by Salaad Nur

As a senior consultant for a provider of financial software and ERP solutions, I am often asked to look at a company’s financial process in order to determine the source of problems they are experiencing. Although the company may be observing what seems to be separate challenges, these often stem from one basic truth. Quite simply, the company is using an outgrown financial software.

These are generally young companies who are enjoying growth. However, we also see many companies who have been living with their “pains” for a very long time, perhaps even for years. In fact, during one of our recent seminars one attendee admitted his company outgrew its financial solution approximately 20 years ago.

To save you from suffering the same fate, I offer these five ways you are losing money by using an outgrown financial software. It is my hope I can help you to diagnose the problem so that you may make the informed decision to move on to a more powerful and efficient solution.

Working Smarter, Not Harder

Most people work harder when the amount of work increases. It’s only natural. However, it is critical to build a management culture with a core value of working smarter, perhaps in exchange for working harder.

So what does working smarter mean? For me it starts with looking at what you and your team is doing, then finding ways of doing it better and more efficiently. That could result from training for the team, a change in approach to work, a change in the technology used to accomplish work, or other changes that will result in efficient ways of doing the work the organization needs.

One of the first indicators that you have outgrown your current financial solution is when every avenue you pursue to try to increase efficiency in your current system leads to a dead end. Or, perhaps you have run out of ideas for accomplishing an increase in efficiency.

If this is the case, you need to quit working so hard to compensate for the problem and take aggressive action to fix it.

Waiting as a Norm

In some businesses, departments waiting on each other has been accepted as a norm. Believe me, I am not impatient (oh never mind, maybe I am), but inter-departmental waiting for data creates hidden inefficiencies that only shrewd managers looking at the efficiency of the organization as a whole realize.

Data communication inefficiency is largely to blame, and financial systems are prime breeding grounds. Consider this: To create an invoice you need customer and contact data from sales, contract information from legal, and then, oh wait, with your current solution you cannot get data until tonight. That could be a 24 hour window during which you have not collected cash that could have already been in the bank.

When departments do not communicate efficiently, you might be, in essence, giving away your products and services for free.

For example, let’s say you have a customer that isn’t paying, but your support team hasn’t gotten the word yet. They do what they are supposed to do as far as they know, and continue to service the client unaware the client is in arrears. With the correct solution, your support department would have real time financial status of the client to make an informed decision about whether or not to continue support.

Your financial solution, regardless of how big or small, needs to be able to quickly communicate with your entire organization, and be smart enough to give each part of the departments what they need, how they need it, and when they need it.

Error-Prone Process

As individuals we all make mistakes. We are human, after all. However, financial processes are not generally tolerant of mistakes. Balance sheets need to balance. Columns need to line up.

It is surprising how many organizations are willing to tolerate processes that are maintained in worksheets or on paper. I don’t have a problem with using worksheets to do analysis, but worksheets cannot be used to track how to depreciate assets or recognize revenue. You are one sorting mistake away from a serious error.

If you have core requirements that force your team to rely on an error-prone process or a process that has a high risk of human error, then the problem is with the system and process, and not the individual that made the mistake. When your financial needs grow to the point the system requires an error-prone process in order to do accounting, it is time to change the system.

Bad Data, Bad Decisions

I often see management meetings of established organizations in which the focus devolves into making sense of the organization and data, instead of making strategic and tactical decisions for the direction of the organization. Financial solutions, and other organizational systems, are working right when they provide clear and concise performance indicators for decision makers so they can do what they are paid to do: make decisions.

Managing is about making an educated hypothesis, taking action, and collecting feedback to either validate or invalidate the hypothesis. Both the hypothesis and the feedback are dependent on getting rich data from your financial and other solutions. Lack of data and/or incorrect data will create wrong action to be taken by management with potentially detrimental results if the cycle continues.

Keep in mind that bad data is not necessarily limited to the choice of your financial solutions, but could also result from how you use the system (quality and consistency of data entry). Be smart. Know what you want from your solution, and then research to see what offering in the market meets your needs.

System Performance

Many financial solutions have limits beyond which users start to experience performance issues. The type can vary, but often includes a slowdown of the solution and/or complete unresponsiveness. These instances can be intermittent in nature, and can affect one or more users. They can also be limited to specific areas of the system (for instance, creating an invoice), while other areas work without experiencing the issue (for instance, updating a customer list).

Performance is the leading indicator of a need for changing your financial solution. It is a sign that either your organization has large amounts of data resulting in the current solution being inadequate, or that your use of the system has changed/advanced over time making the solution’s ability to manage the needed interaction with it inadequate.

On-premises solutions are often impacted sooner with performance issues compared to online solutions due to most organizations lacking internal IT resources that can manage networks, do back-ups, and perform other maintenance tasks. Even if an organization has the resource to invest in IT staff, an organization will need to investigate which one is financially prudent: adding IT resources or changing its financial solution.

What do all five of these ways you are losing money by using an outgrown financial software have in common? For one, they are usually gradual and build up to significant proportions over time so as to go unnoticed, or at least undiagnosed, for quite a while. The second commonality, I’m happy to report, is that they can all be fixed with the right financial software.

About Salaad Nur

Salaad Nur is Senior Consultant, Intacct at LBMC Technology Solutions. Nur has seven years of experience with Intacct, an award winning cloud-based financial software, and CRM implementation. Prior to developing this expertise, Nur served on the “other side of the table” as a controller. At LBMC Technology Solutions, Salaad is part of a team that consults on, implements, supports, and upgrades financial, ERP, and CRM software solutions.

LBMC Technology Solutions offers various financial software solutions. Please contact us for further questions or assistance.