Accounting Nervous System
Our nervous system operates the same as an electrical schematic, or in this case, Chart of Accounts directives. One entry is made, then a ripple effect of events occurs. Between the entry and the result is communication.
Does your organization have a seamless electrical schematic or Standard Operating Procedures?
There are three major functions to your nervous system, just as there is with your accounting system.
Sensory Input: Transactional
The ability of a professional to determine the source and outlier of information received is best explained by the interpreted input sensory system. It determines what the next course of action should be taken, what it affects and what response is required.
If the source of the information is accurate, but the system’s functional response is faulty, there is a domino effect that will impact your owners, vendors, tenants and most certainly your organization.
Example: Utility deposit refund received for a property that was temporarily vacant.
Integration: Chart of Account Allocation
The integration level of accounting, or primary function of the nervous system, is the control of information. Circling back to the Accounting Skeletal Structure blog regarding the Chart of Accounts, this is the nervous system’s framework to route the information to the appropriate response.
What does the right hand say to the left? Imagine for a moment that you had a fork in both of your hands and were trying to feed yourself. Let’s just say, I hope you’re wearing a bib.
Example: Method as of which the funds are recorded in the database.
Motor Output: Reporting
Initiate the combination of the two previous functions to determine the appropriate output. Establishing standard operating procedures and directives will help, if not cure, the miscommunication between all parties involved.
If there is a failure in communication throughout the functions, there will be a system failure. Maybe not immediate, but could result in long-term effects causing irreversible damage such as loss of a client, staff, and in this digital age, your reputation.
Every point in your business affects accounting. Payroll, business expenses, revenue, etc. The accounting functionality of your business is dependent on how you communicate internally and externally. Whether your communication is poor or effective, this will affect your business’ bottom line.
Example: How do the funds appear on the year-end report.
Four Main Nervous System Operations
Control of internal processes
Our nervous system is set up to regulate our internal temperature. When we get a paper cut, our nervous system rushes to contusion and begins the healing process. Understandably, we wouldn’t want to sprinkle salt or lemon juice on the cut as this causes irritation and pain.
Same for accounting internal processes. Placing safe guards on your banking, email and user accounts are quick, sufficient protocols in which most functions end up working themselves out when the system is fully operational and set up correctly. But when an irritation interrupts the flow, pain is quickly followed.
Example: Bank fraud.
Program of spine reflexes
Oops! Someone sprinkled lemon juice on your paper cut! Now what? Do you have systems in place to allow for recovery? Do you have the know-how to assess the wound and take appropriate actions to apply salve, or more lemon juice?
Our recovery of such circumstances determines how well our internal nervous system is operating. The longer it takes to find a resolution could result in a misfire in communication. This translates to how professional your business is when communicating with personnel outside of your organization.
Here are some questions to ask yourself and your team: Are you paying vendors timely which encourages them to show up to the next job? Are you informing your owners of damage repair costs and approval process to eliminate you forking over the cash to pay the vendor for work that was not owner approved? Is the tenant made aware of upcoming maintenance that works well with their schedule? Do you have a point of contact professional for each department?
Example: Conducting a bank switch.
Memory, learning and evolving
In our line of work, it can take up to twelve months to learn the full inner workings of one database and establish system procedures. The ebb and flow, peak and low season of the market, economy and the client’s favored operations. Real estate, property management and trust accounting are continually evolving. Just like our bodies experience different seasons, eating struggles, health issues, it is also important to keep learning and adapting.
How many times have you encountered a situation where you remembered every aspect of it? If it was a bad experience, I bet you placed safeguards to prevent it from happening again. If it was an excellent experience, it may be something you added to your Standard Operating Procedures.
Personally, I enjoy roller skating. I typically take it easy as I fractured my elbow as a child; now keeping a safe distance from others, especially inexperienced skaters. In recent years I have upgraded my gear and my skills have improved progressively where I feel significantly more comfortable racing in my age group. I am a bit of an adrenaline junkie and try to push my body for improvement, aka go faster. One evening, I was faced with an immediate situation to either crash into the wall, wipe out another skater or attempt to use the wall to slow down. I chose the option to slow down by gripping the wall with my hands. Unfortunately, underestimating my speed, the force applied to my left arm by gripping the wall dislocated my left shoulder.
Survival mode kicked in for response and recovery: An ambulance ride, cracking jokes while under the influence of amazing pain medication, setting the shoulder back in place, physical therapy and short-term cautious movement.
As this may have created a set back from getting back into a pair of skates and on the floor, I learned a valuable lesson: I need to learn how to turn more effectively at higher speeds.
How can you improve from past experiences at a higher success rate?
Example: Use of eCheck and ACH disbursements instead of paper checks.
Voluntary control of movement
In other words, self-control. We always come across that one client who is high-maintenance or boasts that they’re an expert in your field. Typically, this type of owner prefers favoritism. Your control can come into play by presenting any complications beforehand to show them that we have their best interest in the forefront of managing their funds and assets. You never know, they may relax a bit.
Example: Two-factor authentication approval process.
Conditions & Disorders
As it so happens, the most common nervous system disorder is a headache. Fortunately, headaches are quickly resolved with several different methods, depending on the individual. I am sure you have come across a property, a vendor, an owner or a tenant that has created a headache for you, which stemmed from some sort of communication, or lack thereof. This form of miscommunication can cause loss of feeling, sight, muscle weakness and impaired mental ability. What does that mean for your organization and how do you believe it is best repaired?
I am sure we can all agree that the most unwanted headache is an audit from a government agency. In some cases, the result of an audit can bring on more severe disorders, such as losing the ability to operate as a business temporarily, or even permanently. Your nervous system just experienced a seizure or a stroke.
Nervous System Structural Health
Preparedness and risk assessment. Error! Error! Does not compute! Our nervous system operates seamlessly when it is functioning properly. However, if there is one snag, a fuse out, a missed call, this could potentially throw off the entire system of operations. Unfortunately, we can’t press the “ESC” button to revert; there is a demand for attention in order to rectify the damage.
If you felt something was off with your physical nervous system, you would want to speak with a physician who specializes in the field and perhaps is considered an expert by their peers. We recommend that you do the same when seeking out an expert in the trust accounting field. Someone who has years of experience, is known to not only perform exceptionally, but can also educate others in the same field.
We encourage you to establish Standard Operating Procedures. The communication internally and externally is a direct connection to your business’ success. When you interview new talent, you want to make sure they are a good fit with your business model and goal. The same application could be used when interviewing experts, as they are not all created equal or meld well with your business model.
Consider seeking experts in the following fields:
Certified Public Accountants: Schedule E and business tax preparation and Real Estate tax laws
Attorneys: Eviction, Real Estate laws in yours and surrounding states
Trust Accountants: Ability to collaborate between the two above and your staff
Mentor: An individual who wisely advises your operations with action strategies and encourages accountability.
You wouldn’t want your maintenance tech preparing the lease agreement, and you wouldn’t want your agent doing electrical work. With that, you need to have experts in their field standing by.
SFL K.I.S.S. Protocols
The purpose behind the cute child-accounting images that are used on our website is because we believe that if we can simplify the accounting process that is easy enough for a child to understand, then we are all successful. This is the approach we use when training new staff to manage client databases. We encourage insight, ingenuity, efficiency and integrity. We understand that everyone learns differently, but we strive to produce the same ending result: the accounting is done correctly and the clients are happy. SFL’s Keep Is Simple and Straightforward protocol is interwoven between our staff and our clients.
Continuity leads to cohesion.
“If you can’t explain it to a six year old, you don’t understand it yourself.” -Albert Einstein