enterprise software

Your Digital Resolution for 2017

Is your company ready to absorb what you're going to throw at it this year - more customers, higher sales, lofty revenue targets, and elevated customer service expectations?

Embracing a "digital" mindset will not only help through the tools it brings - better analytics, big data, mobile, and cX (customer experience) tools - but can transform an entire company's culture to be more customer-centric and better able to execute quickly and accurately.

Middle market companies want to understand how to evolve into this new paradigm and avoid the cost, disruption, and risk of jumping in all at once. To that end, here are three simple things you can do in 2017 to get your team ready for digital transformation:

1. Focus on creating a culture of execution

Why

A organisational culture that is not built for speed or set up for continuous improvement will impede the successful delivery of digital projects,
— Kapil Bagga, GROW-Strategy.com

Digital is all about execution - constantly improving how you serve your external and internal customers and constantly innovating, implementing, and iterating. Achieving small execution victories will build a culture that prioritizes action and will serve as an example for long-time employees about the value this mindset brings.

Just as importantly, an execution culture knows how to fail small and move on. This is difficult for historically risk-averse environments and takes strong leadership to change.

How

  • Execute a project in Q1. Pick a project, a small project. Assign it to someone. Ask them to create a plan. Assign a team. Meet for status weekly. Make sure it's adopted by the business. Simple!
  • Do at least one technology project. No matter what industry you are in, software will be a major driver of your capacity to execute over the long-haul. Bring in the right people to help decide on the project, choose how to do it, and manage it through to execution.
    • Simpler projects can include reorganizing your inventory, improving how people are quoting, or rolling out a new sales tool to your staff.
    • If the business is ready, extend yourselves by touching a large system and more people - inventory control, time and expense tracking, order management, or even a full-blown ERP or CRM project.
  • The goal should be to get someone in your company to plan and execute a project, to improve one very specific area or solve a specific problem, and to prove to your people that not only can changes make things better for them, they can be done with little disruption and be led by people you have.

2. Start a mentoring program

Why

Digital requires collaboration towards the goal of total company achievement. Succeed together on small things that mean something big for the company. This means everyone in your organization needs to support each other and be vested in one another's success. Mentoring relationships send a strong message about how you intend to grow people internally, allow them to develop over time, and how your most experienced people need to invest in the next generation. The best encourage open and honest dialogue without fear of retribution. They also serve as arguably the strongest way to retain and grow young talent.

(C) 2016 Ronan Consulting Group, LLC

How

  • Start small - assign one or two junior staff members to experienced staff who have the mentality of a mentor
  • Create a simple list of topics you expect them to work on (avoid developing a complex framework of expectations). Examples could include career counseling, identifying key skills to develop, helping them network within the company, or exposing them to more of the marketplace. They could even include 360-degree elements with the younger staff member expected to teach the experienced staff member something specific.
  • Set aside budget for them to go to lunch occasionally 
  • Meet with both every 6 months to see how it's going. Don't ask for a formal report - just make sure they are talking about important topics for both the company and the junior staff personally. Contrary to popular theory, I do NOT advocate measuring the program off the bat. Evaluate it qualitatively first, then move towards a more structured program later on.

3. Start planning your digital IT function

Why

Effective digital tools require a number of foundational capabilities - a strong ERP/CRM and enterprise systems platform; a level of consistency with your business processes, and baseline technology skills throughout the organization. The odds are, you have some deferred maintenance in these areas. You may not be able to dive in right now, but you can plan the specific steps to prepare your organization to get there over the next 12-18 months.

For example, a central piece of your analytics strategy will be analytics. In their 2016 Tech Trends report, Deloitte called out "information acquisition and curation" and "information delivery" as two key elements of an analytics program. These items require strong underlying enterprise systems, disciplined processes, and well-established integration between your systems. These are all items you can work on now before you make the investment to dive into the latest and greatest analytics tools.

How

  • Create a roadmap to get to the digital future you want. The right consultant will ensure the roadmap is aligned with your overall strategy and contains the foundational elements required to quickly evolve into a digital model.
  • In the little projects we discussed in point 1, make your people accountable not just for implementing, but for monitoring success and improving the systems once they are being used by the business; and second, focus on agile development - constantly rolling out small improvements that add up to something substantial over time
  • Start vetting vendors who may offer long-term relationships to help build your digital capabilities. Make sure they are selected in a way that aligns with your roadmap long-term 

Even if you are just starting to think about digital, that's still a huge step in the right direction. Commit to spending the next year setting the stage for digital and beginning to evolve the organization in that direction.

Tolerate small failures, learn as a team, and generate lots of new ideas. Learn the digital marketplace - webinars, conferences, vendor demos are all great, easy ways to do this.

And have fun. Digital capabilities are exciting - enjoy the journey!

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How do we decide whether to keep, replace, or enhance our systems?

Great systems can add tremendous value to your business. They make processes more efficient, control risk, deliver a better customer experience, and produce superior data and insight. Poor systems are inconvenient and sometimes devastating – demoralizing employees with red tape, offering a difficult and frustrating user experience, leaving data fragmented and inaccurate, and creating confusion with customers.

If your systems aren't adding the value they should, what should you, as a leader, consider when making decisions to keep, replace, and enhance your systems that maximize the possibility of success?

Systems are a lot more than just technology and business processes. They are behavior patterns, incentives for collaboration, institutionalized cultural norms, and tacit expectations for how your people should be efficient and effective. Successful systems account for:

  • Psychology - why do people think this way?
  • Sociology - how are groups of people behaving?
  • Tools - what do we use to do things better?
  • Management science - how do we measure what's happening?

They are of course also rooted in business science, mathematics, and core technology.  They amplify both desirable and undesirable behaviors and, in turn, either accelerate or hold back your business growth.

The success of your business systems will be determined by three main factors:

  1. How well the technology and processes fit your business strategy
  2. The quality and capabilities of the technology
  3. How well your users adopt

Understanding where your business stands with each of these will help you choose the best path forward.

For purposes of this article, “systems” refers to both the business processes and the technology used to support them.

Fit to the business

The basic question is: did you choose a reasonable solution up front? There are few legitimately bad software packages and also few that will exactly fit your business processes without modification. The question is not “Is the system perfect?” but rather “Did we make the right trade-offs and decide to change the right processes when we selected (or designed) the software?”

To be clear – if a system failure is because of a major deficiency in this area, you will probably need to replace it. If the deficiency is minor, see section 2 for a few ways to address it.

How do you ensure business fit?

A rigorous system selection will force your team to collaboratively decide on the most important requirements up-front and agree on major process changes. Systems projects are a litany of trade-offs – what needs to be perfect, what areas can you change your process to fit the system, and what processes are worth spending more effort and money on (e.g. customizing the system or purchasing a separate bolt-in). The thoughtfulness of these trade-offs are what will set the implementation up for success.

Do not skimp on the selection process. Some of the most expensive implementations are the result of the cheapest selections. Analyst reports will tell you general quality and focus of products, but not how appropriate they are for your business. You need to get inside your business, uncover its operating priorities and biggest value drivers, and match them with the systems you are considering. This takes a little bit of money and a lot of time from your best people – but it’s worth it.

Technology and Functionality

The base technology is usually fine – if it doesn’t “work” it can usually be fixed with some professional help. Custom software can be more challenging or more expensive, but these systems can be fixed as well. The good news is that in the new world of enterprise technology, there are many more options than those offered by your primary vendor to support your most valuable areas, mitigate major risks, or make a challenging system more palatable for your users.

Example: ERP

ERP systems are sprawling technologies that do a lot and ask a lot of their users. The accepted approach to ERP used to be to standardize business processes to the functionality of the package, adjusting only when absolutely necessary. This maximized the vendor’s ability to support the solution and tried to concentrate investment in the most important areas.

This isn’t necessarily the case anymore. There are more niche solutions, software is easier to build, and most platforms play nicely with each other. It’s more important to choose the right ecosystem of technologies that give your business flexibility and in the aggregate add the most value than it is to standardize on a specific package.

If your platform is mostly successful but failing in a small number of critical areas, is it possible to simply plug those holes with secondary applications? This is often easier, less disruptive, less expensive, and more effective. Odds are good that you can avoid a wholescale replacement.

In these cases, you should perform selection processes for add-ons where the base system doesn’t fit the business. This can include features like subscription billing, customer support, portals, analytics and reporting, or workflow applications. Not all packages do these things well, but there are many third-party products that will play nicely with your other systems and dramatically improve these areas.

User Adoption

Your users will ultimately determine the success of the solution. Assuming you made acceptable trade-offs, made reasonable assumptions, and have a fundamentally sound, supportable ecosystem, your users are responsible for the consistency, efficiency, and innovation the new systems drive.

If you don’t think your current systems are adding value, ask yourself: How much is due to poor technology and how much is due to employees resisting using it correctly?

Fixing user behavior is challenging. Most of it is set in motion during the implementation itself. When a system has been deemed a failure, it can be hard to recover. Good project managers will help manage these user expectations in the immediate aftermath of an implementation but this can only last for so long. If things spiral in the months following a go-live, sometimes this can be a lost cause.

So what do you do?

It depends on how bad it is. Sometimes a few loud user groups end up coloring the organization’s perception of the entire system. You need to put a laser-focus on these groups, solve their problems while giving them ownership, and slowly bring them back into the fold. At the same time you need to roll-out incremental improvements demonstrate momentum to improve the business.

If the system isn’t being adopted because people don’t understand it, this can be easier. Start with aggressively pursuing stakeholder buy-in from senior leadership. They need to re-inforce with their staff how important it is to use the system as intended and to identify additional training requirements. This needs to be combined with a rigorous enhancement process that uses stakeholder feedback to improve the system.

If this is the core problem, have an independent professional work with your users on assessing the source of the system’s weaknesses. They will cut through the noise and the politics and be able to tell you the heart of the problem. This is very difficult for anyone who had a stake in the original process.

And remember that the users’ complaints may be right: Maybe the system was the wrong choice or was not implemented well. Given that they have the most detailed view of the solution, they may have valid points in this area. In these cases, the details matter. Understand the specific issues instead of the broad complaints and have someone help you understand if they can be resolved or not.

Remember: it doesn’t matter what the users should be doing, it matters what they are doing. Blaming users doesn’t accomplish anything while giving them resources, listening to them constructively, and supporting them accomplishes a great deal.

In Summary

If you feel your business needs technology changes, look at your systems holistically. Understand the processes, the system possibilities, and the cultural needs of your users. Ensuring all of these elements directly support your growth strategy will greatly improve your business and ensure you can be successful as you grow over the long-term.

Most of all, get an independent opinion. It may end up saving you a lot of money and aggravation, and will certainly help confirm your best path forward.

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New Blog Announcement / How CIOs Can Use Big Projects to Drive Their Strategic Brand

As of this week, I officially have two blogs: The one you see here and one at CIO.com.

On this blog, I will continue to focus on a broad range of issues relating to growth, profitability, and technology-driven improvement across the business and continue to make it relevant for smaller and mid-sized organizations as well.

At CIO.com I will focus on enterprise software specific topics. My agreement with CIO.com means I cannot post the same content here for a few weeks, but I'll put up short summaries with links on this blog whenever I add something new. Today's inaugural post is for CIOs looking to enhance their strategic brand within the C-suite. 

An excerpt:

Enterprise software implementations are among the most expensive, visible and risky projects you will undertake as a CIO. They are also among the most strategically important and, as such, can help propel the CIO to the role of true strategic adviser to the C-Suite.

Click here to read this post and subscribe to the new blog.

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System Selection and the Future of Enterprise Software

Today's entry will be (uncharacteristically) brief because Gartner produced an excellent report on this topic that says much of what I want to convey about the future of enterprise tech.

Gartner's point of view on what they are calling "post modern ERP" can be found here. It is worth your time. (h/t to @John_Hoebler for bringing it to my attention) 

I fully agree with Gartner's view on this topic and it meshes with my experience in many of my full-lifecycle enterprise software implementations. For a few clients, the monolithic model has worked reasonably well, but for many - particularly in software, high-tech, services, and media - monolithic ERP has been a clumsy fit for substantial pieces of their business.

Now organizations have more options available to them. The enterprise software landscape is much more distributed than it used to be. The cloud has enabled many new, innovate enterprise tech companies to deliver products that are highly tailored to a single purpose or function (keeping in the spirit of the weather here in the Northeast, "snowflake systems", if you will). There are great solutions that now cover your most strategic functions. Some examples:

  • If you offer bundled services and the billing module of your ERP solution can't do the revenue recognition required, you can now use Zuora
  • If you have a customer service division that now needs to handle both products and services, there are options like Zendesk that can be used for all your call center operations regardless of the product or service that's stored behind the scenes in your inventory or order management systems.

Your ability to reduce the operational overhead of running these solutions - largely by hosting them in the cloud (usually public) - and turn your investment and people to more value-added activities like managing more integrated ecosystem of solutions and systems will be a greater determinant of your future success as an IT organization.

My point is this:

Software selection and project visioning is more important than ever for new ERP solutions as well as new software that supports any major business function.

New federated ERP models will force companies to carefully select the solutions to bring into their ecosytem based both on their fit to the business and their ability to seamlessly integrate with the core of the enterprise. My advice: don't short-change yourself on the selection process.

  • The decision on your systems will no longer be about the level of fit of every module of an ERP solution to your business processes and how much customization will be required. If it's a clumsy fit to order management but supports the rest of your business, try to find a better order management option.
  • Your should not automatically take a "no customization" route to your enterprise software implementation just because it creates IT complexity. If processes will be substantially sub-optimized by a clumsy process to fit an ERP platform, you should look to see if there is another solution available
  • More native integrations will be available and figuring out which systems and which cloud providers work best together will not be an important part of the selection process
  • Long-term TCO is no longer an adequate measure of a system's costs. If you are sub-optimizing business processes and making people's jobs more difficult to do, you are understating your TCO by ignoring the opportunity cost in these areas. (e.g. forcing data management responsibilities on a sales force because they are the entry point for customer master data)

Systems selection will be about the business goals you are trying to accomplish through ERP and how the systems will integrate with and support the best solutions for every other part of the business. It cannot, fundamentally, be just about the needs of the core area owning the implementation: it needs to also consider the relationship with the rest of the business and their systems.

Elegance used to be defined as the single solution or smallest set of solutions that can enable your business. Elegance now means the ecosystem of solutions that fit your business so well, they can truly help drive your strategy forward.

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The Culture of Successful Projects and the Superbowl

As has been noted ad-naseum today, last night's Superbowl commercials were decidedly more subdued than in past years and many brands made a clear pivot to conveying more "authenticity" in their brands. I would like to think this is a good thing, but there were a few brands who...well, let's charitably say they didn't do this very well.

The worst sequence of ads reminded me of the characteristics of dysfunctional project teams. It came from InBev's Anheuser-Busch who managed to turn themselves in a bully with three commercials. I couldn't help but think how emblematic they were of my least favorite managers and implementation partners. Let's go through their sequence:

First, they aired a commercial intended to convince people to return to Budweiser by mocking craft beers and the people who drink them. Full disclosure: I am a bit of a craft beer fan. What you'll usually find in my fridge is either from Two Roads (Probably their "Road 2 Ruin" double IPA) or from our local Stamford brewery, Half Full. Let's first say that this campaign doesn't make any sense: Budweiser is in the process of aggressively buying craft breweries and marketing them as "craft" brands trying to win back some of the 15% of the market that hundreds of local breweries have taken from them. But then, they try and do that by mocking - without any relevant content - the people who enjoy these products. It's a really unfortunate, bullying approach.

This is Heidi. See, we love dogs!

This is Heidi. See, we love dogs!

Then, that lost puppy commercial. Trust me when I say that my wife and I love puppies like everyone else in America. We have a dog. She was a puppy once and we enjoyed that. I "like" puppy pictures on Facebook when my friends welcome new canine members of their families. I legitimately enjoy puppies. Despite this, my wife and I looked at each other after this Budweiser ad and said "That was basically offensive." It felt like Budweiser was trying to manipulate us into liking them - not that they were making an authentic connection. It was focused on creating a tenuous emotional connection to their logo rather than anything to do with their product. It didn't work for us.

Finally, AB aired the obligatory "drink responsibly" commercial also containing, for some inexplicable reason, a dog. How about a wife and kids? Maybe families of someone else on the road that night? Anyway, I actually didn't have much of an issue with this ad in isolation but found it to be problematic in their sequence.

So, in about 90 total seconds, InBev AB:

  1. Mocked everyone who doesn't like their product
  2. Tried to emotionally manipulate us into liking their corporate logo with a commercial that had nothing to do with their product
  3. Insisted that they are good guys because they want people to be "responsible" with their product and protect their dogs or families, or something.

Insult your opinion. Try to break you down emotionally with messaging unrelated to the main topic at-hand. Protect themselves from blowback by insisting they are good guys and only have your best interests at the top of their mind. Sound familiar?

This happens on big, hard projects all the time and it's the best leaders and managers who can craft a culture that redirects these tendencies. It only takes one person on the team who embodies AB's approach to damage everyone on your team. This will not only damage the mentalities of the people on your team, but create an unhelpful, unproductive and highly political environment that will make it difficult to get meaningful things done. 

There are many approaches to avoiding this type of team culture, but I'll outline five of my favorites here:

  1. Repeat early, often, and in every venue, that all opinions are important. Thank people for sharing their opinions even when they are not necessarily productive. Eventually be direct (and nice) about your viewpoint, but during the process of developing it be thoughtful about every idea and opinion. Avoid mockery or belittlement at all costs and never, ever condescend someone because of an opinion they provide. Assume they arrived at their opinion thoughtfully and probe it - don't seek to discredit it.
  2. Avoid the blame game. Things will go wrong. People will make mistakes. At least once (probably more), someone on the team will make a mistake that requires everyone else do a lot of work to correct it. That's unfortunate, but it will happen. These projects aren't hard because they require everyone to work hundreds of hours towards linear goals: they are hard because there are hundreds of interlocking decisions, ideas and goals that have to interact perfectly. The biggest sentence to avoid: "How could this happen?" There is almost never a productive answer that will help you move forward. The answer is that it's because people are people and you're asking them to do something difficult. One of my favorite quotes to use here comes from HBO's "Too Big to Fail" - [paraphrased] "If you want to go back in time and figure out what happened we can do that later, but right now we need a solution and we need it quickly."

  3. Keep the main thing the main thing. Be the person to redirect the conversation. People will try to use their version of Labrador puppies to sway others to their point of view. Don't let them. You need to be the person to (again, nicely) redirect the conversation to the main question you are trying to answer. There will be lots of good stories, lots of interesting ideas and lots of ways to never solve your hardest problems. State the intent of every conversation or meeting and make sure the dialogue is productive and stays on track.
  4. Meet people where they are. Make authentic connections by being interested in their interests. Do not force generic tropes or mindless sentimentality on them - make an impact by listening to their stories, picking up on queues about their interests and openly expressing interest. I had a client with a division in the Netherlands during the 2010 World Cup. Many of us Americans knew very little about soccer, but some of our team members talked to our Dutch colleagues about the game, its cultural implications, why it was important to them, etc. Many of those discussions turned into real friendships which, in turn, led to a wonderful, productive work environment. It's only because those were real conversations. 
  5. Own it. This is repeated so frequently that I hesitated putting it on this list, but I've seen this at so many clients I feel it still needs to be said. After Russell Wilson's game-ending interception last night, Pete Carroll went to the media and completely owned the turnover. It wasn't a bad pass, there wasn't anything wrong with the route or the receiver, it was a play that he wanted to run that just didn't work out and that was his decision. I loved that. When things go wrong and it starts to point back to you or one of your team members, don't say "well yeah but I'm a good guy because I want you to drink responsibly and I do nice things for people all the time and I give my time to charities and I donate to my alma-mater and...and...and." Just own the mistake, apologize and move on. People will respect it and forgive the mistakes.

No matter what AB's Superbowl ads were, I wasn't going to suddenly start drinking Budweiser. But I could have at least enjoyed the ads and not thought less of the company. Instead, they embodied everything bad about poorly run projects.

Poorly run projects are just awful: they wreck careers, they destroy people's self-confidence, they industrialize an organization's worst cultural tendencies. They represent horrible opportunity cost because good projects can serve as the spark to turn companies around.

Don't run your projects like Anheuser-Busch. Run them like a carefree Labrador puppy trekking back to his best horse friend after sleeping on a not-so-smart craft-brew fan's couch the night before because he had integrity and cared about being responsible.

See what I mean?

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Evaluating Your Finance Function

Does your finance function stack up to your scale?

One of the early functional areas that businesses outgrow is their finance function. The processes, systems and skills that are required to track, maintain and report on organizational finances as companies grow change dramatically. Think of finance as the core of your enterprise – not most critical, but certainly most foundational. Absent a strong finance foundation, it is very difficult to scale, grow and integrate your other functional areas and it makes your management of the business enormously more challenging and less discrete.

Today we will examine three common challenges within your finance function. This is not intended to be an exhaustive list of every problem you may encounter. Instead, these are some of the most common issues that occur and, more importantly, the issues that are most visible to non-finance executives. The solutions may be simple, they may be wide ranging. But once you know where your challenges are, it becomes much easier to establish a clear path to resolving them.

1. Your business makes a lot of manual journal entries

Why it’s a problem

Manual journal entries are error-prone, are not recorded on a timely basis and do not provide adequate control over your books. Since most categories of journals should be automatically generated during the course of business, they often indicate underlying issues with your systems and processes.

Other forms of this problem

a) you have non-accountants submitting requests for journal entries; b) your accountants are doing a lot of offline calculation (probably in Excel) to generate the journal entries (revenue recognition and asset depreciation are common areas for this); c) when something doesn’t look right in the general ledger, it is hard to locate the backup documentation

Common manual journal entries:

Revenue recognition, asset depreciation, lease payments, payroll, purchasing accruals, inventory valuation, receivables backlog

How to diagnose

Look at your previous three months of manual journal entries. If the number of entries is relatively limited, then you probably do not have a major issue. If there are many entries for the same category, you have an isolated problem that you can probably address on its own. If the entries are spread across multiple categories or there is not a distinct pattern for why the entries are occurring, then you have a bigger issue to address.

Possible Solutions

For one, you should evaluate your chart of accounts and make sure it is structured appropriately for your business. Many companies start with a simple chart of accounts and then grow to the point where it no longer provides enough data or structure for accurate reporting. Then, evaluate the integration between the general ledger and your various sub-ledgers (receivables, payables, fixed assets, project accounting, inventory, etc.). If there is manual intervention required during the transfer of financial data between these systems and the GL, then you have a systems issue you need to address. Finally, evaluate your overall finance strategy. If the system is not able to generate the accounting entries you need, it’s probably time to start looking at alternatives.

2. Reporting takes a lot of time and some desirable reports aren’t possible

Why it’s a problem

Reporting and analytics should be your easiest, most accessible tool for managing your business. If you can’t review your key metrics on a regular-enough basis, your ability to effectively manage your business suffers. Lots of time generally equates to lots of effort which means lots of error-prone, manual work.

Other forms of this problem

Let’s briefly distinguish management reports from operational reports. Operational reports are used by your managers to execute the operations of the business on a day-to-day basis and are not what we are addressing here. Management reports are used by leadership to make decisions about how to run the business and these are what we are discussing here. If your set of monthly or quarterly reports is variable (i.e. the exact same reports are not generated every month/quarter/year), if your reports change in form or format based on monthly or quarterly activity, if your finance department needs more than a few days to close the books and generate reports, or if you want to see some new types of reporting but they cannot be generated with your systems or numbers, then you have a problem that should be addressed promptly.

Common problem areas

Profitability and margin reporting is a common pain point for growing businesses - it’s fairly complicated and requires highly structured underlying data. Budget-to-actual reporting tends to maturate later on for many businesses and forecasting is often cobbled together from several imperfect sources of data (note: forecasting usually matures faster in manufacturing environments while lagging in professional services). It is unusual for basic P&L and balance sheet reporting to be an issue – most businesses have this down pretty well. If you have issues with this type of reporting you should probably address them immediately. In addition to being your only true source for good numbers, it probably means something unpleasant lurks beneath the surface.

How to diagnose

Look at your management reporting and see how replicable it is. Talk to the accounting department about how and on what platform they generate these reports. Talk to an expert about what reporting you should, reasonably be able to generate for your type and size of business and ask your managers to put them together. If you can report on most of what should be required then you’re probably in good shape; otherwise it is likely you have some technology/talent/process issues to address.

Possible Solutions

Solving your reporting issues may or may not require changes to your software. Many business actually possess the necessary tools but need to resolve issues in underlying business processes or data structures. This is less expensive to fix and can often be executed in-house, although you probably need some basic outside guidance on structuring the project. If you do not have a strong reporting platform and your finance systems are very old, then you may need a multi-step roadmap to fix the underlying systems and processes before implementing a more robust reporting platform. The good news is this can be done along with better operational reporting and sometimes real analytics so you won’t be fixing just one problem – you’ll be setting yourself up for more exciting management tools as well.

3. You don’t really trust your numbers

question_dkblue.png

Why it’s a problem

I probably don’t need to elaborate on this one

Other forms of this problem

a) If you have questions for the accounting department after reviewing your monthly/quarterly/semi-annual reports, the answer is frequently an adjustment in the ledger and reissuance of the reports that is required. b) It is not uncommon for your summary financials and the expected numbers from each department to not match up (inventory levels don’t seem in the ballpark of what your warehouse manager expects; PO accruals don’t seem to match what the purchasing manager thinks they bought this month, etc.). c) Your outside accountants have a hard time figuring out your numbers each period from the materials you provide.

Common problem areas

This could happen anywhere in the business, but start by looking at areas that a) have an offline process and toolset; b) Have a high monthly volume of transactions; or 3) Have the most people touching the transactions

How to diagnose

Have departments sign-off on the final accounting numbers for each period. If you currently only “close the books” annually or semi-annually, begin to move towards monthly or quarterly close cycles. Although they will be more frequent, they will also be less work and it will be much easier to perform a root cause analysis on any issues you find. After doing this, then start to see how many discrepancies you have on a regular basis.

Possible Solutions

This is more than likely going to start with a systems solution. The hardest part of performing root cause analysis on questionable numbers is finding all the data you need to back it up. The transactions for those numbers are the result of a process somewhere in your business and having a platform for that process that integrates with your finance systems will make your numbers more reliable, generate them with less effort, and cut overhead.

Closing Guidance

One thing to note on finance systems in general: the number of technology solutions available, level of automation that is now considered “normal,” and leading practices that have emerged over the past 4-6 years have substantially changed the expectations of a “corporate” finance department. The next tier of possibilities for your business are more exciting than anything in the recent past – real, insightful analytics, understanding customer profitability based on social media data, operational and sales automation. These are all tools that can dramatically improve how your business grows and can allow your best people to add more value than ever before. Start by improving your core finance operations and then understand how you can begin taking advantage of the new technology available to your business.

Have you encountered any other major problem areas in your finance area? Post them in the comments!

It’s always valuable to get a new perspective on your finance function and Ronan Consulting Group is here to help. Contact us today at info@ronanconsultinggroup.com or (203) 313-9480 to talk about what challenges you are facing in your business and understand what your assessment, diagnosis and improvement options are. 

 

 

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