Continuing our series of posts based upon a recent white paper by Geni Whithouse, entitled Charting a Better Course for Your Business: Eight rules for investing in a new accounting system, which can be accessed (after free signup) here. (This is part five of a six part series.)
Two more factors are important when investigating a new financial reporting system. One is controls and access to the accounting information, and the other involves reporting when a company grows (as many do) into a multi-entity organization. First, controls…
While employees are vital to a business, and their access to important data and KPIs is equally vital, a good system will have the necessary security controls to prevent unauthorized users from accessing certain areas of the system. It’s a delicate balancing act, but as Whitehouse points out, you may not want your A/P clerk entering and reviewing invoices – for obvious reasons. Thus, a good system will enable user rights through a “granular segregation of duties.”
In short, you want a system that provides adequate controls so that users can access the areas where they are authorized, but explicitly not be afforded access to those areas where they are not. Today’s more sophisticated systems employ complex system and security architectures that allow for this. Your typical entry-level, single ledger accounting system, say QuickBooks, will not.
When a system sets permissions and passwords at the module level, providing all or nothing level access to the company’s data, it’s time to evaluate whether that is appropriate to the point your company has evolved. For some, it works; for others, it doesn’t.
One more point: a good system allows for repeating and reversing journal entries, default accounts for invoices, and other system-wide parameters. Such controls ensure uniformity of accounting and can aid in the enforcement of good internal controls and ensure that procedures are applied consistently.
Moving on to our other topic today, as a company grows it often evolves into a multi-entity organization. For example, there may be separate business units for a company that manufactures, and distributes, and implements, and services its own products. Managers need visibility across entities, and often, it’s not practical to force the same accounting procedures across all of them.
In larger organizations, each entity needs to operate independently, even though you often want to consolidate portions of their reporting and financials. It takes a powerful and well thought out accounting system to do this. In a well thought out system, individual entities can be managed independently, have their own reporting standards, and yet the key financial data can be rolled up globally into a parent entity. When an accounting system supports only a single business entity, it’s time to consider a move up in order to provide consolidated reporting and management.
Next in this series, we’ll take a look at multi-currency, and clear access to information. Stay tuned…