Documentation of key internal controls helps ensure the validity of the control process. If a utility is moving to a more virtual experience, or controls have changed due to the pandemic, documentation will be extremely important. 

Documentation of controls proves to both management and external sources that key checks and balances are in place and working as intended. If controls have moved to an electronic process, there are additional security and access considerations that must be taken into account. Also, as information is being transmitted across electronic mediums, additional controls over validation of information may be necessary. 

One example is electronic invoices. Many vendors are set up to provide invoices electronically, and the company must have controls in place to ensure the validity of invoices and verification of any changes to vendor addresses or banking information. If electronic invoices are received, verifying that the billing address and information is consistent with the utilities accounting records is important.

Also, if any banking information is requested to be changed through electronic means, including emails or on invoices changes, a control to validate this information is necessary. This should be an independent verification of this information, such as a phone call to a key contact instead of a reply to the original email. Documentation of this verification, and management approval of key changes to vendors, is important as fraudulent behavior has been increasing since the beginning of the pandemic.

Take extra security and access precautions.

Accounting systems and processes have historically taken into account security and access. However, additional considerations are needed as processes become more electronic. For example, if email approval of invoices is now accepted, the utilities company must ensure it’s coming from the person responsible for the authorization.

In general, each person in the organization has an independent email account that is password protected. However, in many systems, a proxy account can be set up. For example, a manager could allow an assistant or other employee to view their emails or share certain responsibilities within the email account. If that assistant can send an email from the manager’s account, this has the potential of circumventing internal controls as it’s impossible to ensure the approval came from the person with the appropriate authorization. 

Consider cycle counting for inventory. 

Many utilities companies shut down their warehouses once a year and pull in large groups of employees throughout the organization to complete annual inventory counts over a period of several days. During the COVID-19 pandemic, it’s still uncertain when larger groups can gather in an isolated space. As a result, the effectiveness of annual physical inventory counts is top of mind. Many utilities companies are asking whether physical counts should still be required and trying to determine how the counts will look moving forward. 

A trend that already started and has proved effective is cycle counting, even though it takes additional work upfront by both accounting and warehouse staff. The first step is to classify inventory items into categories based on risk and determine the frequency of counting each category. For example, high risk items that are associated with a large dollar amount and critical to keep in supply) should be counted more frequently than low risk items which are less expensive and can be easily replaced; many low risk items only need to be counted annually.

Once this has been determined, a consistent amount of items should be counted each week, bi-weekly, or monthly. Cycle counting generally doesn’t require a shutdown of the warehouse, and warehouse staff can spread the counts throughout the year to increase efficiency. Also, the counts are smaller in quantity, so fewer people need to be present to complete the count.

Use video conferencing for proactive face-to-face discussions.

It’s become increasingly apparent that face-to-face discussions, as opposed to phone calls or emails, provide employees with a sense of connection and balance. Many utilities are considering permanent virtual working environments for some key positions. While these positions have proven the ability to work remotely, there has often been a decrease in connection between employees and management. The ability to ask questions and determine answers in an efficient and effective manner could help increase productivity in the accounting department.

Video messaging or Webex sessions can provide a significant uplift in attitude when employees are working from home. When questions need to be answered, having the ability to ask those questions through a quick video conversation engages employees and management and increases communication and collaboration in a virtual setting.

Encourage virtual learning opportunities.

Learning is also changing very rapidly. As large groups aren’t permitted during COVID-19, virtual delivery of information is necessary to stay on track with current events and continuing professional education requirements. Training can be developed in more efficient and effective ways. 

People tend to learn more efficiently when information is delivered in shorter segments and then reinforced through case studies and discussions. These case studies and discussion can still occur in virtual settings. If you are required to complete continuing education, be mindful of the different types of learning environments that are available and select both the duration and environment that best suits the learning style for your company. 

Embrace change.

In many areas, change was already occurring, but the COVID-19 pandemic increased the pace. Paper-based systems were being replaced by more efficient electronic systems, and key processes were being modernized. The pandemic has stressed the importance of our ability to keep workflow intact while our settings and environments have fundamentally shifted. 

The key to change, especially given the current environment, is staying flexible with one another while continuing to meet goals and objectives. Having a positive attitude and offering encouragement is essential to achieving ongoing success.

Taking a step back to recognize what changes have occurred and what changes still need to occur in the future will help your utilities company drive efficiency, make systems more secure, and help employees stay engaged and productive.

We’re Here to Help

If you have any questions about implementing accounting changes in your organization’s current processes, please contact your Moss Adams professional.

Note on COVID-19

During this unparalleled time, we’re closely monitoring the COVID-19 situation as it evolves so we can provide up-to-date guidance and support to help you combat uncertainty. For regulatory updates, strategies to help cope with subsequent risk, and possible steps to bolster your workforce and organization, please see the following resources: