CODA – Outgrowing your finance systems: sometimes it pays to change

With technological advances quickening and costs falling, we think nothing of changing our outdated televisions, game consoles, cell phones or PCs long before their working lives are over. Yet when it comes to updating ageing finance systems, it appears that many firms are more ‘stay away’ than throwaway. Whether it’s uncertainty over implementation or bewilderment over which system will best suit their needs, a good number are choosing to stick with what they know – even if those systems are creaking at the seams.

But reality is harsh. Just like keeping an ageing car on the road, the older the system the harder it is to find replacement parts or engineers. The hours spent carrying out labor-intensive manual processes carries a cost implication, as well as a potential risk to the business, making the decision to ‘keep with the old’ a false economy.

Moreover, the flexibility that newer, more scaleable finance systems offer actively supports business growth. Globalization has led to the opening of new markets, customers and leaner outsourcing opportunities. Having finance systems unable to handle multiple languages, currencies, companies or different reporting regimes effectively could therefore significantly restrict growth potential. Whether it’s international trading, buying or selling new divisions or simple diversification, companies could lose out to competitors who are simply more technologically advanced.

According to Kevin Roberts, Vice President of Business Development at international accounting and compliance software specialist CODA Financials Inc., aversion to risk and fear of the unknown are some of the main factors behind the reluctance to update finance systems. “A lot of companies worry about system implementation and the costs involved, but supporting a legacy system is not a cost-saving option,” he says. “Migration from a legacy system based on DEC VAX to one on Microsoft SQL Server, for example, could mean the difference between paying out $75,000 in annual hardware maintenance to $2000. The immediate return on investment is obvious.”

For Roberts, failure to update finance systems not only restricts future growth but also threatens existing operations. “There are very distinct warning signs that a finance system has outgrown its usefulness,” he warns. “If you find yourself having to manually manipulate or re-key data, for example, or are relying on meaningful information that is produced outside of the system, you’re in trouble. Reliable, timely and accurate data is essential for decision-making and enterprise-wide control. Making decisions on inaccurate or ‘old’ data could prove fatal for a business.”

Not being able to change reports quickly or easily is another handicap, with Roberts pointing out that companies with older systems are forced to rely on programmers or highly technical users to change reports. “It’s a fight against time and skills shortages with ageing systems. With new systems changes can be made with just a few clicks,” he adds.

When asked what a good finance system should look like, he is succinct in his response. “Single instance and web-enabled. And ‘multi everything’ from a single database that gives you one version of the truth and real time enterprise-wide visibility.”

But it’s open architecture and integration capability that he particularly focuses on. “An open architecture means that you have a choice of what platform to run your system on, and the opportunity to migrate. As a result, the system is future proof,” he stresses. “Having an advanced integration capability means that companies can ‘plug-in’ other systems using standard supported tools. Emerging technologies around web services are making such integration easily achievable. With many systems, however, integration means hacking into the database, or companies being forced to re-engineer or re-invent their systems every time software is changed. This is clearly not desirable.”

There are other benefits. By offering a more flexible chart of accounts, newer systems also make it easier to report in greater detail and reflect changes in corporate or reporting structures. Greater visibility also means better governance and the ability to adapt to changing regulatory environments.

For New Jersey-based Maher Terminals, one of the world’s largest independent multi-user container terminal operators, the decision to update its functional but outdated accounting system has helped increase efficiency and flexibility. “Changing our financial system was a giant leap for us. It totally changed the way we report on our business,” recalls Lorraine Soos, Vice President Controller at Maher. “The unified, fully integrated system helps us to report more timely, accurate financial information, which is vital for our business. Our staff now carry out more analytical work as opposed to data entry, and we are currently testing new technologies which will further improve efficiency.”

Soos says that the initial implementation took just three months. Since that time, Maher has expanded its business, having been named as the future operator of a new handling facility at Fairview Terminal in Prince Rupert, Canada. “The new system and subsequent upgrades have certainly supported us as we have expanded,” adds Soos. “And we will continue to invest in new technology. After all, our mission statement is: ‘If there is better way to serve you, we will find it.’”

To learn more about how Maher Terminals’ migration to a new finance system benefited the organization and how such a move could benefit yours, visit www.coda.com