Why You - And Your Clients - Need a Strategy For Your Accounting System

SYNOPSIS

An accounting system is more than a transaction repository. It’s a means of driving your business forward, providing you have a strategy in place to enable it.

The problems and implications leading from a lack of strategy apply whether your accounting system is entry level, mid-tier or an ERP solution. On premise or cloud based, it doesn’t matter.

PROBLEM

The problem is twofold :

• the Finance function is increasingly expected to provide strategic direction. It is more important than ever that the accounting system Finance uses provides insight to manage that expectation
• you have a Business Plan in place which takes your business through the next three to five years. What a majority of businesses forget is that unless your accounting system maps to that Plan it will act as a brake, impairing your ability to achieve your goals.

It is common for an IT Strategy to overlook the needs of Finance systems, especially in sales driven businesses. This is why, all too often, we see businesses scrambling to replace accounting systems in a hurry.

IMPLICATIONS

Without an accounting system strategy your business is exposed to the following :

business plan :

• goals are not achieved

accounting system :

• not able to provide adequate input for informed business decisions
• business risks outgrowing its accounting system
• congested or disorganised Chart of Accounts
• high incidence of workarounds

Finance :

• spreadsheet based analyses
• time consuming and complex period end close

internal controls :

• excessive reconciliation controls needed to ensure financial data integrity

IT :

• Finance system replacement deferred in preference to other systems; neither funds nor time are available to replace an accounting system when it’s needed
• excess cost driven by high system maintenance and support demands

cost :

• lack of process automation leads to high headcount and inefficiencies

risk :

• supplier no longer supports your system or version
• upgrade path is lost if your version is too far out of date
• consolidation in the systems market is expected to continue
• experienced resources leave rendering your system unsupported; high replacement costs

SOLUTION

It doesn’t matter where you are in terms of your business lifecycle, both problems are solved by aligning your business and IT plans with a systems strategy. However, the strategy must balance :

• functionality needed to support the business to the end of its current cycle, with
• the cost needed to achieve it

The functionality you need is driven from your business plan, the funds available from your IT budget. In this way all three strategies and plans are aligned.

Think in terms of a functional envelope that your business grows into. This will ensure :

• a cradle to grave strategy aligned with your IT and business plans
• your accounting system does not act as a brake on your business
• you no longer run the risk of outgrowing your accounting system
• a system replacement plan is in place when it’s needed; shorter selection timeframes and reduced costs are welcome by-products
• Finance is able to provide the strategic direction needed
• efficiencies translate into profit and growth
• risk is mitigated – a plan is in place dealing with future unsupported systems or platforms
• IT maintenance costs are reduced
• end-of-life system support costs are avoided

Mark Woolley is a Systems Accountant and a Director of Corporate System Solutions Inc. specialising in enterprise system evaluation, selection, implementation and ad hoc system solutions. For more information visit www.corporatess.com.