financial management systems Archives

As with all data, understanding what your data is telling you is critical, especially when extracting the right data from your financial management systems.

When investigating, researching and purchasing financial and accounting software, it is advisable to get some feedback from financial managers and financial directors who have had exposure to a variety of software packages. They can help you make an informed decision based on your business, products, size and scope of operations. For entrepreneurs and SME businesses, choosing the right software and being able to interpret the data can make the difference between success and failure. Many entrepreneurs are very sales oriented and are not experienced enough to know what to do with the data or are unable to extract the right data from their current financial management systems.

Engage the services of an experienced financial executive

In order to extract and interpret meaningful data from your existing system, or when investigating a new system, you will be in need of someone who is capable of and has the necessary experience, when it comes to extracting beneficial financial data. For those companies that don’t want or don’t need the services of a full time Financial Director or Financial Manager, there are reputable companies, such as The Finance Team, who outsource the services of trustworthy and experienced FMs or FDs on a part time or interim basis. In this way, companies are able to tap into their knowledge and expertise when extracting the necessary data from their financial management systems. These part time FD’s and FM’s are continuously exposed to a variety of financial management systems and are thus able to benefit the companies through their expertise and experience.

What data should be analysed

Being able to extract the right data from current financial management systems can sometimes be tricky. The following criteria should be taken into consideration over and above the standard criteria:

Volume: the amount of data being collected.
Velocity: the speed at which data is being generated/collected.
Variety: Businesses data can come from a variety of different sources.

Financial data contains objective metrics that measure the quality of financial health of the company. Companies who can extract insights from their business data and apply those insights correctly to systems and operations will definitely have a competitive advantage over others companies that cannot.

Extracting the right financial data can make money for the business

Possibly the most feared phrase. Being able to extract accurate and timeous financial data, will avoid the possibility of a SARS audit down the line. In fact, through the correct evaluation and extraction of financial data, you could possibly “make” money for your company. Armed with this financial data, experienced FMs and FDs could possibly cut down the amount of tax payable by your company. Again, one need not engage a full time resource in order to do this. Part time and interim FMs and FDs are up to date with current tax legislation; they have to be in order to engage and add value to the companies that they service.

At the end of the day all financial management systems offer a similar range of benefits, the trick is how to use the data produced by the financial management systems to your benefit.

Photo credit: hghyork.co.uk

Finance departments these days are being hard pressed to play a larger role in supporting the business and operational decision making within an organisation. Besides the mandatory financial function, finance departments need to measure and manage corporate performance against strategic objectives. They need to do more with the same or even fewer resources. FD’s of companies have had to find ways of getting faster and more effective data out of their existing financial management systems to be able to meet this demand.
Listed below are 3 methods you can use to get valuable data out of financial management systems.

(1) Effective management reporting

Beyond regulatory and market demands, finance departments are playing an increasingly bigger role in management reporting. Finance departments must provide company leaders with timely and accurate performance information. This information enables effective corporate performance management (CPM). CPM represents an expanded scope of responsibilities for finance departments as it extends beyond the traditional components of corporate reporting and includes planning, budgeting and forecasting coupled with business analytics. Providing the data is no longer enough;finance departments are now expected to deliver insight into how to interpret results to drive decision making and improve performance.

Effective management reporting allows for an improved reporting cycle that benefits the business by allowing:

• Greater confidence when certifying financial statements.
• Lower compliance costs and less volatility in financial data.
• Scalable processes and better information to enable decision support.
• Management to pursue other strategic objectives and value added activities.

(2) Effective use of Technology

The accounting systems and software are in place to capture, analyse and produce reliable financial data. Most companies, whether big or small, have an accounting package that they use for their business. Effective use of the current package can make a big difference to the company’s bottom line. Excessive reliance upon Excel spreadsheets, excessive manual journal entries, manual account and bank reconciliations are prime examples of not using technology effectively. This, however, does not mean that companies need to purchase new and expensive accounting packages. It is advisable to seek out an independent and objective financial expert, such as an outsourced part time financial executive, who can objectively assess the current system to ascertain if the current system is being fully leveraged. These outsourced financial experts have current and up to date experience across a variety of platforms and are able to advise on which package to use or how to get the most out of their current package. We often get involved with clients and are amazed at how much money, time and effort has been spent upgrading to new systems when their existing system was more than enough. All that was required of the old system was a better understanding of functionality and perhaps better trained staff. Salesmen of ERP systems are fantastic at selling a Ferrari (at a discount) when a BMW would have been perfect and then selling very expensive consulting time to convert the Ferrari back to a BMW with a slightly bigger engine. (For the record, I am a very big BMW fan)

The effective use of technology is essential to gaining timely, accurate and transparent data. However, buying new systems and software is not always the answer and can often do more harm than good. In some instances companies have too many applications with overlapping capabilities, which can create confusion and incorrect data coupled with redundancies that interfere with accurate reporting.

My advice to any company wanting to change financial management systems is to ask the following basic questions:

1. Is the change a nice to have or a must have? If it’s only a “nice to have” DON’T DO IT.

2. Have you evaluated a number of different options?

3. Have you had an independent expert evaluate the options specific to your industry and company needs?

4. Assuming you have decided to go ahead, have you trained your staff effectively? This is your biggest risk as employees hate change.Limit this risk by excessive training if needs be. Be sure to include this training in the quoted inclusive cost of the software as it can become very expensive.

5. Prior to final switch over, will it be possible to run both systems in parallel? You can’t afford any down time and there are bound to be some problems with the new system.

(3) Effective training of financial staff

Effective training and continuous up-skilling of financial administrative staff is critical to getting valuable data out of financial management systems. It doesn’t matter if you have the most up-to-date accounting software available on the market, if your staff does not know how to use it correctly then there really is no point. The-up skilling not only applies to junior or administrative staff. Everyone from the CFO / FD needs to have continuous education on the company’s chosen accounting software. This will ensure that the data produced is trusted, up to date and as accurate as possible which is critical, as it provides the FD’s and CFO’s with tools to accurately advise company leadership as to the processes that need to be undertaken to positively impact on the bottom line.

For more information on Grant Robson and The Finance Team visit www.thefinanceteam.co.za