Where great minds meet Honeycomb Connect
Home | My Cell | Help | Contact Us
Select Hive/Cell
Corporate Finance (CF50)
December 17, 2017  
Corporate Finance (CF50)
Corporate Finance
Executive Member Profiles
Executive Reports
Solutions Exchange Gallery
About Honeycomb Connect
Contact Us
Corporate FinanceExecutive Reports
CASE STUDY: Outgrowing Your Finance System
September 3, 2007
...back to list

CASE STUDY: OUTGROWING YOUR FINANCE SYSTEM

TECHNOLOGY is an essential tool in today’s economic environment.

And while it is possible to survive without the latest business applications, relying on antiquated finance systems unable to handle multiple languages, currencies, companies or different reporting regimes effectively could seriously threaten your corporate health.

Whether it’s international trading, buying or selling new divisions, diversification or just growing the business, companies could easily find themselves losing out to competitors that are simply more technologically advanced.

Moreover, as the regulatory environment becomes more complex, and the call for good governance and sustainable value creation more powerful, relying on outdated systems that cannot produce accurate, timely or reliable data offers little assurance.

Growth strategies therefore, however good, can simply become glorified statements if a company hasn’t equipped itself with the right tools to execute effectively.

However, for many organizations, concerns over system implementation and the costs involved are a definite a turn-off. After all, if it isn’t broken, why fix it?

But as Kevin Roberts, Vice President of Business Development at international accounting and compliance software specialist CODA Financials, Inc. explains, supporting a legacy system is neither a cost saving option, nor good business management.

“Migration from a legacy system based on DEC VAX to one on Microsoft SQL Server for example could mean the difference between paying out $75,000 in annual hardware maintenance to $2,000.

“The immediate return on investment is obvious. Furthermore, reliable, timely and accurate data is essential for decision making and enterprise-wide control. Making decisions on inaccurate or “old” data could prove fatal for a business.”

Admitting that your finance system needs an overhaul is just the first step however. Identifying what system will best support the organization and its business is infinitely more challenging.

For example, would the company benefit more from a specialist finance package (best-of-breed) or ERP – a system that covers all aspects of the business?

“First of all, you need to establish whether you’re simply changing one outdated system or all of them,” advises Roberts.

“For a company looking to update all its systems and preferring to deal with just one vendor ERP is certainly an option. However, implementation can be lengthy, and there is the potential to be locked in, exposing the organization to rising maintenance costs.

“Furthermore, if you’ve got in house systems supporting the processes that make your business “unique”, then scrapping them all for ERP would make a poor choice.

“Specialist finance packages can offer faster implementation, and are relatively simple to integrate with existing business systems. The vendor will also be more focussed on helping you to meet accounting challenges and keeping up to date with changing reporting rules.”

However, it’s the open architecture and integration capability that best-of breed systems offer that represents a winning combination for Roberts.

“An open architecture means that you have a choice of what platform to run your system on, and the opportunity to migrate. As a result, the system is future proof,” he explains.

“IBM, Microsoft or Linux for example may be the industry-wide accepted applications of today, but that could change.

“Having an advanced integration capability means that companies can ‘plug-in’ other systems using standard supported tools. With many systems, integration means hacking into the database, or companies being forced to re-engineer or re-invent their systems every time software is changed. This is clearly not desirable.”

When New Jersey-based Maher Terminals, one of the world’s largest independent, multi-user container terminal operators, chose CODA-Financials to replace its outdated financial accounting software it had certainly done its homework.

The company, which handles around 50 per cent of the New York/New Jersey ocean traffic and has its own in house cargo documentation and management systems, spent two years researching various specialist finance systems before making its final decision in 1998.

Since the initial implementation – completed in just three months - Maher has added other systems including CODA-Procurement, CODA e-Assets and is currently testing CODA-XL to replace its ageing financial reporting system.

According to Lorraine Soos, Vice President Controller at Maher, the initial decision to replace the company’s “functional but outdated” finance system may have been a big step, but the ease of implementation, and the subsequent vendor/customer relationship, has given Maher the confidence and appetite to continue investing in new technologies.

“The move was a giant leap for us, and it totally changed the way we report our business,” she recalls.

“The three month deadline may sound tight, but it was one we had set ourselves and we were determined to meet it.

“As CODA grows so do we. For example, we recently migrated to the fully web browser-based version of Financials.

“Although some of our users are still using a Windows Client, all users are accessing the same information. CODA has helped us to do that.”

When asked what were the priorities in choosing the new system Soos is unequivocal in her response.

“Real time data is very important to our business, and we need to have results as quickly as possible,” she explains.

“Our union workforce is hired on a daily basis through the New York Shipping Association. CODA enables us to track the hours and dollars associated with hiring anywhere between 1,000 to 1,700 longshoremen daily.

“Prior to CODA-Financials we were tracking revenue, expenses and statistical data mostly in Excel spreadsheets.

“Having reliable real time financial data means we are able to make decisions timely, and without the need to re-key data. Increased control and automation had also enabled our staff to spend more time analysing data as opposed to entering it.”

When Maher decided to implement CODA-Procurement it found itself re-engineering its complete purchasing system and developing reports so that information could be viewed online. Key to acceptance of the system was the InTray feature.

“It’s invaluable,” says Soos.

“Transactions are put into a holding area to be reviewed before they go to the General Ledger, so supervisory personnel can review and correct mistakes before they are incorporated into the system.”

The decision to implement a multi-currency, multi-company and single instance system has also proved beneficial following expansion of the company’s business.

“For the last two years we have the need to use dual currency due to our operation in Canada,” explains Soos.

“As a result, we have the challenge of consolidating our Canadian P&L using US accounting rules.”

Indeed, the company’s Canadian operation is set to expand after Maher was named the future operator of a new handling facility at Fairview Terminal in Prince Rupert, Canada.

“The new financial system and subsequent upgrades have certainly supported us as we have expanded,” adds Soos.

“And we will continue to invest in new technology. After all, our mission statement is ‘If there is better way to serve you, we will find it’.”

In a new finance system, flexibility and scalability is just as important as integration capability. For companies managing a widely spread organization, maintaining consistency of service and controlling costs is a never-ending challenge.

“A good finance system should be single instance and web enabled,” recommends Roberts.

“And ‘multi everything’ – currency, company and language – with all information accessed from a single database meaning that you have one version of the truth and real time enterprise-wide visibility.”

For STA Travel, one of the world’s largest travel companies for students and young people, moving to single instance was the first stage in a highly ambitious IT strategy aimed at modernizing its information systems and replacing outdated technology – including 18 different finance applications that were in use around the world.

The company has experienced impressive growth in size and sales in a highly competitive sector since it was founded in 1979. However, it knows that it needs to remain close to the individual needs of each customer to maintain its market leadership.

According to Nigel Nerurkar, IT program director with STA Travel Group, the solution is a careful mix of local and global processes.

“For us information and efficiency must be matched by the kind of flexibility and reliability – on a worldwide scale – that no ordinary company can guarantee,” he explains.

“Our customers want to do so much. They want to explore different cultures, experience the rich diversity of people and places all over the world. They want to study, work, play and learn, gaining maximum return from everything they do.

“If STA is to cope with the paradox of mass customization, it needs to be able to ‘plug and play’ different service offerings and manage an enormous matrix of possible destinations, experiences and needs. All at a price that delivers value to the customer and the company.”

Implementing a single, global finance system, enabled the $1.1bn turnover company, with more than 400 retail locations in 85 countries across the US, Europe and Asia, to adopt a standard chart of accounts and common finance processes across the group. It also gave STA Travel a single view of the company’s complex finances.

The new system was hosted on central computers in the US, and rolled out across the group via a web-browser application. The open web-based accounting solution not only fitted the STA Travel’s IT strategy, but could be easily integrated with existing and new POS (point of sale) systems.

As well as better decision making resulting from its single finance infrastructure, STA Travel says it made significant cost savings, has improved information flow, has faster and more accurate consolidation of group accounts, and has simplified future development and enhancements.

Moreover, as the company builds on the solid and flexible finance system, it will seek to drive its business more proactively through a better understanding of which products and customers are profitable, finer targeting of promotions and marketing campaigns and elimination of under-performing suppliers, products and services.

“With multi-million dollar decisions about acquisitions, channels and markets, we cannot afford to make mistakes,” adds Dick Porter, STA Travel’s chief executive.

“That’s why we believe that in the long term, our ability to formulate and execute winning strategies is our biggest source of competitive advantage.”

In conclusion, companies – especially those facing fast growth or change – need to recognize that keeping an out-dated finance system can be a false economy that will impede growth and reduce responsiveness.

Not only could investing in newer systems prove less expensive than first thought, it could deliver direct cost savings plus numerous ‘downstream’ benefits once users get better, more up-to-the-minute data and a solid understanding of the dynamics of the business and the market in which it operates.

Neither are the benefits restricted to larger firms. Small to medium sized enterprises (SMEs) can also take advantage of better flexibility and scale. Globalization has led to the opening of new markets, customers and leaner outsourcing opportunities and in a competitive economy, all businesses, no matter how big or small, need to be able to take advantage of opportunities that arise before their competitors.

Updating your legacy finance system will enable you to do that.

IS YOUR FINANCE SYSTEM OUTDATED? – THE WARNING SIGNS

  • Manually manipulating or re-keying data
  • Relying on meaningful information produced outside of the finance system
  • Costly maintenance
  • Loss of system support
  • No ‘spares’ or engineers with system experience or knowledge
  • Reliance on programmers or highly technical users to change reports
  • Unable to add additional currencies or companies.
  • Do you know what the hard costs are of running your existing application?

WHAT A GOOD SYSTEM SHOULD LOOK LIKE

  • Single instance and web-enabled
  • Integration capability and open architecture
  • Multi-currency, language, and company
  • Smooth implementation

 
Printer-friendly version
E-mail this to a friend
Comment on this story
...back to list
Member Site Tour
User Name:

Password:


Forgot password?
My Cell | Help | Contact Us Privacy Policy | Legal disclaimers
Copyright © Honeycomb Connect