There is a reason today why accounting for big business is so complex, tedious, and requires a large staff of people to manage; and you’d be surprised, it’s not because so many people are needed or because the work is too difficult; it is simply because most big businesses fail to utilize the tools available to them and are unable to maximize the efficiency and productivity that they can get out of such tools.
Over the years, I have consulted for several small businesses. Most of them were moving into that phase from a very mom-n-pop setup to becoming an established small business, where they were going to start implementing some formal accounting procedures, have proper policies, and were going to get organized because that it is what it would take for them to be able to keep up with the amount of business they were getting. It is worth saying that even in large businesses, it is the fallacy of management, as it is in some medium and small sized firms too, that each departmental head ends up treating his/her department like an individual business unit, and that’s a big deviation from what the goal originally was when any such department was setup. It is, therefore, imperative that businesses at all times keep in mind that the costs formal accounting, formal policy, statutory compliance, management accounting etc. are all overheads, and if they are not managed, they can seriously cut into the bottom line profit of any business.
So, why is there such a disconnect in accounting; costs are soaring high, compliance is becoming more and more difficult, and every year, the financial statements for public and private companies become more difficult to read and understand. You would think, that with all the state-of-the art software and information systems available to and affordable by such businesses, they can reduce the their costs, drive efficiency into their accounting policies and procedures, and efficiently produce GAAP, SOX or whatever-it-is-that-you-need-to compliant statements, and spend more time and resources simplifying the information for potential investor and outside parties with a vested interest. Of course, the latter doesn’t happen for a multitude of reasons, but we shall steer clear of that discussion. After all, the whole premise of this article is based on the Corporation not being evil, and what changes it needs to go through to harness the power of modern financial information systems.
There several ERP type solutions available to big business today. Oracle, JD Edwards (now owned by Oracle) and SAP are the three market leading ERP Solutions, and if they are used right, a big business can do wonders with it. The problem, however, is that just purchasing any of these solutions is not going to be enough. Hundreds and thousands of hours have to be spent on customizing and developing the blank platform that these solutions provide, and it is in this department that most big businesses fail.
You see, customizing JD Edwards, SAP or Oracle requires:
– Extensive Business Planning
- Serious Systems Analysis & Design Knowledge
- Minimum interference from IT Staff during these two phases
- Input and involvement of Accounting & Finance Staff
I have seen too many businesses that will purchase an expensive, fancy piece of software and pressure their IT Department to get it up and running in a week! It doesn’t work like that, and it will never work like that. Here is how, in a nutshell, an installation:
Once you’ve decided that your business is growing to the point where you need an extensive piece of software, it’s time to get your act together.
Map your business requirements, systems and workflows. This is absolutely the most important part of the process of implementing a massive information / financial system. If you don’t know where your data flows from, WHAT EXACTLY that data is, where it comes and from and where it will go, and how it is transformed from data to understandable information, you’ll never be able to utilize the software the way it was meant to be used. Most businesses that skip this entire process and take a “develop as you use/grow” approach toward customizing and evolving ERP software like JD Edwards or SAP will suffer massive problems, to the point where they will have so much legendary data of one sort, that they will end up hiring an extra person to manually manage every additional feature that they could have initially built into the financial information system.
Systems Analysis & Design. This is where your hardcore IT Department needs to stay out. Might I suggest that the purpose and goal of most IT Departments is to TECHNICALLY do and make possible what is asked of them, instead of taking on a more hands-on approach to changing processes to keep more control in their hands. You see, ultimately, the end user, who in this case is your accounting and finance staff, or sales staff, has to use the software, and the requirements should come from them, and should not be translated to what the IT Department thinks they are. That’s why you need a systems analyst, to map the business requirements with what is technologically feasible, and ultimately, what is more cost effective, letting IT have it their own way and hiring extra staff (and paying for the software), or just paying for the software and making do with existing staff? When I finished as a student and started my career, people used to laugh at the concept of a systems analyst, and the ultimate mockery of the system analyst profession was made of by the Computer Science geeks, most of who make up IT Departments. Although the culture has now changed, I cannot tell you how many gazillions of dollars this lack of analysis has cost Corporations around the globe. Somebody has to bridge the gap between business and technology, and I can assure you, your IT Department will never be able to do it.
Well, I’ve said enough about this, haven’t I?
Yes, please! These are the people who will be using your financial information system. They know what is needed, and they know WHY they need it too. So, when you buy software and develop it for them to use, shouldn’t they be the ones directing the development of such a software. I cannot believe how many businesses simply leave out the end user when planning on making big changes to their accounting and finance software systems, and to efficiently make such a change and plan for growth and more of this tedious accounting work, it would do good to solicit these users for advice before making the blunder and hiring 15 extra staff members!
Remember, the teams that design, implement and support need to be separate from each other, because if they’re not, the on single team will ultimately try to make it’s life easier and profitable in the long run. That means you’ll waste thousands on software, get crappy design, and will end up paying to hire people to do things manually. Might as well skip the ERP software purchase.
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