Turn it on, again
29 Jun 09
Even in a downturn there may be good reason to invest in upgrading your financial management system
by Robert Outram
Why should cash-strapped companies even think about investing in new IT right now for their financial management and accounting systems? What kind of visible benefits should they be looking for?
Alistair O’Reilly, group managing director with software company Access, says: “In a recession, cash disappears; customers stop paying so quickly and sometimes go into administration. At that point, there is a very real need for cashflow and cost control to be strictly managed; however, this is when weaknesses and shortfalls in existing financial management systems become apparent.”
He adds: “Management and the board require real-time responses to myriad different questions such as: who owes us the most money and what is their credit rating?; how many debtors do we have over 60 days?; why are the customers who have placed orders on stop?; what is our most profitable stock?; what is the comparative cash benefit or deficit selling this item verses another?; what is the cost/sales ratio of this department compared to another?; or what is the gross margin per chargeable staff?
“If the financial management system cannot deliver this detail, it’s time for it to be replaced.”
For Alan Quinn, managing director, Castle Computer Services, moving to an up-to-date system with greater sophistication and functionality, such as Microsoft Dynamics NAV or Infor’s SunSystems, is well worth it if it delivers greater efficiency for the user.
Quinn says: “We are seeing many businesses focusing more than ever before on tracking project and contract costs versus budgets, which is only possible with the detailed real-time information that an up-to-date financial management system can provide, once it is integrated with other key business systems.
“Financial management software also needs to integrate with the rest of the IT infrastructure to ensure efficiencies can be gained from e-purchasing and the increased sales that will be delivered by outbound telesales systems and online trading portals.”
“It’s natural to see a new financial management system as a cost, but the reality for most is that it is a genuine investment that can drive sales, deliver visible efficiency benefits and a measurable return.”
Jairo Rojas, director general of the Business Application Software Developers Association (BASDA) says: “With today’s fully-integrated business systems, you can instantaneously access critical data that provides a complete and up-to-the-minute view of your business – so you can respond to customers faster and grow your business more profitably. Sales representatives can view the complete customer record, including service issues, billing issues and more. Warehouse managers can instantly view approved sales orders on their ‘dashboards’, and accounting personnel are able to view support issues when calling customers to collect payments.”
Neil Deakin is commercial partner manager with Validis, a BASDA member business. He says: “It is not necessarily the case that all businesses should be investing in a new core accounting system, but they should be making the most of the system they have already got in place, by investing in value-adding technology services.”
For example, Deakin says instead of just using financial software essentially for statutory compliance purposes, businesses should be using it to:
• guide their business decisions and strategy more effectively, accurately and in a timely way, and
• control their relationships with the businesses they interact with from both a supplier, buyer and financing perspective.
Also, he says, businesses need full verification that the information their clients need to supply on a monthly basis to banks and other finance providers is reliable. Deakin says his company’s offering, Validis, together with the new Graydon Enhanced Credit Information Service, validates and analyses business accounts before generating detailed management information that can automatically be submitted in a standardised, summarised format to external trading partners and providers of credit and finance simultaneously. This means requests are dealt with once and once only.
Another reason to upgrade creaking financial systems is that all businesses will soon need to be ready to meet the demands of electronic filing for both HMRC and Companies House. Deakin says: “This is likely to lead to the end of pen and paper or spreadsheet accounting.”
Bryan Richter country manager of Mamut UK says that IT purchasers should look for a general rise in productivity: “If a company chooses poorly performing software, a lot of productive time is wasted on troubleshooting, robbing the IT department of time which could be spent on delivering innovation in more strategic areas. In terms of less quantifiable benefits, decision makers should ask frontline staff about their experiences with financial software – does it make their working day easier? Are tasks easier to execute? Often, this kind of feedback can prove invaluable when selecting software.”
Return on investment is crucial, stresses Simon Kearsley, CEO at accounting software vendor bluQube. He adds: “The more frustrated organisations are with their current finance systems, the faster the returns are likely to be. In some cases, savings can be almost immediate because of the labour-intensive nature of the previous finance package. For example, many finance personnel spend several days each month compiling reports and manipulating spreadsheets, when much of this could be easily automated.
“The other consideration is whether your system is equipped to manage new growth once the economy improves. If you can get your finances in order now then it will give you that edge over the competition when business picks up.”
Grant Roy, managing director, Shackleton Technologies, says that there are still companies investing in new IT, downturn or no. He says: “Somewhat contrary to received wisdom, we have seen increased spend on financial software. In at least two cases, this has been against a backdrop of reducing headcount. It seems that the financial crisis has forced managers to reconsider the benefits of automation versus headcount.
Roy adds: “Recently, we installed a project accounting solution in a professional practice. The payback period was based on more productive use of the senior partner’s time. The company estimated that if the partners’ time could be spent on income generation rather than tedious data gathering and number crunching, to simply calculate fees and work in progress, the installation would pay for itself in less than one year.”
With an increasing focus on “green issues” – and awareness of energy costs – finding an application that can reduce waste and make your carbon footprint smaller is another reason to invest in IT.
Reinhardt Fuhrmann, sales & marketing director of Carbon Control Software says: “Our Care Taker suite of software applications can cut PC energy use without compromising end user or IT productivity. Care Taker reduces electrical consumption by 35 per cent – 68 per cent, depending on usage patterns.”
He adds: “This allows companies and users to focus on their business, confident that the software is optimising PC energy usage and reducing wastage day and night. Our aim was to develop a solution to carbon reduction that is cost efficient and, typically, the investment is returned in less than six months.”
Simon Crompton, managing director, CCH Software, advises taking a holistic view. He says: “Looking at software as a series of individual applications is counterproductive... it is ineffective to change different software tools one by one. Whether it’s producing letters in Word, filing client accounts, managing time or managing CRM [customer relationship management] software, it is essential to consider all applications in light of how they work towards the company’s long-term goals.”
Crompton also warns, however, that you should first make sure you’re getting the best out of the software that you currently use. He says: “Typically, it takes at least six months for any payback to be felt from new processes, and a knee-jerk reaction can lead to employees stumbling over a new way of doing the same jobs and three months later looking again for a better solution.”
As well as dissatisfaction with an existing system, there are more positive reasons to upgrade. Simon Cordier, a director in Ernst & Young’s financial management practice, says: “Why spend on IT? One reason is that there have been some great leaps forward in the marketplace. The development and consolidation of existing platforms has made a lot more functionality possible.
“For example, business performance management used to be niche, but now it is more integrated with traditional general ledger systems. ‘Transparency’ and ‘integration’ are the buzzwords today. Companies are awash with data, but what you need as a manager is information. The need to understand which product lines and operations are profitable is crucial, and this places tremendous stresses on traditional, ‘legacy’ architecture.”
Castle’s Alan Quinn says: “Historically, business intelligence software has been too costly for anyone but the larger enterprises. However, new solutions such as QliKView are bringing powerful applications into a price bracket that can deliver value traditionally reserved for large corporates to small and medium size organisations.”
Quinn adds that “software as a service” (SaaS) – where applications are remotely hosted rather than installed in the company itself – is another development that could tempt some businesses to invest. He says: “The demand for this is increasing as businesses start to understand the benefits, knowing that you don’t have to worry about hardware upgrades or continuity of service to users. We have recently invested in a high-security data centre which allows Castle to offer financial management applications as a service, while at the same time providing secure hosting to meet business continuity needs.”
Duane Jackson, founder and managing director, KashFlow Software, has based his business around a web-based approach. He says: “The low monthly cost of SaaS has other less obvious benefits beyond the reduced impact on cashflow and zero capital expenditure. As you’re usually in a monthly rolling contract with the vendor, they have to be delivering exceedingly good customer service to keep you as a customer.
“Compare this to the traditional model, where you pay a large amount upfront and it is easy to understand why many SaaS vendors work hard to keep customers happy by offering free and fast support.”
Still sounds too much to splash out? Cordier says that “tactical fixes” such as spreadsheet control applications might be an alternative to an expensive wholesale upgrade, but he warns: “There is no silver bullet. You won’t find one single application that will solve all your problems, but the true benefit is where you can achieve integration, for example, between finance and risk management.”
Triton awash with hot ideas to save time and money
Triton Showers is the UK brand leader in electric showers. The Nuneaton-based company employs 340 people, with a turnover of £50m.
Triton Showers were using a Payroll Bureau, ADP, to assist them in all their payroll needs – using a product called Surepay, a DOS-based system, installed in 2001.
In October 2007, Triton was given notice that the system was to be replaced with a Windows-based Payroll solution in 2009, so they decided to start looking at other options.
The incumbent bureau service was costing Triton approximately £20k a year, and the company was not happy that the server for the replacement product server was to be hosted overseas, in the US.
Nigel Pond, financial controller at Triton, opted for Pegasus Opera II Payroll and HR. As Pond explained, costs were becoming prohibitive: “Previously, with our in-house processing, we still required people to input the payroll information, time-sheets, absenteeism, bonus scheme details and so on. We were not saving on headcount, so it undermined the whole point of outsourcing our payroll to a bureau.”
Pond is impressed with XRL, the Excel reporting tool that was part of the Opera II package, which exports data straight from the payroll system into Microsoft Excel.
He adds: “If you can use Excel and Access (or other similar tool e.g. Microsoft Query), you can use XRL. Its ability to extract information from payroll along with a utility, written for us by our Pegasus Partner, Technology Management, enables us to update information, such as hours worked and individual bonus scheme details. This saves us many hours of work and the risk of human error is much reduced.”
He adds: “In this economic climate, controlling and reducing our costs is crucial. We will save over £10k a year using this system. The ROI [return on investment] is evident within the first year of installation. This, coupled with XRL, cemented the deal for us.
“If you are using a DOS-based payroll system, you are making life more complicated for yourself. You should migrate to a Windows-based application and save yourself a lot of time.”
About Hot Wheels
Hot Wheels International, a leading bicycle and skateboard distributor, invested in IRIS Exchequer in order to keep pace with the company’s expansion.
The distributor, which counts Halfords Group among its customers, has experienced 40 per cent growth following its expansion into the mountain bike sector.
Russell Merry, a partner at Hot Wheels International, says: “Our accounts manager has worked with many different packages over the years, but IRIS Exchequer is the only one which thinks like an accountant. This might seem obvious, but it’s amazing how difficult some packages can make it for you to find what you’re looking for quickly.”
The Paperless module processes invoices, purchase orders and statements in IRIS Exchequer and immediately sends them out via email, saving vast amounts of time and money. This is extremely valuable, Merry says, when speed of response is crucial to fulfil customer orders promptly.
“As our business grows, we’re relying more and more on these time-saving benefits,” he says.