This article has been provided by Nextworld.
Whether driven by internal initiatives or external factors, change is the primary force moving organizations to improve their agility. As the pace of change has accelerated, many financial systems have become more of a liability than an asset.
Your old, legacy accounting system can’t keep up with today’s business realities. It’s time to evaluate how prepared you and your financial management system are to adapt to what’s next.
Below are 7 tell-tale signs that your financial management system is due for an upgrade.
1. Month-end close lasts more than a few days.
In a 2022 survey, over 50% of companies reported that it takes 2-3 weeks to complete the month-end close process1. This delay should sound alarm bells. If your month-end close takes more than a few days, you’re left with little time for strategic planning or analysis.
While reducing your month-end close cycle doesn’t happen overnight, it’s critical to understand whether your financial management system could be doing more by automating manual steps. Automation allows you to eliminate manual activities like journal entries that tend to consume valuable resources, hamper agility, and put a drag on your operations.
A modern enterprise resource planning (ERP) system can enable automation and dramatically reduce the time needed to complete the month-end process – two days is a realistic and reasonable target for most organizations. The time savings on this process alone is a compelling reason to consider a new system.
2. You’re spending more time in spreadsheets than in your system.
Spreadsheets are popular because they are fantastic tools for performing a wide range of tasks like running ‘what-if’ scenarios with your data or performing a data cleanup exercise. However, like any tool, spreadsheets can be misused and expose the company to unnecessary risk – much to the dismay of executives. Spreadsheets also lack the controls, rigor, testing, documentation, maintenance, and other characteristics of sophisticated finance systems. One CFO put it this way: “I’m not concerned with the spreadsheets I know about. I’m concerned with the spreadsheets I don’t know about.”
If you find yourself performing important enterprise system activities like currency revaluation, consolidations, or financial statement preparation in a spreadsheet, your current ERP is not serving your organization well.
3. You find yourself chronically understaffed.
If you find you require more and more people or resources to complete basic processes, your financial system is likely contributing to the problem – and, it may be the cause. Rather than add headcount or make overtime a regular occurrence, first look for automation opportunities.
Although most companies recognize the value of automation, many are hesitant to embrace it with their current systems because recouping the cost of implementing a new ERP seems insurmountable.
These types of hesitations and compromises add up over time, often requiring expensive additional resources to overcome functional deficits. Modern systems can automate more processes more completely than legacy financial systems with tools to implement change quickly and bring about significant cost savings.
4. You’re being asked for information your team can’t deliver.
It’s your worst nightmare. While presenting details on your company’s financial status, you’re asked for data you can’t deliver.
Legacy financial systems were designed to satisfy basic needs like producing financial statements and any additional management information produced by those systems was considered a windfall. Today, access to a wide variety of management information is a basic expectation and the data you need to address unexpected questions should be available quickly from across all functional areas of your enterprise.
Tasks like creating reports and researching questions should be simple and performed in real time, and the information you desire should be presented in ways that is easy to understand. Modern systems enable you to respond quickly and accurately to a wide set of inquiries.
5. You’re not asking “why”.
Is your system better at telling you “what” than “why”? If you’re like most of your peers, your financial system can likely provide routine information like your accounts receivable (AR) balance and cash flow. However, it may not be able to identify more complex answers to “why” questions like which product is responsible for increases in days sales outstanding (DSO).
Legacy systems were designed to process transactions, balance the books, and answer “what” type questions. If you need answers to “why” type questions, you need a solution that goes beyond just doing the math. You need robust but simple-to-use analytics capabilities that can provide actionable insights that translate to business value.
6. Auditors come back with numerous control challenges.
Do auditors or regulators frequently come back with control exceptions, system deficiencies, or other negative findings? At best, these can be time-consuming and expensive to address. At worst, audit findings can potentially be damaging to a company’s reputation and future goals.
Your financial system should inherently establish and manage the necessary controls for current and future regulatory requirements. Compliance standards should be natively enforced by your software solution.
7. Any change is painful.
Perhaps the most telling sign that your current financial system is ready for an upgrade is whether any change – no matter how big or small – is painful, expensive, and time-consuming to implement. With legacy ERP systems, shifting the revenue model, responding to new regulatory requirements, rolling out a new product line, or acquiring a company, virtually any change can have major system implications.
Oftentimes, these types of financial system changes also require expensive outside consultants, new point solutions, risky spreadsheets, or more staff. Because they are architected to support flexibility, modern financial systems can help you become a more agile organization and avoid the pain of change altogether.
Any one of these 7 signs could be an indicator that your legacy system is an obstacle to your company’s ongoing digital transformation.