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Need a competitiveness breakthrough? Computerizing your accounting isn't enough

Computerizing your operating departments - not just your accounting department - is what will make you the alpha competitor in your segment

Here's an assertion that's bound to stop most business people in their tracks: Computerizing just your accounting department does little to make your business more competitive.

Because ... what about your operating departments? These are the parts of your organization that deal with customers, suppliers, bill collectors, logistics.

Just as important, these departments mutually affect one another with what they do every minute of the day. Have you empowered them with computerization? (And we're not talking about spreadsheets or stand-alone departmental solutions here; more on that later.)

By giving your accounting department a software solution, you've just computer-empowered the scorekeepers. But not the players. So okay, you're getting your trial balance, balance sheet, and P & L much faster now. Great ... for monthly board meetings. Not so useful for enabling day-to-day operations.

Your operating departments need the benefits of computerization possibly more than your accounting department does.

Does computerizing the accounting department improve your service to customers and suppliers? Those are the publics that determine your success in the marketplace. Does computerizing the accounting department improve your order fulfillment times? improve your collection success rate? increase your inventory turnover ratio? reduce inventory pilferage losses? stop overstocks and stockouts?

Not likely.

That's because accounting departments and operating departments are chasing very different things.

Accounting departments are concerned with compliance – submitting reports and analysis to boards of directors, to CEO's, CFO's, tax authorities, the SEC.

Operating departments are concerned with execution – bringing in the revenues, cutting costs, collecting receivables, delivering to customers, preventing stockouts. Getting things done in the physical world.

The two divergent goals require different - though interlinked - computerization solutions. Too often, companies try to make one computerization project achieve both goals. The outcome is confusion and dissatisfaction.

You may have improved your compliance by computerizing your accounting department. Now you'll want to improve your ability to execute -- by computer-enabling your operating departments.

Sales managers need on-demand access to detailed historical sales data. In real time. Sales people need this information at the moment that they're completing a transaction, not at the end of the month.

Sales managers need to know inventory levels right now, in real time. As they're negotiating prices and terms with customers. Purchasing officers need to know inventory levels and historical costs right now. As they're haggling with suppliers.

But a lot of that information is with the warehouse guys.

Accounting departments and operating departments are chasing different things. Accounting departments are concerned with compliance; operating departments are concerned with execution.

CFOs want to see the flow of collections and remittances day-to-day. But that information is partly with Disbursements and partly with Credit and Collections.

Credit and Collections people need always-updated ageings of A/Rs. They need fast and reliable issuance of statements of account. But some of that information is with Sales and some is with Accounting.

In fact, every department's work effectiveness relies a lot on information that other departments generate.

And as long as they're not computer-empowered, what do you think your operating people are doing right now in response?

They're building up their own departmental databases, that's what.

But the trouble is, these departmental databases are isolated "islands of information." Each exists to serve the department that built it, and nobody else.

Sales people build up their own data, but chances are good that it's not synchronized with accounting's data. Warehouse people build up their own data, and it probably doesn't jibe with accounting's data. And so on across the company. Purchasing. Billing and collections. Warehouse.

All this scattered information slows down business processes. Every time there's a significant transaction, someone will be wanting to do some cross-checking. But the data is in so many separate places.

Cutting a cheque to pay a supplier? Someone is sure to ask to see the original invoice. Oh, that's with the accounting department.

Then someone else will want to check if maybe we've paid it already. Oh, ask cashiering. And then somebody else will seek assurance that the items we're paying for have already been delivered. Oh, check with the warehouse.

And since the information to answer all these questions resides in separate data silos, getting answers burns up a lot of time. Imagine if even just a fraction of your transactions trigger these confirmations-cum-investigations. You can see how it slows down your transaction turnaround time. You can see how it slows down your readiness to deal with the next deal.

But what if nobody had to consult another department in getting their work done? What if everyone in the team had all the detailed info they needed to complete their tasks - already at their fingertips?

Businesses should really aim for this big breakthrough when they set out to computerize: to be dazzling at day-to-day execution. Collecting receivables, purchasing stocks, replenishing branches, disbursing payments. Without snafus, without failures, without needing to apologize -without process defects.

This is also known as "being customer-oriented" - generally considered a good thing for a business to be.

Want your company to be brilliant at day-to-day execution? Then know that the balance sheet and P&L are of no use to operating people. Those reports lack the detail front-liners need to address day-to-day, hour-to-hour business issues. You need to computer-enable the players, not just the scorekeepers.

Islands of information are obstacles to productivity.

And this means bringing relevant data to the fingertips of your front-liners, all the time. A paper report once a week just won't cut it.

So it boils down to this: it's your operations people that you need to empower with computerized tools. It's they who make the transactions happen. It's they who bring in your revenues. It's they who need detailed information dozens of times every single workday.

And don't forget: it's the operations people and what they do day by day that account for most of your costs. When you cut their time slack and rework, you cut your costs.

What your operating people need, then, is data that's synchronized in real time. What they need is integrated information. You need to connect the unconnected islands of data for them, and provide a single source of truth for everyone in the enterprise. The answer is an integrated database.

A well-designed subsidiary ledger app gives you: a) a solid foundation for an accounting system; b) a strong MIS for management to do data diving with; c) real-time info that lets your operating departments coordinate as if telepathically; and d) an info resource that aids your front liners as they transact with customers and suppliers.

What does "integrated" mean? It means when you input details of a transaction, you at the same instant update other subsidiary ledgers and MIS reports.

One worker doing a transaction should update not just his department's database, but all other departments' databases that also need that transaction information. The moment he posts it, the data he's encoded should already be visible to the other departments that need the information.

For example, a sale transaction updates the sales book. But it should also update the accounts receivable book, the output VAT schedule, the customer ledger, the inventory level, and the gross margin report. All at the same time and at the speed of thought.

With LAN and/or WAN technology, all this information can and should be instantly available to many different operating departments, not just the sales department. And certainly not just the accounting department. Use LAN and WAN technology to empower key company players with real-time info.

You know that at the operating level, your people are wrestling with transactional concerns. They're looking forward, not backward. "Has XYZ Co. paid for that last delivery and can I extend them more credit?" "Did that last Acme Corp. job use up all the sealant and should I therefore order more sealant?"

Having integrated information is like having the power of mental telepathy among your operating departments.

"Can I go ahead and give ABC Co. the discount they're requesting?" "Is our stock of size 3 widgets already replenished?"

With real-time info available to all (with authorized access), team members can extract timely info that will answer these questions. And much more.

The treasurer can look at the collections report to estimate his available cash from operations. He can look at the accounts payable schedule to plan his likely cash needs for the next few weeks.

The purchasing manager can look at the stocks on hand report to see which SKUs are running low, so that he can order replenishment stocks. The marketing manager can look at the same stocks on hand report to see any overstocked items that may benefit from a special promo.

The billing and collections department can print out statements of account. They can print out receivables ageings to help decide which trade debtors to hit up first or refer to a collection agency.

All of these team members are looking at one single, synchronized, mutually consistent database.

When you have an integrated database, you give your people the tools to close the deal now - rather than two hours or two days from now. You give them information on demand, so they can act - and transact - fast. And move on to the next transaction.

You give them clarity by giving them information whose audit trail is visible 100% of the time. Operating people will go about their days confident that all their information is always up to date.

Freed from uncertainty, always sure of their facts, they can focus on rendering outstanding customer service - day in and day out. Because that's what makes small companies prosper into bigger companies.

Having integrated information is like having the power of mental telepathy among your operating departments. You eliminate confusion-making islands of information.

With this capability, you get another not-so-trivial benefit. You eliminate most back-room clerical encoding as you know it. You save massive amounts of man-hours all over the company. What happens to all this enterprise-wide free time?

Your operating people can now accomplish more revenue-generating, customer-pleasing things in the three-dimensional world. Liberated from paper-pushing, they can now be more engaged in creating value - with customers, with suppliers, with process improvements, with problem-solving.

An integrated solution - like that illustrated in the preceding animation - installed in a LAN or LAN/WAN, provides a single source of truth, available in real time to all team members. This speeds execution of myriad tasks companywide. It raises workers' confidence levels. It quickens the firm's operating tempo. It makes for a nimbler, more competitive organization.

Address the transactional information needs of operating people, not just the compliance mandate of accounting people. Computerizing only the accounting department won't let you achieve process efficiency and competitiveness breakthroughs.

Most accounting software addresses just the accounting department's needs, period. But a company determined to surge ahead of competition will invest to empower the day-to-day work of their operating people. Purchasing, warehouse, sales, cashiering, credit and collections. Not just the accounting department.

Empower your operating departments with an integrated subsidiary ledger and MIS solution. (Also known as ERP or enterprise solutions.) Then watch them jell into a high-achieving team. - rsr

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Title:   Need a competitiveness breakthrough? Computerizing your accounting isn't enough
   Computerizing your operating departments is what will make you the alpha competitor in your segment

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