Tuesday, October 23, 2007

Four Simple Things

Does your company need to financially manage different projects, some taking longer than a year, such as in agriculture or construction?  Does your company have a business cycle that does not coincide with your fiscal year?  Do you have to manage and track many different events each year?

If your answer is, “Yes,” to any of these scenarios, you’re not alone.  Are software applications out there to help manage this dilemma?  Not many, and none I know of with seamless interfacing!  There are some job costing applications, but they’re a lot of additional work and don’t always have the complete financial picture.  The same is true for some project management systems, most of which are usually very structured and inflexible.

The general ledger (G/L) should be the application that you turn to, mainly because all financial data winds up there eventually.  Right?  We’re back to our old problem.  It seems to me that most general ledger packages out there today are trash!  From my past rants you know the following problems:

• Rigid account structure.  You can’t modify account structure (add additional sub-accounts, change the size of account numbers, etc.) once your initial general ledger is built.

• Restrictive calendar.  Usually G/L applications offer only one calendar, and it’s preset for 12 or 13 fiscal year “periods.” What happens if the project lasts for 18 months?

• Lost detail.  Detail is summarized into period reporting “buckets” and then deleted!  You should be able to hold onto the detail, and if you want summary totals on your report, let the report writer do the summarization, not the G/L.

• Statistics.  You can’t measure performance on dollars alone.

That’s it, just 4 simple things that need to be corrected in today’s G/L design, and you’ve got the tools you need.  I wonder when that’s going to happen.

Sunday, September 16, 2007

Drill Down!

Ever been to a financial presentation before the Board, and watch the Controller trying to substantiate dollars in a particular account?  I have, many times, and it “tain’t funny McGee.” There he is, frantically thumbing through reams of paper looking for that lost posting.  Sounds of stuttering and a lot of sweating occur at moments like this. 

There is a better way, providing you have the right software!  A good G/L system needs to have the ability to “drill down” into an account and present to the viewer all postings to that account.  Sadly, there are only a few G/L systems that can do this, and even some of those are hampered by lack of historical detail data because they accumulate detail transactions into summary accounts every time a reporting period is closed.

Imagine how nice it would be having this type of software connected to a projection system on the Controller’s laptop.  When a Board member asks the question, “Why is the Board’s entertainment account 50% over budget?” The Controller can instantly display the fact that the Board consumed 3 cases of Scotch at the last quarterly meeting!  It may not have been the answer that they expected, but at least this time the Controller would not be the one stuttering and sweating!

This is but one example, albeit rather whimsical, on how this type of software can be used.  Think of all the uses it would have in everyday situations.  Rather than have to dig through all of the posting reports (if you can even find them) to determine what happened to an account, just drill down to the detail. 

Drill down is a fantastic tool, and every system should have this ability.  Are you listening, developers?

Thursday, August 09, 2007

Bean Counters’ Lament!

Most General Ledger applications are worthless as a financial management tool.  They report only historical “dollar” information, usually in a time frame that has nothing to do with your company’s business cycle.  I have alluded to this problem in past rants.  Here are some of the specific problems:

Typical G/L reporting is a P&L, Balance Sheet, and a summary Financial Statement.  This may satisfy the bank, but it does NOTHING for TIMELY information on the efficacy of your company!  What good does it do to sell a lot of Widgets if you are losing money on every one that you sell? 

Dollars alone are not a good measure of performance.  The value of money fluctuates over time, and comparative statistical data is required to evaluate a true picture of performance.  Few, if any, financial packages offer broad statistical information “within” the G/L, and those that do only have limited capabilities.  Every G/L account should have the capability of being supported by at least one statistical account.

Another requirement for an effective financial management tool is flexible reporting periods.  I have ranted on this subject before in, “Can the Buckets.” Does your business cycle revolve around the month-end reporting?  Would a weekly position report be more useful?  How about comparing last week to the same week a year ago?  What about a five-year comparison?  Why lose the detail information after the current year?

To perform effective analysis, interface data from ancillary systems (A/P, A/R, Inventory, and Payroll) must be timely and not tied to a laborious batch process that can only be run on a dictated schedule from the application developer.  This would have to include statistical.  Information will not be timely if it can only be updated on a weekly or monthly schedule.

Most accounting packages don’t provide this capability or even a decent report writer to work with.  Instead, the accounting staff is required to spend an inordinate amount of time preparing spreadsheet reports for management because their antiquated, poorly-designed, piece-of-trash financial package can’t get the job done!  I can’t believe that bean counters aren’t pitching a fit about this!

Wednesday, May 30, 2007

THORNY THREE

There are 3 things that are common to General Ledger packages that prove that no thought process took place when these packages were written.  These 3 items have been a thorn in Controllers’ sides since computer-based General Ledgers were devised.

Thorn #1:  Account structure format is permanently defined when the system is initially installed, and therefore cannot be changed!  Eventually, business and accounting needs change.  Without the ability to modify the account structure format, the only way out is to start completely over again.  Only the mentally ill would want to do that.

Thorn #2:  For some unknown reason General Ledger accounts can be deleted if there is no apparent activity within the General Ledger.  On the surface this may make sense, but what about activity in the subsidiary systems, such as Accounts Payable, Receivables, Payroll, etc.?  Talk about a disaster!  When you buy a Financial System you would think that there would have been enough intelligent thought given to this problem.  Wrong!

Thorn #3:  Developers assume that only one calendar is needed to run a business and that it consists of 12 periods, period.  I guess they also assume that you only work 9 to 5, Monday through Friday, and that there are only 3 colors in the universe.

You’d think some intuitive software developer would have figured out the solution to these “thorns,” but it looks like we’ll have to live with them a few more years.  I hate to be so picky, but enough is enough. 

Thursday, January 18, 2007

Narrow-Minded Versus Open-Reporting

For background read: “Can the Buckets!”, category Systems.

I can’t believe some of the narrow-minded providers of accounting software who don’t see the importance of a system that can be used as a REAL MANAGEMENT TOOL.  When you push them for more reporting power they are likely to come back with, “Did you know we’re an eight billion dollar a year company?” All that tells me is that there are a lot of pigeons out there that will buy a product based on the name only.  Talk to any CEO, manager, or supervisor on how their current General Ledger helps them manage, and they’ll give you the true story.  Let me explain . . .

Once we do away with the “buckets” concept and write systems using an active open database, the General Ledger becomes more than a reporting tool for the Auditors.  It becomes a Business Management Tool.  Modern database engines, along with proper database design can provide needed performance, processing hundreds of thousands of transactions in mere seconds.  You would then have a system that could support multiple time frames or calendars.  These calendars could be for a 4 month period of time or an 18 month period.  It doesn’t matter, it’s whatever your needs are, you are in control.  What a concept! 

You’ve got everything you need for project management; i.e., payables, receivables and payroll data.  Of course, this assumes that you have good interfaces coming from these systems.  Too bad some of the major software providers didn’t write all the packages that they’re selling, but buying is cheaper than developing.  A complete financial system should be a seamless integration of data and function, but I digress.

Another tool that goes along with open reporting capabilities is the use of statistical information.  Such things as payroll hours, number of items produced, quantities sold, all become an important part of producing a picture of real performance when measured against the dollar. 

Without open reporting and statistical data you don’t have a real Financial Manager.  The big guys will try to sell you on allocation journals and customer reports, etc.  Those aren’t features those are requirements.  Ask them about open reporting and statistics.  It’s fun to hear them stutter and listen to the yammering about, “Why would you ever need those things.” Get a grip!

Am I wrong?  I don’t think so.