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When buying financial accounting system, strong steering committee is key

Before starting the financial accounting software selection process, put a clear strategy and a carefully selected steering committee in place.

Financial accounting system software doesn’t just help you close the books--the right solution can be a competitive differentiator that helps organizations efficiently manage valuable resources and gain important insights into their businesses.  But choosing accounting software applications can be one of the most daunting technology tasks an organization will face, for a number of reasons:               

  • The sheer breadth of applications, ranging from financial accounting system software and procurement software to financial analytics, financial reporting, and forecasting.
  • Integration issues: Regardless of whether the software comes  from one vendor or consists of many products from specialized vendors, getting all the pieces to work together requires time and expertise.
  • Organization-wide reach: Financial applications impact a wide variety of job titles and departments, all with differing requirements and concerns.          

Fortunately, there’s help. Consultants say a formal strategy can smooth the selection process. The key is creating a committed steering committee composed of stakeholders from each department that will be impacted by the project.

Need for better financial accounting systems

Because a major financial accounting system upgrade is potentially disruptive and costly, many organizations avoid making a move without clear reasons to act. One important driver is the competitive benefits that accrue from greater efficiency.

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Research by APQC, a Houston-based benchmarking organization, shows that top-performing companies typically finalize quarterly earnings reports in about 15 days versus the full month required by poor performers. Period-close advantages extend into year-end financial data analysis -- top companies need only about 19 days to finalize results, while laggards require as much as six weeks. Time, in this case, is money. The best-run enterprises spend only about 16 cents per $1,000 in revenue for these financial reporting activities, while lesser performers shell out $1.09 for basic financial tasks, according to APQC.

Saving money may be incentive enough for many organizations to strive for a more efficient financial accounting system -- whether it’s part of a full ERP suite or a streamlined, standalone application. But budgets aren’t the only consideration, say financial consultants. The latest products offer embedded financial analytics that can quickly turn financial data into actionable information, said Henry Ijams, managing director of PayStream Advisors, a Charlotte, N.C.-based research and consulting firm that specializes in financial systems. “Management needs to make faster decisions,” Ijams explained. “They can’t wait any longer to look at quarterly numbers to see how they did last quarter. They need to look every day, every week at real-time information.”

Ijams describes the dilemma of one recent manufacturing client whose financial accounting system was reliably performing all the basic functions, such as building balance sheets and income statements. But management became increasingly frustrated when it realized a competitor was launching new products faster and with lower materials costs, thanks to insights available from financial analytics. “Any system can do the books, but not every system can perform an analysis about how should I be running my business differently,” he said.

The financial accounting software buying team

How can organizations determine the right financial applications for their needs and mitigate time-consuming and costly implementations? Eventually, they’ll need a formal process for identifying gaps in current operations, researching potential solutions, making final selections, and successfully negotiating software contracts. But first they need a team to spearhead the process.

Ultimately, the CFO and comptroller will have the final say in any acquisition, but PayStream consultants advise organizations to stack the ERP steering committee with a cross-section of people from procurement, payroll, manufacturing, and other areas. “Finance may drive the selection process, but it certainly needs the help of everyone who may benefit from the system if it’s enhanced,” Ijams said. “They all need to be at the table.”

The CIO and the IT organization will need to sign off on technical issues, said Robert Kugel, senior vice president and research director for San Ramon, Calif.-based Ventana Research. In some cases, IT may push for a particular ERP or financial accounting software platform because of an overarching goal to standardize ERP vendors or because new capabilities may be available in modules already covered in an existing software license, Kugel said.

The steering committee will be working toward one common goal, he added. “You’ll want to put off as long as possible that ‘Oh, shoot!’ moment when you realize that the big, expensive software you just bought won’t do ‘X.’No matter how hard you work, something is going to get overlooked, because this is enormously complex software. But you want to do your homework and be as diligent as possible so it doesn’t happen on Day 2.”

The steering committee’s work isn’t finished once the selection is made or even once the new solution is up and running, according to Kugel.  He recommends that organizations maintain a group dedicated to staying up to date with ongoing trends in financial technology, “so when it comes time for the next change, you know exactly what is out there.”

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