High tech system, low tech process
When I graduated college and began my role at Morgan Stanley as a product controller, I was really excited to start using all of the technology. I mean, surely a company making deals as large as this would have some pretty cool systems to play with, right? How wrong I was! The general ledger was a mainframe system from the 1980s complete with DOS interface, limited colour scheme, and poor export functionality. How could this be, and why do I have to fight with the computer to get the numbers that I need?
Who cares what the system looks like?
The market for systems is flooded with interesting looking products. From fancy buttons, to standard reports, and nice looking colours, modern systems provide the luxuries of a comfortable office. Most are available as apps for smartphones! The question is, why does any of this matter?
The truth is, it does matter! Having a system, such as an ERP system, which is quick, easy to use, and provides quick reporting is important to manage a company's financial and business data. Standard profit reporting, expense queries, and the ability find customer information is important to efficient operations. They can provide a good way to make good use of financial resources by investing in a system instead of people, gives management the ability to prepare reports without relying on admin and finance staff to prepare for them.
This does, however, come at a cost. By investing in an expensive system with many "bells and whistles" depletes resources and turns variable costs into fixed ones. Staff costs are variable especially those who are paid on a hourly basis, whereas system investment is a fixed asset (albeit intangible).
Keeping up with the times
Everybody wants to have reports which are prepared for them, which are available in the system, and which have a modern feel. The challenge comes when determining whether the cost of investing in a system like this is as beneficial as it seems. The technology is going to be great, but is it right for you?
What is it that the company really needs, and what is the system going to do? Most systems have multiple modules and components to them, and in some cases these are sold separately or together which can cloud judgement on procuring the most appropriate system. At the very least, the system the company invests in should contain:
Easy to use master data tables. Master data drives the ability to query information. These tables will include, customer and vendor records, sales people, budget centres, and ledger codes. The standard master data tables should be easy to use and customise, and have an ability to have additional ones created.
Easy to customise queries. Most systems will come with standard reports: income, expenditure, and assets. Companies will quickly outgrow systems which do not allow for customisation. The ability to review income by sales team or costs incurred by project will become more important as the company grows.
Integration with other systems. As the business grows and changes a company will find it needs more specialised software. For example: A global business may need a credit card system in the future to handle customer payments. These software also need to properly integrate, otherwise, manual processes and reconciliations will consume operations staff time.
Available technical support, at the right price. Every system will come with a warranty, and every system will have technical support, but what support does your company need? If the company is only one person, it probably helps to have any pay for the developer's technical support plan, but what if you have an IT person in house? Would it make sense to have this person take on the support role? If the system operator does not have flexible support options, consider whether the company can grow with yours.
The system itself must be flexible enough to ride with the company's changes; therefore, if at least the above conditions are not met, the system most like is not the right one for your company.
System resource or human resource?
Balancing human resources and system resources is important, otherwise what is the purpose of the system? Some companies will ask what is the purpose of the person? System resources can process data much faster, but the human resource will understand the data, interpret it, and explain it. A human can also work around errors and is more flexible. A computer generally will only do what its told.
Investing in systems should not come at the expense of humans in every case. It would be a poor choice to automate everything because systems cannot replicate the work that a person can, and when the system fails, a person will need to come and take its place. When investing in the system, a company should consider the following about its workforce:
What task is automating? - A system will automate the task, but the outcome will always need to be monitored by a person. Systems can prepare a debt management report, even send out the emails, but what happens with the person does not pay? Who will make the phone call, submit to collections?
Economies of scale - A new system will free time from the person who originally was performing the task manually. With a system freeing up this person's time, there is human resource available for more analytical tasks. Consider the workforce efficiency and overall process efficiency.
Can staff perform different tasks? - Someone who reconciled the bank account many not be in a position to close sales with customers. Consider how staff roles and responsibilities will change. Can this person take on a new role, and if so, how much training is required? Sometimes difficult decisions must be made, but always give people the opportunity to learn new skills.
System resources should not come at the expense of human resources. A 2019 study by MobileMarketer.com reported that people prefer human interaction over a bot. So, while a new system will save time, always consider the company's brand, reputation, and ability to increase revenues.
Deciding to buy a new system
Purchasing the new system will still require the old fashioned management. Systems enhance and can take the place of other resources; however, in order to maximise their use, management must still still set appropriate governance. Implementing approval protocols within the system via the workflow, setting master data policies, and mapping the procedures the system will take part in are very important to ensuring the right roles and responsibilities and reduce duplication of efforts.
Chayim Messer Consulting can help your company determine its needs and help to appropriately implement the system and improve the organisation's design to maximise human and system resource. Contact us today for your free consultation.