Posts Tagged ‘financial accounting systems’

Apropos of some of our recent posts (like this one and this one) about the increasing need for access to current financial data, quickly, in volatile times, comes a recent article from the “CFO Journal” section of the July 24th Wall Street Journal.  In the article, The Journal’s Senior Editor Emily Chasan [pictured at left] points up the dilemma facing many large company CFOs that we, in our practice, find confronting financial execs at much smaller companies today: namely, the need for more timely and uniform financial information to help them react quickly to fast-changing conditions.

They face a tough choice, as Chasan notes.  Either spend “serious time and money to unify their financial systems in one fell swoop, which can entail consolidating… general ledgers, processes and legal entities, or take a piecemeal approach that will address specific needs but may not bring major benefits.”

Some opt to do nothing.  But increasingly, experts say, companies are taking action to get better financial data.  According to the International Data Corp., businesses spent nearly $16 billion on financial-accounting applications worldwide in 2011, up 10% from 2010, and about double the growth rate from a year earlier. 

While the pain of these changes is always a major factor, businesses are finding benefits from eliminating costly consolidation processes, and “getting more real-time business information that can help identify areas of stress.”  The recent recession has taught businesses that “too often they didn’t have the information they needed and they didn’t have an ability to get that information,” said one leader of a business intelligence team at KPMG, LLP.

Compounding the problem, acquisitions can often complicate reporting problems.  As one corporate accountant reported, “we don’t replace systems immediately unless the business needs it right away.”  But eventually, companies want divisions “speaking the same language.”  And since investment in financial and accounting systems has long been considered a cost center, Chasan says, “companies have been led to budget for upgrades and maintenance each year rather than tackling major overhauls.”

So, when it comes time for an overhaul, as the North American CFO of BASF said, “If you are making a change, you cannot go big enough.”  His firm had made a number of acquisitions that left them with disjointed systems, so it aligned its accounting, payroll and benefit systems during an upgrade to its ERP system.  Today, the company reports that it can now produce more comparable data and spend more time on activities that support the company’s growth strategy.

And in the end, that ‘ability to support a firm’s growth’ is typically found to be the number one underlying reason for the investment in ERP.  And that’s a fact whether you’re a very large company like BASF, or you run a smaller firm like, say… yours.

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