Getting to Phase 2

This article is reproduced with the permission of CAmagazine, published by the Canadian Institute of Chartered Accountants, Toronto.

By Bill Kennedy

The best way to ensure your accounting system is relevant and up to date is through Phase 2 projects

When employees at a computer consulting firm were asked to suggest topics for break-out sessions at the firm’s annual event for its clients, where vendors display their latest software, one consultant suggested Getting to Phase 2 as a topic. A few weeks later one of the partners took him aside and said, “Your presentation had better be good. Half the people have signed up for it.”

It seems many accounting systems never get fully implemented. As the implementation date approaches, technology and budget pressures force the team to separate the “needs” from the “nice to haves.” The nice to haves are delayed until Phase 2 in order to meet the project deadline. The problem is that Phase 2 never comes. The project team moves on. The budget is expended and there is little will on the part of the accounting staff to spend more time on the new system. Unfortunately, the features that end up not being implemented may well have been the ones that convinced you to buy the package in the first place. Examples include ad hoc reporting tools to allow nonfinancial users access to their data, an executive dashboard so operational management can see key performance indicators at a glance, mapping software to show the geographic distribution of customers for the sales team, or scanning software for a paperless office.

Some clients view systems implementation as a finite challenge, to be addressed as quickly and cheaply as possible and then move on to other issues. But some take the opposite view. They see their systems as constantly evolving, quizzing consultants about new and upcoming features. They call at budget time, asking what they should plan for the next year, keeping the accounting system updated as an annual routine.

Most software packages are represented by user groups, often sponsored by vendors or consulting firms. User group meetings are an excellent way to keep in touch with new developments. Many software firms aim to have a new version every year. Computer consultants typically watch for features their clients could use or have been requesting. While some clients like to stay on the most current version at all times, many install every other up-grade or wait until their current version is no longer supported by the developer.

Phase 2 projects

An accounting system should be examined regularly to be sure it is relevant and up to date. Phase 2 projects are a good way to do this. Here are some suggestions:

People — Ask the accounting staff to identify time wasters. What processes involve the duplicate entry of the same data into different systems? Which system reports have to be manipulated in a spreadsheet to add information needed for the user? Does staff have to search through filed documents to find information not captured by the accounting system? Is training required? A good example of a time waster was at a tool and die manufacturing plant. Clients would call asking when their orders would be ready. But the computer system did not track customer orders through the shop, so an accounting staff member would have to go into the plant, check where the order was and call the customer back. This process was time consuming and unproductive.

The solution was in the job-costing system. Because every order took the same route through the plant, to know how close to completion the order was, all they needed to know was who last worked on it. A simple inquiry screen where staff could search the time records by order number saved staff hours each week. The change also improved customer service as answers could be found while the customer was still on the telephone.

Reporting — One of the most powerful Phase 2 projects is to put reporting tools into the hands of the end users so they can get the information they need, in the format they want. It need not be expensive or cutting-edge software. A simple way to accomplish this is an Excel pivot chart, which is the graphic equivalent of a pivot table. The pivot chart is effective for people who prefer graphics to tables of numbers. Sales statistics can be presented in a particularly powerful way using this format. Information about a sale, including amount, salesperson, territory, item purchased, customer and customer address, can be downloaded into a text file using a report writer. If the accounting system does not have its own report writer, then Crystal Reports and the SQL Reporting Service are good general purpose utilities. The file can be imported into a spreadsheet, a pivot chart created and the end users can experiment for themselves.

Another typical Phase 2 reporting project is self-serve reports from the Web. Managers can download the reports they need when they need them. The reports are stored on a secure corporate website and are typically refreshed automatically overnight. Making the reports available to managers on an as needed basis frees up the accounting staff and gives managers greater control over their financial reports. The Web can also help reduce data entry time and increase accuracy by allowing users to enter their time and expenses directly or change their personnel records, e.g., updating address or banking information after a move.

Account structure — An account structure that no longer meets the organization’s reporting needs is a serious time waster. For example, take a client with an older IBM minicomputer system. The customer numbers were four digits long, arranged alphabetically, and the client ran out of space for customers whose names started with “E” and “N,” so these were added to the bottom of the list. The result was a tedious search for duplicate customer numbers whenever a new customer sent in an order.

Pressure was taken off the system by creating five-digit customer numbers and multiplying all existing ones by 10, providing more room. Another client ran out of room between general ledger account numbers. For example, if the account numbers 100,001 and 100,002 had been already assigned but the client needed a number between them, he would create a 100,001A account. This made report design and data entry awkward.

Side systems — Limitations (perceived or real) in the accounting system can lead other managers to set up their own systems. In-formation is collected and stored, often in a spreadsheet, before it is passed to the accounting department. These systems can be eliminated with a change in accounting structure to capture more details about transactions, but the side systems may not be easy to find. The extra work may be so ingrained in the routine that managers may not be aware it is no longer necessary.

Duplicate data entry — No one enjoys having to enter the same transactions in multiple systems. Inevitably there will be synchronization errors, forcing the two systems to be reconciled. However, integrating two computer systems seamlessly can be difficult and expensive. If the two systems were created by different developers, there is the problem about what to do when one system upgrades but the other does not. A simpler project is to have one system create a data file and have the other one read it. As long as any upgraded system can still produce or read the data file, the two systems can evolve independently.

Operational data — Many systems allow the entry of nonfinancial data along with the accounting transactions. For example, a statistical account can be created for the number of units sold so cost and revenue data can be tracked on a per unit basis. Other useful measures are departmental head count, number of rejects, product grade, number of event attendees or number of days lost to injury. Such information is particularly useful for charitable or not-for-profit organizations where money is a constraint rather than a goal and the organization’s success is measured by what it does, not by the profit it makes. An advantage of including operational data in the accounting system is that often the accounting system’s report writer can be used to produce the reports rather than having to download them to a spread-sheet and add the nonfinancial results manually.

Other users — Other users of software or others in your industry are an untapped resource. For example, a company was dissatisfied with its payroll system, which was only a couple of years old. When the vendor’s references were called, it was discovered they had all moved to other firms. Their advice helped the company get its payroll system back on track.

Accounting system users are usually more than willing to discuss their systems and are candid about what features they like and the ones they would change.

Make an effort to attend the customer events hosted by the software developer or consulting firm from which the system was purchased. They may be a good source of ideas that may start you on your way to that elusive Phase 2.