Abstract

There is no question that Business Intelligence can play a significant role in increasing internal productivity as well as competitiveness. To some extent I am going to play the role of devil’s advocate in this article and challenge people to utilize Business Intelligence at the right time and by the right people.

Why do firms suddenly need Business Intelligence?

I have read a number of articles recently that advocate the use of Business Intelligence by many people within an organization. Actually the reasoning seems to be valid. IT departments are swamped with requests for service by more and more people. Many of these requests are Business Intelligence oriented. People see things happening in their market place and need to respond as quickly as possible. Business experts say that we need to become more agile, ready to change our operational and sales strategies in an instant to meet an ever more chaotic competitive environment. Business Intelligence tools are becoming more and more powerful.

The recommended solution is simple. Teach people how to utilize Business Intelligence tools so they don’t have to wait on the IT department several weeks. The underlying assumption is equally simple. If people know how to use Business Intelligence tools, they can react quickly as market conditions shift.

Do you really need to move this quickly?

I don’t think that Business Intelligence for SMBs and SMEs needs to be based on the assumption that we need to react quickly; almost it seems as if there’s a panic. If we don’t address the crisis de jour, our opportunity to meet the challenge will pass in just a few weeks. That’s what some industry experts seem to be saying. Be ready to react instantaneously and in order to do so you need instantaneous information from your Business Intelligence system. Since IT cannot react that quickly, it’s up to the individual to generate the information they need. That means these individuals need to know how to use the Business Intelligence system.

I accept the fact that firms need to react to changing market conditions, but I don’t agree that reaction times are measured in days, not months. Business conditions do change, but you shouldn’t try to react with a speed of a commodities trader. Yes, some firms make money in the commodities market, but there are also far too many examples of firms and unsupervised individuals making bad bets.

Maybe the underlying issue is the whole notion of reacting to changing market conditions. If you need to react quickly, that’s a knee jerk motion and you may not have all of the information you need simply because you tried to use your Business Intelligence system to react quickly.

Maybe you should be more proactive?

Rather than trying to use your Business Intelligence system quickly in order to react quickly, you should proactively use your Business Intelligence system to put you in a position where you can react quickly and effectively. I think that’s the issue. You cannot achieve long term success if you are constantly reacting to changing market conditions.

This doesn’t mean you should never react quickly. Sometimes you need to do so, but the key issue is creating a proactive Business Intelligence system so that when conditions change, you already have simulated the conditions. Proactive means that you have discussed various scenarios and have the information at hand when and if conditions change. Actually you should have already defined market scenarios and used your Business Intelligence system to help you determine what your reaction should be. Proactive means that you have already asked and answered the question.

Who should generate the intelligence?

If you have decided that it’s best to be more proactive, who should be responsible for generating the information you need to make sound business decisions? I am still not convinced that people need to be spending their precious time designing Business Intelligence reports. Many Business Intelligence systems are very powerful, but this power tends to be wrapped in complexity. Most people (and firms for that matter) need to concentrate on what they do well. Sales and marketing executives should spend time determining what the firm should do, not determining how vital information can be extracted from the Business Intelligence system. That should be the responsibility of the Business Intelligence guru. Sales and marketing executives should be using information effectively, not generating it.

Does IT need to be responsible? Possibly or you could create one or more super users that know the Business Intelligence system intimately. Business Intelligence for SMBs and SMEs (given their rather limited number of employees) has to be more of a one man or woman show. That’s not the best scenario due to the risk of losing that valuable person, but then that’s an issue for all SMBs and SMEs and every one of their most talented employees. The key question you need to address is in essence the experience/benefit ratio of any Business Intelligence system. People who use a Business Intelligence tool infrequently are going to take longer to extract the information simply because they need to refresh their memory before they begin. At the same time their reliability of the data extracted might not be as high, again simply because they are not quite as knowledgeable as someone who does this more frequently.

In the end there are two objectives you need to keep in mind. If you proactively take the time now to determine what information you might need in the future and create the decision support tools (reports as well as what if analysis tools) you will need, you won’t have to react in a crisis mode when market conditions change. Second, you need to determine whether it makes sense to train people on a complex Business Intelligence tool when they may not need that tool except on an infrequent basis. Again, if you take this step now, you will be ready when the need for information occurs.

Creating an internal Business Intelligence system

Business Intelligence for SMBs and SMEs isn’t just about reacting to outside market influences. It can and should be just as important to control internal business operations. Actually this is the case for any firm.

While there is no doubt that sound business decisions are based primarily on the person making the decision, these decisions need to be based on sound information. Seat-of-the-pants decisions might work for small firms where the experience of the primary decision maker is the key element, but there is just too much information spread over too many decision makers for this practice to work in larger firms. In this case accurate and timely information must serve as the foundation upon which sound decisions can be made.

Why do you need this information?

Accounting and ERP systems can store and regurgitate just about anything you want. Actually it’s possible that for every transaction posted there can be 20, 30 or 40 fields that will allow you to slice and dice data any number of ways. The fact that you can carry reporting (intelligence?) to this level of detail doesn’t necessarily mean you should do it.

Start by asking yourself why you need the information. If it doesn’t lead to a decision, then you don’t need it.

In what format should this information be presented?

With the exception of audit trail reports, rows and columns are out. In no case can they lead to a decision.

Pie charts and bar chart are out as well. They, like row/column reports, are no more than a snapshot of a specific condition at a specific instant in time. People should never make snap decisions and that’s all this information can support.

Having said this, there is one use to which some specific data can be applied. Exception Management or Business Alerts are usually triggered by a specific value, but only if that condition falls outside an expected range. As an example, if a customer’s account exceeds its credit limit or a specific invoice becomes “x” days overdue, that condition should be brought to the attention of a named individual. Business Alerts handle the notification process while Exception Management gives users the ability to deal with an alert in a contact manager like application that allows them to track the steps they (and others) take to resolve an issue.

If rows and columns, bar charts and pie graphs are not acceptable, what’s left? Line charts are the only form of reporting that actually lets users develop a sense of the history and future of business conditions that can then give people the total picture. It really doesn’t matter where a company is today, nor does it matter where a company has been. All of that has already happened and cannot therefore be changed. What can be changed is the future and that’s where people need to concentrate their thoughts.

Think of a line chart as a beginning, a middle and an end. Historic values form the anchor upon which the line chart is constructed. The last current piece of data is the jumping off point and the extension of the line formed gives us an idea as to where our future “might” be.

Once we see the total picture, we can determine if it is heading in the right direction. Well, that’s part of the analysis, but not everything. The extended line chart gives us a hint of our future, but we still haven’t figured out if that’s where we want to be. You need a second line chart that acts as our target. Now we can see in an instant our past, one possible future and our target.

There are still two adjustments we might need to make. If the volatility of the data is significant, we may have to utilize some form of smoothing to make the data more understandable. Second, data does not follow a straight line path. Sometimes it’s increasing/decreasing over time. If that’s the case we may need to utilize some form of analysis that let’s us see these trends.

Now we can “see” the data and make a decision. If the trend seems to be within the acceptable range or budget we created, then no decision is required. If the trend seems to be heading in a negative direction, then we know we need to take action. No data analysis will ever tell us what to do, but this approach will help us determine if we need to do something and most importantly if the decisions we have taken seem to be having a positive affect.

One last thought. The key to the charts we have been discussing is that they give us an opportunity to become more proactive. If you see that your actual results are starting to trend in a negative direction, you can proactively take steps to make changes before the raw data indicates that you need to do something. Of course this is just another form of forecasting, but in this case the forecast is operationally oriented.

What information needs to be extracted and displayed?

While it is certainly easy to create graphs once the data values have been identified, the hard part is determining what you need to track. Remember, you can create any number of fields than can be used to feed your data analysis engine. Picking the right fields is the tricky part.

Think of an Income Statement. It’s got lots of data that could be graphed. Now think of virtually every accounting and ERP system’s ability to support drill down. If you can drill down from a data value to underlying information, then the information is of no use to you because it is being influenced by other data. Since you cannot track everything, you need to identify those basic factors that have the most influence on your business. Identify your profit drivers.

Maybe inventory turns in a distribution environment can be thought of as a Profit Driver. Don’t forget though that it’s not going to be possible to track every single item your carry. Maybe start with inventory turns as a whole, then by product line or possibly region. Where you start is not as important as your ability to quickly see where you may have a problem developing. Then you can drill down to a more detailed analysis.

Profit Drivers are a bit like the concept of a common denominator. You need to identify those values that are not influenced by other factors. If you can track and control these key business drivers, the Income Statement will take care if itself.

Summary

Effective business decisions drive business profitability. These decisions need to be rooted in facts that can be brought to light instantaneously. People do not have the time to guess. They need to know where to place their attention. They also need to know whether the decisions they make are having the desired effect. If there is too much data, the issues may remain clouded. If there is no way compare actual results against targets, how can you ever know if you are where you want to be or need to be. Finally, people need to identify those Profit Drivers that have the most significant impact on the organization.

Business Intelligence systems are the vehicles by which critical information can be extracted from an accounting or ERP system and used to not only monitor internal processes, but also support the strategic decision making process whereby firms can identify opportunities to create tactical advantages or meet market challenges. Since changes in tactics might need to be implemented quickly, there is no time to waste. You do not have time to query your Business Intelligence system and you certainly need to avoid the creation of erroneous data analysis.

If you are going to rely so heavily on your Business Intelligence system to support the decision making process, your analysis needs to be proactive and it needs to be managed by people that are Business Intelligence experts, not casual users. If you can determine in advance what your competition might do, then you can also determine in advance what you might do. Rather than waiting (and doing nothing) until your competition strikes, you can and should be using your Business Intelligence system to support the planning process, not support the reaction process.

Abstract

The process of selecting a new accounting or ERP system can become very time consuming and frustrating. Rather than presenting a multi-page document that discusses each task you need to accomplish, let’s concentrate on a single issue: evaluating the system itself.

At this point in your accounting and ERP software evaluation project you should have completed at a minimum the following significant tasks.

• You have solicited and received the buy-in from each significant stakeholder: executive, CFO, CIO or IT manager, line of business managers, sales and marketing managers and staff and finally the people in the trenches (those people who will actually be using the system on a daily basis).
• You have met with each of these stakeholders and determined what from their perspective they like and dislike about your current system.
• You have met with various executives and managers and determined what the company needs to do well to achieve excellence.
• You have also met with executives and managers to determine the direction the company will be taking in the future (current direction as well as expansion into new industries and geographic territories).
• You have figuratively speaking taken the company apart and put it back together to enable it to become more competitive (some may call that process improvement) and have launched improvement projects to transform the business.
• You have met with stakeholders and determined what features, functions and reports the new system should support to achieve the company’s strategic and operational objectives, some of which may be future events that “might” happen.
• You have researched various product options and discussed your requirements with vendors and/or software resellers.
• You have conducted a very high level needs analysis to identify and eliminate those products that clearly cannot meet your most important operational and business intelligence requirements.

Now we have reached the point in time where this article becomes relevant. The only products being considered are those that appear to meet your most important requirements. Although you have not yet actually “seen” the product in the level of detail you will need, the vendor or reseller has confirmed the fact that their products can meet these requirements. This hands-on evaluation will either confirm or deny the relevancy of those products under consideration and you will decide which products move forward.

Step by Step Analysis

A proper hands-on product evaluation (a.k.a.demo) cannot be completed in a single day. This also applies to an evaluation of a mid-market accounting system. Keep in mind the fact that there are several significant stakeholder groups and each need to view the system. Actually some people might need to view the system twice. The first viewing would concentrate more on ease of use while the second viewing would analyze detailed functional processes. Some people will need to actually “touch” the system as they will be asked to enter transactions and this will require some time to complete. Given all of this you will need to decide who should attend a demo, when and the format of the meeting (viewing from above or actually operating the system).

Functional Requirements

An accounting and ERP software evaluation project must start with a very detailed analysis of features and functions. RFIs (Request for Information) are important decision tools. If a product does not support a significant number of key requirements, it should be eliminated from further consideration regardless of how good it is in other respects. It doesn’t even matter if a product is generally accepted in the industry. If it doesn’t do what you as a unique firm need it to do, then it probably isn’t right for you.

The RFI analysis can be scheduled as a two-step process. Take the RFI you created (If you didn’t create an RFI, then stop and do so!) as you evaluated your current system and created a vision of your future. Identify all of the requirements that are very important to critical. Use this same check list to vet each product under consideration. Look first at the critical requirements that cannot be met. Then look at the requirements you identified as being important, but not necessarily critical.

If a product does not meet a sufficient number of your critical requirements, particularly when compared against other products under consideration, maybe it should be eliminated. Of the products remaining, identify the important requirements that cannot be met. Then determine if these requirements can be met via an existing third party enhancement that has been thoroughly tested. If no third party enhancement is available, can the product be customized? Finally, compare the list of shortcomings for each product. If one product is clearly weaker than other products, decide whether it should be eliminated or not.

At this stage in the accounting and ERP software evaluation process you are looking for products which you and a majority of your users like (first impression discussed below) and one that can do what you need it to do. Whether you eliminate a product now or later is really not that important other than the fact that evaluating any product is very time-consuming. If the products you decide to carry forward are supported by the people who will be asked to use them, then it’s OK to eliminate one or more products as you move forward.

First Impression

While it’s all too easy to immediately launch a detailed hands-on analysis of a candidate product, you really need to approach this in the proper order. The first step should be a high level view that gives people an overall sense of a product. Since resellers and vendors are all too eager to give you a “dog and pony show” to promote what they think are a product’s strengths, give them this opportunity. Let them show their product and all of its glory (with some controls of course to keep them on track). Your objective here is a little different. You want to give your users an opportunity to form an initial impression of a product.

First impressions can become in many cases a self-fulfilling prophesy. If a system seems to be complex and the data input process more time consuming than with their present system, these first impressions may become difficult to overcome. Imposing a complex system on people who have not had an opportunity to view it first and approve it may prove to be a significant issue.

While first impressions are extremely important, you need to submit to your users products that meet your functional and transactional requirements. It makes no sense to ask people to spend a significant amount of time evaluating a system if it doesn’t meet certain minimum standards. That’s why you need to complete the detailed functional analysis first.

Touch the Product

High level views of a product are important, but some people really need to “touch” the system. This is particularly true for people who are going to be responsible for transactional input. Modern accounting and ERP systems have become powerful tools that give firms more control over their daily operations and certainly more business intelligence. Unfortunately the achievement of this power may impose more burdens on people than you might realize particularly if you don’t really need everything that a product provides. That’s why it’s critically important that people assess how a product is going to fit within the business processes of your unique firm.

This hands-on analysis should concentrate on two key areas. How long is it going to take to complete a transaction such as an AP invoice? Second, to what degree do the business processes as required by the accounting or ERP system possibly conflict with the preferred business processes of your firm?

Business intelligence applications can give people very useful information, but the extraction of that information usually requires the addition of data fields that were not present in your “old” system. That’s OK as long as you understand that it’s going to take more time to complete the transactions that contain the added fields. The more information you need, the longer it takes to input source transactions. You need to strike a balance somewhere.

To some extent the same argument holds true for business processes. Workflow can become a very powerful tool that helps people do what they need to do, but at the same time it can impose activities on people that do not need that level of control. The larger the system the more it has the potential to impose processes that are not needed or wanted. As your accounting and ERP software evaluation process moves forward, you need to understand what the system will impose on you and whether this imposition is appropriate for your firm.

Third Party Enhancements

No accounting or ERP system can provide everything every firm needs out-of-the-box. With limited resources vendors have to decide what functionality they are going to create and what functionality they are going to encourage third parties to create. Since it is very likely that your evaluation will reveal functionality gaps, it is vitally important that you determine if there are third party enhancements that address these gaps. Of course this also means that you will need to evaluate these applications just as you are going to review the core accounting functions.

Customization

If the products you are evaluating do not meet all of your functional requirements and you cannot find acceptable third party enhancements, some degree of customization will be required. My first suggestion would be to see if it’s possible to eliminate the need to customize a product in the first place. If there are other products that do not require the same degree of customization, maybe you should eliminate from further consideration a product that requires substantial customization. I realize that this candidate for elimination might be a crowd favorite, but substantial customization should be avoided if possible.

If no product supports what you need, maybe you should change your business processes. I realize that you might think you need certain functions, but it makes no sense to customize a system if you can change the way you do business. Maybe the fact that no product supports what you think you require is a sign that you need to change?

Business Reporting and Intelligence

This is probably one of the less complex issues you will need to address in any accounting and ERP software evaluation. At the same time it is one of the most important considerations. Today’s products all support some form of Business Intelligence (BI). Even mid-market and small business products support fairly sophisticated reporting systems. My challenge to you is this. What do you really require in terms of BI? Given the fact that you can extract just about anything you need, the evaluation really should focus more on what you think you require rather than a product’s ability to slice and dice data. Since it’s extremely easy to create reports and graphs, it’s also extremely easy to produce too much of what you really don’t need.

I have addressed this issue in several past articles and would therefore refer you to these articles if you are interested, but would also summarize my thoughts as follows.

• Ask yourself why you need the information you think you need. Challenge people to justify their need for specific BI information just as you challenged yourself to justify a new accounting or ERP system.
• If you are going to improve business performance, you must start by identifying the key drivers that influence your bottom line. I am not convinced that people spend enough time identifying what they really need to do well. Key drivers are like common denominators. There are no underlying factors that influence their behavior. Identify these key drivers and control them and those business processes that are affected by these key drivers will improve as the key drivers improve.
• Truly effective business metrics give you a basis for comparison that either tells you where you are going and whether you are above or below expectations. As I have said many times in the past, bar charts and pie charts are pretty creatures, but they tell you nothing as does every other “status report”. Status reports are static by their very nature and therefore will never support the decision making process. You need to create a system that tracks key business drivers and helps you understand where you have been, where you are, and where you appear to be going. In addition you need to determine where you would like to be. That’s your target and that’s what you compare against your actual performance.
• Consider creating an interactive Exception Management reporting system. If you identify key drivers and you present that information in terms (mostly line charts with some form of regression analysis and forecasting) that will allow you to see where you need to concentrate your efforts, you have two of the key ingredients for an effective Exception Management system. Use the system to analyze this data and build in alerts that help you become more proactive than reactive. Then take the last critical step. Build a task management system that allows you to track your efforts to control and improve key drivers. A task manager is not unlike a contact manager in that it allows you to record notes and schedule reviews. It also needs to support collaboration so that multiple people can be working on the same issue and sharing their thoughts and analysis.

Customer Relationship Management

Customer Relationship Management (CRM) systems can become powerful tools to generate new business and hold onto the business you already have. The real question is whether the products you are evaluating support CRM the way you would like to practice CRM. Some CRM systems are so powerful that they actually get in the way of efficient and effective sales and marketing activities for individual firms.

Evaluate the CRM system associated with the product you are evaluating. Does it support the way you would like to run your CRM activities? Does it offer the functionality you need as a unique firm? Does it offer so much functionality that it gets in the way? Are there other CRM products that more effectively support what you want to do? To what degree are these products integrated with the product being evaluated?

CRM doesn’t necessarily drive your business, but it is the gateway to new customers. People need to look on the CRM system as their business ally, not their business foe.

User References

While first impressions and hands-on testing of candidate accounting and ERP systems is critically important, these experiences are not the same as day-to-day “testing”. That’s not possible so you are going to have to rely on current users to paint a possibly different picture. Your task is not as easy as it might seems because the most readily available references are those provided by vendors and resellers and these firms are hand picked to represent the best of the best. If users are truthful, they will provide information regarding success as well as challenges they have faced.

By all means talk to vendor and reseller provided references. You might even consider site visits if the reference is fairly close. Don’t stop there though. Product specific user groups can be identified and contacted. Their experiences might be very educational. You might also try web sites such as Toolbox.com that allow participants to literally ask a question such as “Does anyone have any experience with Product X”?

Vendor and Reseller Evaluation

If a product has passed all of the tests you have subjected it to, your final analysis should concentrate on the vendor and reseller. Do the vendor and reseller both appear to be stable financially? What is its roadmap for product development? Is this a new product to the market, an older product that may be declining or a product that is growing in terms of popularity? Who is going to be responsible for support? How quickly will support people address your issues?

In the end the most important question needs to be asked. Is the potential relationship with the vendor and/or reseller one that is more like supplier/customer or true business partner? The services provided by your prime contact (vendor or reseller) can answer part of this question, but your gut feeling is more important. If you are going to establish a relationship with a reseller or vendor, it should feel more like partnership rather than a strict business relationship.

Buy-In

You needed a buy-in from all stakeholders before this accounting and ERP software evaluation project launched, and you will need this buy-in now before you move forward to a purchase decision. Hopefully the vast majority of your users have all concluded that a single product was superior to all others and are eagerly awaiting its implementation. That’s the ideal case. Reality says that people will have questions and issues that need to be addressed. By all means address every issue as it arises. The fact that someone might not have voiced a concern doesn’t mean they have no concerns. It might just mean that they were reluctant to do so.

As you move from step to step in this evaluation process, make sure people feel comfortable moving forward. If several people have the same concern, make sure these issues are addressed before you move forward. Don’t ignore people and don’t “wait until later” to address issues. You want people’s buy-in on a continuous basis, not a specified point in the process.

Conclusion

The accounting and ERP software evaluation process can become time-consuming and that’s OK as long as you are spending your time wisely. Of course “your time” means everyone involved in this evaluation project. Having identified through your research products of interest, you will need to follow this step-by-step process rigorously. The initial steps you take are more allied with eliminating products from further consideration, while the final steps are really geared to painting a picture in everyone’s mind of how a candidate system could be used on a daily basis. Start with several products. Limit the number of people participating initially as those people will be responsible for a single task: determining which products meet a minimum level of your functional requirements and which products do not. As you move forward, more people should become involved as they are going to be asked to use the system on a daily basis. In the end you want people to look forward to the system they have had a hand in evaluating.

Abstract

Why do I keep on discussing accounting and ERP software selection? It’s really quite simple. Accounting software selection (small to mid-sized firms) or ERP software selection (larger and/or more complex firms) projects are difficult, time consuming and frustrating at the best of times. Compound that with a less than effective selection plan (or a poorly executed selection plan) and you can almost guarantee failure; either failure to achieve many of your objectives or failure altogether. While I could spend the next ten pages discussing every task that should be included in your software selection project, let’s just highlight some of my top concerns.

Start at the Bottom

I have mentioned this several times and it bears repeating. Most ERP software selection methodologies stress the active involvement of senior management as a critical first step, I would beg to differ. Senior management must approve and actively support such projects, but it is far more important that the “users” of the system participate in every step of the ERP software selection project.

How can you determine what the organization needs if you don’t ask people what they need to do their jobs more efficiently and effectively? People are a firm’s most important asset. They have to want to succeed and be given the tools to do so before the firm as a whole will ever achieve excellence.

Define Where you Want to Be

You are not going to achieve success if you focus on today’s issues rather than tomorrow’s opportunities. While there is no doubt that correcting current issues is one of the drivers of change, you cannot just focus on what needs to be corrected. Improvements might give you a bit of a positive bump in performance, but they are dealing only with where you are today, not where you need to be tomorrow. The leaders of truly successful firms spend a lot of time “thinking”, trusting today’s issues to others. Operational managers are a bit more rooted in today, making sure things get done. That’s what they get paid to do. However, even operational people should be devoting some of their precious time to developing a picture of where they need to be to meet tomorrow’s challenges and opportunities.

ERP Software Selection is a Learning Opportunity

Ignorance is possibly one of the most critical contributors to failure. How can you build a better tomorrow if you don’t know what’s possible? Although this is certainly a significant issue for smaller firms launching an accounting software selection project, it can and does affect larger firms that are more used to ERP software functionality. The leaders of smaller firms may have very little experience with the rich functional and reporting options available in today’s accounting products and to be honest it’s difficult to secure such knowledge without talking to a reseller. Unfortunately reseller’s tend to want to sell software, not teach people and that’s the dilemma.

Having said that, maybe you can combine your learning experience with your later detailed product evaluation. You are certainly not ready to make a purchase decision, but you do need information to understand the possibilities that can be found in a modern accounting system. Maybe the best course of action is to find a reseller that is willing to teach you. The fact that they are willing to do so is probably a very good indicator of the level of service you will receive if you were to purchase their product.

Better Reporting Leads to Better Decisions

Accounting and ERP systems should not make decisions. Their role should be presenting relevant information in a timely manner that will allow people to make better business decisions. In the past accounting and ERP systems generated lengthy static reports that presented a picture of some aspect of the firm at a single point in time. In today’s interactive world, static reports contribute nothing to the decision making process. Let’s face it; you cannot make a decision unless you have all three elements that contribute to the decision making process:

• Where have we been?
• Where do we seem to be going?
• Where should we be?

As I have said several times in the past (it’s one of my favorite soapboxes), you cannot make effective decisions unless you have a time-phased picture of your actual results (past, present and projected future) as well as a picture of where you believe you need to be. Now you have all of the information you need in a single graphical presentation. Since time-phased graphs lend themselves to analysis, you can even take this information and create a system that presents only the information that needs your attention. If the actual results are within specified parameters, you don’t need to spend any time reviewing that which does not need to be reviewed.

Before we continue, let me jump up on one more soapbox. One of the best examples of scrapping static reports is the trusted Aging Report. In this case you do need to know when customer’s are not paying you in a timely manner and you need to know which invoices are overdue, but the process of collecting overdue accounts doesn’t have to be manual as it is for many companies. Manual business processes are time-consuming (expensive) and ineffective. The collections management process is a poster child for such waste.

If you think about it for a moment, the process of collecting overdue accounts is really a form of contact management and that’s what should be employed to reduce your AR. After all, a modest 3 day reduction in AR for a $10 million firm will generate a cash flow of $85,000. Eliminate the waste. Improve your cash flow. All you have to do is ask your vendor if they or a third party have created an application that is no more than a highly specialized contact manager and one that will help you change your customers’ payment pattern.

Demo Evaluation

At some point you need to actually touch, feel and evaluate accounting or ERP systems. First and foremost you need confirm that the product does what you need it to do and does so following processes that make sense to you. Demos are not just about confirming functionality. You have to evaluate whether the product makes sense to those people who are going to have to use it.

As products reach into the ERP space, they become more robust, but that degree of comprehensiveness may increase the time it takes to enter transactions. That’s why it’s so important that you evaluate your ability to run your business processes on a daily basis. Does the system support your business processes and to what extent does it impose business processes on you that you really do not want?

You also need to evaluate your ability to make decisions based on information that will be in the product’s database. How easy is it to extract critically required information? Does more detailed reporting require additional fields? To what degree will this slow down transactional efficiency?

Let me jump back in time a bit. As I indicated earlier, your learning process might be enhanced significantly if you were to talk to vendors or resellers. After all, your knowledge of what’s possible in terms of functionality and reporting may be lacking. I think it’s OK to contact vendors and resellers to schedule some learning time. While it’s too early in the sales cycle to think in terms of purchase decisions, you can learn a great deal about possibilities by looking at today’s products. Just make sure the vendor or reseller knows that you are not actively “shopping” right now. At the same time remember that their time is as precious as your time. Use it wisely. Learn what you need to learn. If the vendor or more particularly reseller is interested in mentoring you, they may later on become a trusted business partner.

RFI or RFP

As you are moving through your software selection project, you are going to need to evaluate functionality and you certainly are going to need to know what this system is going to cost. Just make sure you do it at the right time. RFIs (Request for Information) should be designed to help you compare your functionality requirements against possible semi-finalists. Once you have confirmed via an RFI and subsequent demo that a product does what you want it to do, you can then take the final step to create what will become a legal document. This RFP (Request for Proposal) will establish the cost of the project (software, data conversion, implementation, training, etc.) as well as the project’s terms and conditions.

Both of these steps are required, but I do have one significant concern. As a user keep in mind the fact that these two activities are very time consuming for vendors and resellers. You need to do your homework first. If you have spent enough time with a vendor and/or reseller, your RFI should really deal with just your most important requirements. If you have reached the RFP stage, a listing of required functionality is important as it requires that a product do what you need it to do. You should already do know this via your research, the RFI and demos, but it’s a good thing to confirm everything.

The real problem is unsolicited RFIs and RFPs. How can you possibly ask a vendor or reseller to answer detailed questions about functionality and project costs when they have spent no time with you? This is a complete waste of time and you accomplish nothing. The vendor or reseller doesn’t know you and you certainly don’t know them or their product. How can you possibly form a business relationship if you are strangers?

Conclusion

The process of selecting a new accounting system or ERP system is one of the most difficult projects any firm will undertake. Failure isn’t an option, but it seems as though many firms challenge failure simply because they don’t understand how to organize such a project. It’s not just about doing some web searches or reading reviews. Accounting software selection must be approached from a step-by-step basis. You have to do your homework. You have to understand not just where you are, but where you want to be. You need to find that one product that does what you need it to do and you need to find that one vendor or reseller with whom you can form a lasting and truly beneficial relationship.

Abstract

Not withstanding all of the marketing literature to the contrary, accounting software selection, successful installation, and efficient and effective daily use is not easy. In fact, it can be one of the most frustrating experiences any company will ever undertake. The time wasted in the selection of an accounting or ERP system that will be replaced is of minor conse­quence when compared with the staggering loss of productivity and profitability growing out of the chaos precipitated by an ill-suited accounting software system.

While it’s true that small business accounting systems don’t contain all of the functionality and business intelligence (that’s reports to most people) typically found in higher end products, the risk of failing to select the best suited accounting product is no smaller, nor are the negative financial consequences.

Step-by-Step Guide

The road to a successful accounting software selection project requires a solid foundation, detailed information gathering and analysis, a step-by-step approach to selection, installation and implementation, patience, cooperation, dedicated and constant management support and finally a little bit of luck. The key to all of these activities is a plan built upon a realistic assessment of your organization’s strengths and weaknesses, including your ability to organize and manage what could become a lengthy and complex undertaking.

The selection process itself can be divided into any number of specific tasks and more detailed activities. Given the limited nature of this accounting software selection article we will discuss only the most significant steps.

Educate Yourself

Any project of this magnitude and critical importance can fail simply because you get off on the wrong foot. If your objectives are not based upon what’s practical for you as a unique group of individual people, everything that follows can carry with it a fatal flaw. If the benefits you attribute to the project are unattainable under any set of circumstances, it’s very likely the project will fail to achieve its objectives, and might fail altogether.

As you are organizing your accounting software selection project, you might want to consider some of the following suggestions.

• Your success in business is not dependent upon what accounting or ERP software product you use. It is dependent on the people who use that product.
• People make decisions, not information systems. Give your people the structure, incentives, tools, processes and data, and let them make the right decisions which need to be made at the right time.
• The most powerful accounting or ERP software system will have little of no effect if it’s the wrong system for you, your organization and your employees.
• If your company is not organized for success, the most powerful accounting or ERP software system will have little or no effect upon your bottom line.

Define Your Objectives

Define your objectives in detail before proceeding further. These objectives could be quite simple or they could become quite complex depending upon the need for changes in the organizational structures, processes and personnel that will surround the new system. Of greatest importance these objectives need to be reasonable and attainable.

Justify the Decision

When people use the term “justify” they think in terms of a monetary return and that certainly is important. However there is an equally important question you must answer and that is “Are you ready to undertake this project?”.

Organize Yourself for Success

Although it may be possible for a bookkeeper or accountant in a small company to select an accounting package with no assistance from any other person other than the owner of the business, this isn’t possible in larger organizations. People need to be involved in each stage of the project. Users should have the right to critique the current system, and define what they need to do their jobs well. People need to be involved so they will feel comfortable with the ultimate purchase decision. This is going to become a very complex project, requiring significant thought and, of greater concern, time on the part of a large number of people. Since each of these people has a regular job to do as well, coordinating their participation and input will require some form of plan. The larger the organization, the more complex the plan will become.

Organizational Analysis and Improvement

Regardless of whether you might be purchasing no more than a small business accounting system or one costing several hundreds of thousands of dollars, some degree of internal reorganization will be required. The selection process will give you the ability to ask yourself the very simple question “What do we need to do very well in order to succeed in our market?” Since the process of acquiring a new accounting or ERP system will require that you at least partially reorganize your accounting processes in order to either meet the requirements of the new system or take advantage of features and functions not previously available (and therefore not currently assigned to any one individual or work group), this is an ideal opportunity to expand your internal analysis to others areas of the business. Use this as an opportunity to build a stronger foundation for success.

Preliminary Needs Definition

The accounting software selection process shouldn’t start by having you launch right into a detailed definition of required features, functions and reports. While you will reach that point, you have to begin by building a solid foundation for that detailed needs definition. You might want to start by asking each person open ended questions that give them the ability and the right to critique the present accounting system, suggest improvements, and of equal importance critique the organizational structure and processes that will surround the new system. In essence, this first step is an assessment of your organization as well as your accounting system.

Preliminary Needs Analysis

This is what could be called a high level needs analysis, concentrating only on the features which are of greatest importance to you. The objective here is to eliminate those products which clearly do not meet your most critical requirements or which do not meet nearly as many as other products. All you are doing is reducing your list of candidates to a number you can examine in detail without the process becoming burdensome.

Identify and Evaluate Business Partners (Resellers)

Most mid-range and above accounting products are distributed via a network of resellers and in the end these people (the firm itself as well as individuals within the firm with whom you will be working) will for all practical purposes become your business partner. Actually even small business accounting products that you can purchase directly are supported by a reseller network that could provide a whole range of services including installation, data migration from your current accounting system, training, installation of ISV solutions and report creation. Just as you have a choice with respect to products, you have a choice with respect to business partners. Talk to several within your geographic region. Talk to them about the product itself as well as the services they provide. Talk to some of their customers. Evaluate them just as closely as you should evaluate the product itself.

You might ask why I would seemingly insert reseller references too early in the accounting software selection process, but to be honest it’s never too soon. You can gain a lot of information from resellers about functional possibilities, but you also need to control the relationship from the get-go. Resellers want to show you a demo and make a sale. They really don’t like wasting precious time with someone who seems to want consulting assistance. You do need to be fair, but if a reseller is willing to work with you on a slightly longer decision time frame, that person may have demonstrated that they could become a very valuable business partner going forward.

Detailed Needs Definition

Once the preliminary analysis has been completed, you can begin to build a more comprehensive needs definition and it is this needs definition which will form the basis upon which you will make a final purchase decision. Start with the Preliminary Needs Definition. It should have listed your most important requirements. Now fill in the gaps, describing in detail every feature you will need. In essence this document will describe exactly how the new accounting system will operate from a functional, reporting and strategic perspective.

Many vendors want you to just start with demos and eliminate any form of detailed functional analysis. They claim that they have spent millions of dollars building best practices into their products and therefore you don’t need to change anything. It’s all been done for you. I am not quite sure I accept this big brother attitude. At a minimum you need to study your current system, gather information regarding what you could do in a modern accounting or ERP system, and finally deciding for yourself what’s best for your unique organization.

Detailed Needs Analysis

While the objective of the Preliminary Analysis is to reject products that clearly should not be carried forward, this detailed analysis is designed to identify a product’s strengths as well as its weaknesses and therefore you can approach this task from both perspectives. If one product really does not compare favorably against your requirements while other products do compare favorably, then that product should be eliminated from further consideration. If you really like one product even though it may not compare quite as favorably as other products, it is perfectly acceptable to keep that product in the mix.

Select and Evaluate Product Finalists

Now you must evaluate the system itself from a practical basis, as well as evaluate the relationship you might establish with the software provider and/or reseller. Once all of the selection factors have been analyzed, a final selection can be made. This isn’t a totally objective accounting software selection review process, particularly for smaller companies where the single most important selection factor is the degree to which people fall in love with a particular product. For these users, functionality is less important than their ability to use the product. Rather than setting a single selection objective based upon functionality, smaller companies should look for a product people actually looking forward to using.

Evaluate Required ISV Solutions

Virtually all accounting and ERP products will utilize add-in applications to either supplement missing features or to meet industry specific requirements. This is even true for small business accounting products. While it would be nice if the core accounting system met all of your requirements, this is not possible for many firms. ISVs (Independent Software Vendors) can provide you with just the right combination of functions and reports that you need. As such you need to expand your search to include ISV solutions and evaluate them just as you should evaluate the core accounting system.

Final Purchase Decision

There is no right answer when it comes to accounting software selection. If you are extremely lucky, one product will have moved to the forefront and impressed everyone throughout your organization. Even if that product may not be the top candidate from a strictly unbiased functional point of view, the fact that everyone likes the product and feels comfortable with it and the reseller with whom you will be working indicates that this product is the best one in this unique situation.

Installation and Implementation

Installation and implementation is no more than a series of physical tasks, carried out in a precise order and managed by a precise in-depth plan. The enemy here is time. All normal accounting functions have to be carried out while the new system is being installed and data transferred. In addition, people have to be trained so that when they first start processing information they will be almost as proficient as they were on the old system.

Post Implementation Management

It won’t be possible to complete all system, process and reporting modifications prior to going live with the new system. In fact it isn’t advisable that you try to do so. Some modifications will have to wait until the core applications have been installed. Time may not permit some adjustments to the system until after it has been installed. New or modified reports may have to be designed. Some adjustments to work flow patterns and job responsibilities may have to be made once daily processing has reached a stable level. The real underlying truth here is that no system is static. Business demands, personnel, product functionality and hardware options will change over time. Therefore, the system itself must change to meet these new opportunities and demands. If you accept the status quo, system performance, either actual or theoretical, will decrease. The only way to avoid this danger is to institute a continuous cycle of analysis and change. This isn’t change for the sake of change, but real change that leads to greater service, efficiency and effectiveness, and therefore profitability.

Summary

There is no single path that will lead to a successful accounting software selection project. You have to do the best you can given the scarce resources you have. In the end your objective is to find a product and a business partner (vendor and/or reseller and ISVs if required) with whom you can form an effective and efficient partnership. Certainly the product selected must be able to do what you need it to do, but you also have to “like” this product and be able to use it effectively and efficiently. You also have to be able to work well with the organization providing and supporting the product. For small to mid-sized business firms this would be a local reseller. That’s why we use the term “partnership”. You have to work well with the product and the reseller standing behind the product.

Here are a few popular posts on ERP Software Blog that you might find of interest.

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5 Steps to a Successful Implementation of Your New Accounting System by John Hoyt, Technology Management Concepts

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