How the right accounting and finance tools can help your company succeed

[Blog by Chris Tredwell]

Modern Business has changed. It isn’t about IT. It isn’t about software. It’s not even about you. It starts with your Customer. At its heart is your product and the market it addresses. 

Companies can no longer wait for a market to come to them. People are smart, they have been here before and most importantly they learn. Today we see more and more customers looking to buy what they actually need and not what the major vendors want to sell them.

In a maturing market where IDC and Gartner generally agree that 5% growth is the norm, Cloud-based / On-Demand vendors are presenting record growths in revenues.

Is this indicative of a significant change, not just for accounting solutions but business management software in general?

We think so. Gartner, like many others, see customers delay buying activity with organisations including Sage, Oracle, SAP and Microsoft whilst they struggle to assimilate the various significant acquisitions they have made in recent times (for example the major distraction of acquiring Business Intelligence and CRM solutions). Legacy on-premise solutions hold little or no traction with the modern, discerning purchaser given an increasing realisation regarding the ongoing costs of licensing, infrastructure and support, such solutions entail.

According to some research, this is fuelling a significant drive towards online accounting / SaaS (Software as a Service) finance and accounting solutions and slowing investment in traditional applications. But why?

One reason is that many organisations are looking for ways to drive down cost. Most Cloud solutions are located in secure data centres with levels of security and management that even enterprise IT departments find hard to achieve. The Cloud delivery model allows business application and infrastructure costs to be spread over a period of time rather than paid for upfront. It also eases remote access to business applications and interaction between different organisations, both of which are increasingly required for many business processes.

Whilst it is generally accepted that almost any business application has the potential to be adapted for the Cloud, it needs to be introduced carefully alongside existing business models and that financial and cultural issues need to be addressed as much as, if not more than, the technical ones.

Why do companies fail?

“To fail to plan is to plan to fail” as the edict goes is not too far off the mark. Having a clearly understood strategic goal is at the heart of the matter.

What is the business for? Why will customers buy your products and services? How will you achieve such a goal? Business plans are very useful tools in encapsulating not just a set of numbers relating to revenues and expenditure, but also what strategies and actions will be put into play in order to achieve a set of measured results. Measures are important. If you’re going to fail, fail fast. Either adapt, change, or simply stop what you’re doing and do something different.

Not directing resources to the appropriate task, or not doing so in sufficient numbers, or simply not doing so at the time time, can often cost a business dear. Planning resources, managing cash- flow, or appreciating the importance of working capital (the amount of money you need to actually fund the operation of the business) are all paramount in structuring a sound and lasting business proposition. And it all starts with a plan.

Must Have Tools

So you have an idea. You need a plan. It should list goals, objectives, multiple strategies, SMART actions (Specific, Measurable, Achievable, Results-based with defined Timescales). All looking good? Great, now it’s time to get on with the real work.

To start with you must have systems capable to billing customers for your products and services. An online accounting solution normally has the ability to automatically cope with a variety of product types, multiple delivery locations, VAT / taxes and so on as well as being able to email invoices directly to a client (as opposed to printing it out and sending it in the post). Once billed it is important (if not working on a cash with order basis) to collect payment from customers in the shortest possible time-frame so tools to measure outstanding debtors (people who owe you money) that can be used to chase up slow payers etc. are also vital.

On the other side, managing your expenses in the form of orchestrated purchase order processing and purchase invoice approval will provide appropriate controls on your outgoings. Obviously the idea is to spend less than you receive in sales revenues.

Managing the difference between the two is vital on a week by week, month by month or period by period basis depending upon the velocity of your trading. This is where the cornerstone of finance and accounting comes in to play. An online accounting solution should be able to assist you in managing your gross and net margins, cash-flows, indirect costs (establishment, insurances and utilities etc.) as well as interact directly with your bank for the payment of suppliers and the banking of cash from customers. Wheresoever possible such information contained with the accounting system should be updated in real-time. The modern business needs to be agile and ready to adapt, having up to date performance information is, therefore, an imperative.

Reporting

It’s not very efficient to have operational personnel spending excessive amounts of time collecting and collating data merely to provide information to support the effective administration of any business. Such “business intelligence” should be able to harvest through everyday processes captured at source, such as the sales team, buying department or in the field, removing the need for members of staff to identify, find, organise and present key performance metrics.

In modern Cloud-based solutions such as Aqilla, all data can be captured within a document which reflects the way most organisations operate. For example, one cash receipt document can summarise cash receipts from multiple customers in a single step; a simple-to-use weekly time-sheet can be used by all staff members and can address multiple projects and activities; invoices can be free form or relate to catalogue items, and a payroll summary could link to the detail captured in the payroll system.

Straightforward document status management is also essential, enabling a flexible approach to the processing and authorisation of any item using rules set by the finance team.

All data can also be entered into the system electronically using a web service. Such an approach supports the entry and amendment of all source documents, the updating of status information, as well as the entry and amendment of static reference data.

Create Information — NOT data

Very often, large amounts of data are provided to the business at the expense of reliable, relevant information. Making sense of huge volumes of transactional data (Big Data?) is only going to be of use to a small percentage of the organisation. In addition, forcing staff to use complex and cumbersome business intelligence software, which they may struggle to understand and prefer to avoid using, drives down efficiency.

There are a large number of instances where data is extracted, re-formatted, tabled, graphed and delivered to audiences using systems which, in the main, users don’t even bother to open or log-in to find out why or what is relevant to them. This is because they do not know how to or they do not see it as part of their day to day responsibilities. In addition, the data often contains information which, whilst accurate, is of no contextual relevance to their role.

Budgeting

Having your business systems tell you what is happening is one thing. Returning to your original plan, they should also be able to compare how you are fairing against your original expectations. This is where budgeting comes in to play.

Setting up a budget or forecast should be quick and easy. Systems should allow you to break a budget down to whatever level of analysis you require (be it by product, store, region etc.).

Budgeting should be part of the core accounting process, not an add-on feature and should enable you to track the performance of the business over an extended number of periods. Knowing what is happening today is great but understanding trends in terms of income and costs over time can be of significant value when considering making further investments in infrastructure or product development.

Talking Spreadsheets?

Companies have spent millions developing such systems but the returns often fall well short of any expectations of improving margins, efficiency or productivity.

One way to reverse this situation is to provide users with tools that are easily accessible from anywhere; familiar, flexible and adaptable (designed to scale from simple straightforward operation by the occasional user to the sophisticated and complex analytical needs of a ‘power’ user). One commonplace tool is Microsoft Excel. If a financial and business management application can provide proper two-way integration with such everyday and ubiquitous tools, the situation can be improved considerably.

Of course, with a modern Cloud-based solution such as Aqilla, all data can be maintained in either the application via the web, or locally in Microsoft Excel. Making and saving any change in either the core business system or Excel means that the data is always available in real-time and accurate in nature.

Full enquiries can be replicated within a worksheet including predefined selections, for example, to select by account name or period range identifiers. This negates the need to export data — a practice which at once renders the information instantaneously out of date, introduces the risks associated with version control and adds to a possible overly complex security issue that can lead to questions around access and availability.

Such vulnerabilities can be eradicated by removing spreadsheets altogether, but that is not practical in a world where users and managers require instant access to easy-to-use data that they can work with. Ensuring any spreadsheets link directly to the data (as opposed to a being an off-line copy) can add real value, save lots of time and reduce errors in reporting.

Data linked directly to the database ensures information is always as accurate and up-to-date as the core finance system. Documents and journals can even be prepared and managed externally using the same approach and then imported into the ledger.

Such on-line or linked data also has an additional benefit to a business in terms of data security. Very often, any access to the data requires a secure login using certificated and/or encrypted connection (e.g. https://) or other web security service. As a result, it is impossible to access the data without the correct user ID and password. If data is required off-line, Aqilla enquiries can, of course, be exported to high-quality PDFs, CSV files and Microsoft Excel worksheets (or OpenOffice, Google Docs etc.). Worksheets can be opened directly or saved for later.

We believe there is no real debate. Modern Cloud-based accounting and business applications allow businesses to use the latest software developed on a subscription basis, removing the need for upfront capital investment in terms of hardware and software, as well as upgrade costs. It also means that businesses, no matter what their size, no longer need to manage and support accounting applications in-house, as that is taken care of by the company supplying the service.

• Commercially — it makes sense and will save money. Technically — it is much simpler. Businesses no longer need to purchase, configure or maintain their own in house servers running dedicated database applications. Users can access the systems 24 x 7 from anywhere.
• Operationally — it is more secure. Operating critical business systems in a secure, reliable and well managed UK data centre, providing automatic backup and disaster recovery protection is proven to be far more reliable than traditional in house client- server-based configurations.

Summary

So, a plan to deliver profit will hopefully lead to long-term success! Whilst every business is different, every single one needs the right controls and in terms of accounting and business support, the right software.

However, whilst ensuring your business chooses the right software tools, remember the people you have using them matters almost as much as anything else. Properly trained, motivated and effectively managed people can add real value too.

As well as the tools to do the job, make sure you have great products; a receptive market; a robust plan and some great people. If you do, it’s likely your customers will notice and as a result, come back to you again and again.