Accounting Software Library Articles - The Annual Business Checkup

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Abstract

Once you have fully implemented your new business management system, to assume that it and the support structure around it will continue to operate at maximum efficiency and effectiveness invites issues you do not want to face. Just as we as human beings hopefully visit our doctor on a routine basis, your business management system deserves, in fact requires that you initiate a formal review (checkup) at least once each year.

Introduction

It might be wise to consider establishing a formal annual review of your business management system (hardware, software and people). Here we are talking about an analysis of the entire system to assess its overall performance. You might even think of it in the same light as the preliminary analysis you conducted at the beginning of your software selection project. You want to talk to people using the system to determine their level of satisfaction, their need for additional training, work practice modifications, additional enhancements, etc. By adopting a formal review, you can take steps to make sure the whole system is operation at peak efficiency. Depending upon the size of the company, number of users and applications installed, this review could be accomplished in as little as a few hours, or stretch over several days. The point is not the length of the review or the detail, but the fact that you accept this as a necessary investment in the long term maintenance of your financial management system.

Detailed Service List

The Annual Business Checkup is not a predefined set of services or tasks. The key element is the notion of a formal review of the business management system. In this case the system is not just the accounting software but every factor that contributes to sound business management practices including business objectives and strategies, business processes, personnel, and finally how the business management system relates to each of these elements. To some extent it can be viewed as software selection lite in that the analysis should start with a review of business strategies and tactics and then progressively move deeper into the organization following essentially the same path as a formal software selection project. In this case the objective of the exercise is not the selection of a new business management system but the fine tuning of the existing business management system.

Review Business Objectives and Strategies

If a business is to compete effectively, it must be organized for success. All business processes, the business management system itself, and its personnel must contribute to the achievement of business objectives and strategies. Therefore the first step is a review of the business itself and the industry in which it competes. At a minimum the following questions should be asked.

1. Has the business entered new markets during the past year?
2. Is the business contemplating moving into new markets in the next twelve months?
3. Have the demands of existing markets changed in the past twelve months?
4. If the response to any of these questions is Yes, what does the business need to do well in order to compete effectively in these markets?
5. Are existing business processes adequate to meet the objectives and strategies of the business? If not, what specific changes need to be made?
6. Does the organizational structure and personnel contribute effectively to the achievement of the established objectives and strategies? If not, what changes need to be made?
7. Does the business management system support effectively the business processes required to compete effectively in the markets in which the organization competes? If not, what specific changes need to be made?

Review Detailed Functional Effectiveness of Business Management System

The first step described above starts with the objectives and strategies of the business itself. This high level review must be followed by a more detailed review of the business management system and how it supports the efforts of individual people and workgroups. The objective of any business management system is helping people do their jobs better and by doing so help the organization compete more effectively. Each person or workgroup in the organization that integrates with the business management system should participate in this review. This is the only way management can ensure that every person is contributing to their maximum potential. If improvements need to be made, who is better qualified to identify these improvements than individual people? Their supervisors may not know what is required and to limit this review to only management level people is to limit the potential effectiveness of the entire review process.

This process is identical to the preliminary needs definition that was so vital to the initial software selection project. Each constituent (person or workgroup) needs to be asked the same questions and their responses examined in detail. The following questions can serve as a guide, but each organization should decide exactly what questions should be asked.

1. Briefly describe your job responsibilities.
2. In your opinion, what does the company need to do well in order to succeed?
3. In your opinion, what does your department or team need to do well in order to support the corporate objectives identified in the previous question?
4. What do you need to do well in order to carry out your personal job responsibilities?
5. What specific tools do you need to accomplish these tasks?
6. What specific information do you need do you require in order to carry out your job responsibilities?
7. What specific information do you generate and send to other people?
8. What specific reports or information do you generate and file?
9. What creates the most significant problems for you in trying to do your job effectively or efficiently?
10. Do you have any specific concerns about the information you produce?
11. Do you have any non-accounting concerns that affect the way you carry out your job responsibilities?
12. If you had an opportunity to reorganize your job responsibilities, what specific steps would you take to make your job function more efficient or effective?
13. What do you believe the company is doing well right now?
14. What do you believe the company needs to do better in order to become more profitable?
15. What do you believe the company needs to do better in order to improve customer satisfaction?
16. What do you believe you are doing well right now?
17. What do you believe you need to do better in order to become more efficient and effective?
18. What can you do to improve customer satisfaction?
19. What specific accounting processing features are critical to carrying out your job responsibilities?
20. What additional features would be desirable, but not actually critical?
21. What features in the present accounting system seem to work very well?
22. What specific features in the present accounting system need to be improved?

Review Detailed Reporting Effectiveness of Business Management System

Business management systems process information and produce reports. That has always been their primary objectives. The previous step examined the functional effectiveness of the business management system. The next step in The Annual Business Checkup must be a detailed analysis of the reporting system as the information generated by the business management system supports the decision making processes that move a company forward.

Once the functional analysis has been completed, users must turn their attention to the reporting system. This analysis should ask some very critical questions of each person.

1. What is the objective of the report?
2. Are these objectives being met and, if not, why not?
3. Is the report easy to read? If not, how should the format be modified?
4. Does the report contain the information required? If not, what specific information should be included in the report and how should it be formatted?
5. Is the report too generalized? If so, how can the information be made more specific to the needs of the people reading the report?
6. Is there too much information on the report? If so, what needs to be eliminated?
7. Is the information sorted correctly? If not, how should the information be sorted?
8. To whom is the report circulated?
9. Do each of these people actually require this report, or only a portion of the information?
10. How often is the report printed?
11. Is this the best frequency? If not, what is the best frequency?
12. What specific information or reports are not being generated?
13. Why is this information required and how will it help improve efficiency or effectiveness?

One of the dangers of all business management systems is that they can store and regurgitate an enormous amount of information that at best has marginal usefulness. While people need information to make sound business decisions, they should require only specific information that is specific to their job. For some people the number of reports sent to them is a measure of their importance. That must be avoided. For other people they struggle each day because they are not getting the information they need at all or are not receiving the information they require in the proper format.

The reporting system must help people make decisions (excluding of course those reports that verify the validity of the data input into the system). They must define exactly what information they require and the format required to read and interpret that information quickly. Reports should help people understand where they stand and where they should go. Reports should help people identify actual or potential problems and the factors contributing to these events. Specialized reports should not be avoided simply because they cost money to design. The time a person can save by not having to wade through poorly selected and formatted information will more than justify the cost to create objective specific reports.

Review Executive Information Systems and Exception Management Systems

Two additional steps should be taken when analyzing the reporting system. Virtually all standard reports produced by an out-of-the-box accounting system are by necessity somewhat generalized. As such the specific needs of an organization may not be addressed by these generic reports. Two areas that should be analyzed in detail are Executive Information Systems and Exception Management.

An Executive Information System presents summarized information that helps people see at a glance where they are going and how they are performing with respect to their objectives. Rather than wading through generalized reports, people should be able to identify the key information they need to gauge their performance, set targets for each of them, and then review their performance against these targets.

While some accounting systems are beginning to offer Executive Information Systems, most of this data is generic and very generalized. A truly effective Executive Information System should present information that is unique to the company, department, workgroup, or individual. That is where some work may be required, but the time saved will more than pay for the creation of such a system.

Exception Management Systems are to some extent a specialized Executive Information System. In this case though the application isolates those items that require a user's attention because specified targets have been exceeded. While some accounting systems support the notion of triggers that will send an internal e-mail to an individual notifying them as an example that a sales order has not yet shipped, a more effective method may be the creation of specialized reports that highlight as an example all sales orders that are late, or all purchase orders that have exceeded their requested delivery date. Creating these reports is fairly straight forward and eliminates the necessity to review a more generalized open sales order or open purchase order report.

Review Functional Possibilities

The last item that should be included in The Annual Business Checkup is an analysis of applications and functions that the company is not yet using. In many cases users do not realize the potential of certain applications or may not even be aware that specific software supported business processes are available. The best example of this is collections management. Users simply presume that since they have an aging report they need nothing else to collect overdue accounts or that nothing else is available. Some products do in fact collections management either directly or through a third party application.

Consultants or resellers should be constantly searching for new applications that can benefit their client. User should be constantly searching for the same thing and demanding that their consultant or reseller present to them all possibilities so that they can take advantage of new applications or improve their business processes. If an organization does not move forward, it will move backward because many of its competitors will be moving forward.

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