Online, on time?
Friday, 5th October 2007 by Neil Hodge
Many companies are not taking advantage of the benefits online financial systems could provide. There are some key areas that could be improved.
While there is no doubt that the internet and high-speed connectivity have changed the way businesses can operate, many organisations admit that a lot of their day-to-day processes are still paper-based and do not take advantage of the opportunities that technology can deliver.
Consultants say that this reluctance to change is not financially driven; rather FDs are unsure which software will deliver the best value for money and they are wary of how easily packages can integrate with the existing IT infrastructure.
Matthew Ash, sales manager at IT vendor Creative Computing Solutions, says, “Most FDs we speak to are interested in anything that cuts costs and improves profitability. But they feel it is important that any implemented software enhances the business and doesn’t just offer a newer version of their old software.”
So how best can the FD use the web-enabled technologies that offer real-time access and multi-site operability out there to end the headaches surrounding paper-based processes?
1 E-invoicing
One of the most paper-intensive aspects of any finance function is raising and receiving invoices. Little wonder, therefore, that companies are investing in web-enabled software to automate these processes.
South African brewer SABMiller opted for an e-invoicing solution when it established its corporate centre in the UK. At the time, the company was using a SAP system from the main trading company in South Africa that was more suited to making payments for goods, rather than payments for professional and consultancy services. The lack of an appropriate tool created a number of problems for accounts payable: purchase orders were not routinely raised and it was difficult to pre-assess the monetary value of the service being provided.
SABMiller chose BasWare’s SAP-certified enterprise purchase to pay solution as its e-invoicing package. Stephanie Videlo, SABMiller’s finance manager, says that by using a workflow tool, the invoice status can be tracked and employees have the information at their fingertips when a customer or supplier calls.
Other businesses have seen discernible benefits in automating their invoice processing. Penny Goodwin, accounts manager at computer consumables distributor RDS Systems, says that the firm bought Draycir’s software package Spindle Professional in January 2006 to run alongside the company’s Sage accounts package. The software enables the firm to automatically email invoices as soon as the goods are dispatched, and send credit notes, financial statements and payment reminders to customers who have not settled their bills on time.
“The software is basic and easy to use and the implementation process was very smooth,” says Goodwin. “Since installing it, we have found that we have much better credit control because invoices are sent on the same day as delivery. Also, we have greater assurance that clients have received the necessary documentation because we can check our email system.”
2 Online filing
The government has been trying to convince more companies to opt for online tax filing. Lord Carter of Coles has recently been commissioned to report on how user-friendly HM Revenue & Customs’ website was before “encouraging” – with a fixed deadline – a date for companies to be forcibly bound to file their accounts online.
Consequently, software vendors have seen a great marketing opportunity. According to IT consultants, most companies are opting for familiar names and basic solutions.
Sage has certainly seized on the opportunity in its offering to SMEs. Peter Bateson, practice director at Lincoln-based solicitors Andrew & Co, says that his firm opted to move to online filing for the financial year-end March 2005. It uses Sage Payroll software because it is readily compliant with HMRC’s systems. The firm now uses the software to file all PAYE-related forms and to file VAT returns online to HMRC. “We used to budget for around two days for our accounts staff to complete the year-end paperwork. Now it takes about one hour as we are constantly updating our accounts information online and sending it directly to HMRC,” says Bateson.
Stephen McConnell, business services manager at accountant Baker Tilly, is also a fan of online filing. He has been testing a beta version of Sage’s new product called Sage 50 Accounts Professional Online. This allows clients to upload their financial information to a secure website so that their accountant can check that all the information is correct. It can then be forwarded to HMRC immediately online.
“In our trials with clients we have found this system cuts the time spent checking a client’s accounts information by half,” says McConnell. “That results in significant cost-savings for our clients as they are not billed for as many hours.”
3 Real-time analysis
High-speed internet connectivity has propelled business demand for “real-time” information sharing and unrestricted fast-data access. “Business can no longer rely on out-of-date numbers so analytical concepts and real-time data collection from numerous sources have become key to how a finance professional works,” says Chris Ward, business intelligence consultant at CedarOpenAccounts, a supplier of financial software packages.
“An example could be a credit limit that has been breached or a client’s credit rating that has altered. If that happens, a warning will be given that no new sales should be shipped until cash has been collected. These alerts trigger real-time change in the business and are at the heart of what performance management means.”
Many major UK companies are using real-time analytical software to improve financial performance and corporate governance. Lloyd’s of London insurer Equity Insurance is using Applix’s TM1 solution to carry out complex business modelling on all areas of the business. These planning capabilities mean the company can achieve complete transparency and create uniform processes across the organisation. Equity Insurance can now update data into the TM1 system from the legacy Sun Accounts system every five minutes, making it near real-time. Previously, this process took 24 hours.
Martin Richmond-Coggan, vice-president, EMEA at Applix, says, “When considering a real-time business intelligence application there are important components to evaluate: how often should the data be analysed and what should be done with it? Success is not always about providing data in ‘real time’, but at the right time.”
He warns FDs that “real-time applications are appropriate only if real-time results are required. Moreover, the value of real-time is not just in the ability to calculate at speed but whether the results that are produced can be analysed in a similar time frame.”
4 Software as a service
Software as a Service (SaaS) involves buying in business application recourses over the internet. The application will be managed by a third party and housed at an external location.
There are a number of advantages to this, says Bob Tarzey, principal analyst
at research firm Quocirca. First, SaaS is usually paid for as a subscription or
on a per-use basis, so the need to make upfront investments in expensive applications and IT infrastructure disappears. “Measured over the life cycle of an application, SaaS may be cheaper than an on-premise deployment, depending on how it is paid for and the scale of the deployment,” Tarzey says.
Some of the early leaders in the SaaS market include Signifo’s WebExpenses, a web-based expense claim and report programme, and expressHR’s solution that manages all aspects of the recruitment process.
Michael Sterling, FD at recruitment agency Eden Brown and a user of expressHR, says, “FDs like the SaaS model more than the traditional software purchase approach because there is lower risk as the provider must ensure success to gain transaction revenue.”
5 Web-enabled Sarbanes-Oxley compliance software
It’s an undeniable fact that FDs are increasingly having to take more personal responsibility for their published accounts in the wake of Sarbanes-Oxley, so it’s little wonder demand for online systems that can check multi-national and multi-jurisdictional financial reporting standards and regulations is growing.
Compared to the costs of consultancy on the issue, getting SarbOx compliant software in place might well prove a real bonus for the harassed FD. At the start of this year, OpenPages, a provider of governance, risk and compliance management solutions, released Governance PlatformSM 5.0, designed to unite an organisation’s governance, risk and compliance initiatives into a single management system.
The platform claims to provide firms with a better understanding of the risks that can impact their business and a greater insight into the effectiveness of controls that monitor and mitigate those risks – but of course, with an Act as complex as SarbOx, it’s unlikely to be able to cover everything. So beware of claims that ‘the software can help organisations reduce unexpected outcomes, become more efficient, improve top-line and bottom-line results, and increase company valuation’.
The platform also incorporates OpenPages FCM, the market-leading software solution for compliance with the Sarbanes-Oxley Act and similar worldwide financial reporting regulations.
However, as one FD, who asked not to be named, put it, “Given the potential penalties that can be meted out by the US SEC, it would be a brave vendor indeed to suggest that such a software solution can give 100 per cent assurance of Sarbanes compliance.”
Case study
Litasco, the international marketing and trading company of the Lukoil Group, needed a single online budgeting and financial reporting solution that had the capability to consolidate a 12,000-cell Excel package under US GAAP and cut data processing times. The company’s existing reporting procedures lasted almost a week. This meant that analysts working within Litasco spent up to 90 per cent of their time compiling reports, leaving little time to examine the data produced.
Laurent Corbaz, head of financial reporting and planning at Litasco, says, “The reporting process had been incredibly slow and often provided inaccurate or unusable data. We needed to move away from reporting on Excel spreadsheets towards something that was more manageable but just as easy to use and familiar to our analysts and management teams alike.”
Corbaz says that his key requirements from any implementation were to cut reporting time, remove the reliance on Excel spreadsheets, enhance the finance department’s ability to analyse business key performance indicators and integrate easily with SAP.
After considering a number of different packages, Corbaz opted for OutlookSoft, which specialises in corporate performance management software. It was rolled out in several short stages over five months.
Corbaz says that reports that could previously take up to a week to finalise can now be produced in just half a day, amounting to a 90 per cent reduction in total reporting time across the organisation.
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