CFOs take their financial systems into account

Chief financial officers are no longer passive "bean counters" that growl retroactively when company expenditure goes over prescribed limits. Rather than just manage cost centres, they`re expected to add value to companies by using financial information to develop opportunities for management and operational teams.

John King, a partner at KPMG Consulting, says companies now talk business solutions rather than IT solutions. "There is a clear recognition now that IT systems are there to enable business processes and procedures, as well as deliver pertinent information to management to assist in developing future business opportunities.

"CFOs are expected to understand far more about technology and what it is capable of delivering than they previously were. They are also expected to use this technology to share financial information across the company and to proactively participate in developing business strategies. To do this, they need financial systems that not only interrogate information, but also deliver it in a way that other management members and operational staff can access and understand - quickly and efficiently.

CFOs are now expected to understand far more about technology and what it is capable of delivering than they previously were.

John King, partner, KPMG Consulting

"As every transaction within the business has a financial impact, maximising the deliverables of the financial systems has become crucial to CFOs. More and more often, the catalyst for re-engineering is the realisation that inadequate or insufficient integration across inter- and intra-company platforms hinders the collection and interrogation of financial information," says King.

He adds that with more and more companies prioritising customer retention ahead of recruitment, customer relationship management (CRM) is playing a far greater role than ever before. "This has had a significant impact on how CFOs view their financial systems, as it is these that allow them to interpret customer spend and direct the management and operational teams accordingly."

King`s emphasis on the need for financial systems to deliver information quickly is echoed by several other vendors in the mid-range market.

Among these is Dion Retief, MD of the Business Unusual Group, which owns iLanga. iLanga distributes a financial software solution for mid-range companies called SunSystems, which was developed by UK-based Systems Union.

Retief states that CFOs cannot operate effectively using systems that do not deliver real-time information. Mid-range companies, he says, must have financial systems that integrate with analytical and business intelligence tools that allow users to interrogate information in a familiar desktop environment, without having to rely on expert assistance or technical expertise.

His views are echoed by Stefan Coetzer, director of client services at Lorge Consulting. A Softline company, Lorge Consulting is an Accpac accounting software reseller and business solutions consultancy.

"Financial software is no longer just about debits and credits - those days are long gone. The focus of today`s CFO is on management information at speed," says Coetzer.

Financial software is no longer just about debits and credits - those days are long gone.

Stefan Coetzer, director of client services, Lorge Consulting

"We`re not talking about historical information either. Today`s constantly changing markets require that accounting software contributes significantly towards identifying future trends and the impact that these trends will have on the client`s business."

In addition, financial systems must be capable of flagging danger signs as well as highlighting market opportunities. "Success in increasingly competitive global markets requires a totally integrated financial software solution that provides updated management information on a daily basis. Forget about basing decisions on a month-end analysis - it`s 29 days too late!"

For Richard Firth, chairman of MIP Holdings, enabling companies to own their financial systems is as important as the information these deliver. MIP Holdings is a locally-based IT solutions house that develops integrated financial and business systems.

"In the mid-range market vendors are dealing with entrepreneurs who don`t have access to huge amounts of funding. These companies need to get the most out of their IT systems as possible in order to stay in business through remaining competitive.

In the mid-range market vendors are dealing with entrepreneurs who don`t have access to huge amounts of funding.

Richard Firth, chairman, MIP Holdings

"Because every transaction that takes place within a company relates either directly or indirectly to its financials, companies need access to their financial systems` source code to make sure these stay as flexible and as relevant to the business as possible."

And, says Firth, as IT is now a fundamental part of each and every business, source code translates into the IP of a business.

Asked whether he believes that the Internet has had a major impact on financial systems, Firth replies: "We`re not looking at dot-com here but rather dot-business, which is simply a matter of enabling e-business.

"What the advent of e-business has done is force us to take a closer look at integration issues. To give customers access to business information over the Web, you have to be able to give him an open view across several platforms."

Jeremy Waterman, MD of Accpac Africa which supplies financial and business management solutions to the mid-market, concurs. "E-business is not a revolution - it just has to be enabled."

Steven Cohen, CEO of Softline, says "the big impact has been to send people off in the wrong direction and get them involved in developing for the Internet. It hasn`t taken off yet and it`s been a big waste of time."

Softline and its accounting and payroll software subsidiary, Pastel Software SA, recently announced the formation of a new company, AccountMate Africa, to provide enterprise accounting software solutions to the upper end of the market. Pastel`s financial and accounting software range is used by SOHOs, small to medium-sized businesses and companies at the top end of the market.

"In our business it is quite simple to develop software and the push for new development usually comes from the vendors. This is possibly the first time in this market that the vendors have pushed and the uptake has been about 1%."

E-business is not a revolution - it just has to be enabled.

Jeremy Waterman, MD, Accpac Africa

He adds that he does believe that solutions developed specifically for the Internet will eventually take off. "But then, whoever has developed applications now will just have to rewrite them anyway."

Cohen points out, however, that software vendors cannot simply sit back and adopt a 'wait and see` approach. "Those who don`t get involved in developing for the Internet are bound to get left behind, particularly if Microsoft`s .Net initiative does turn out to be really cool. So we`re stuck in a risky balancing act which involves spending a significant amount of money on research and development in an area where no returns can be guaranteed."

He claims that the greatest advantage of the Internet to date - and it is a significant advantage - is the ability to connect to anyone, anywhere, any time of the day or night.

There are other factors that organisations wanting to invest in a particular financial package or solution should consider. Among these is whether the solution is a good fit in the South African market. Most vendors agree that UK-developed systems work well in local markets.

Says Waterman: "I don`t think companies experience any significant problems with systems developed in the UK, as the legalities and taxation issues in that country are not very complex or very different from our own."

Ashley Ellington, Africa divisional manager at Sage Enterprise Solutions, agrees, saying that UK-developed systems fit "very nicely".

However, upgrading and supporting systems developed beyond South African borders can prove problematic.

Waterman cautions SA businessmen to take a careful look at how well established vendors representing overseas solutions are. "It is important to consider the critical mass of the company installing your financials. We`ve seen suppliers come and go, and what happens to companies when their suppliers are no longer around to offer support."

Stephen Corrigan, a director at Pastel Software SA, points out that local is also often lekker from a financial perspective, as the rand has lost about 50% of its value against the US dollar over the past three years and the currency`s fortune seems set to continue to decline.

It is important to consider the critical mass of the company installing your financials.

Jeremy Waterman, MD, Accpac Africa

"The cost of dollar-, pound- or euro-based software is increasing exponentially. It`s getting to the point where companies could seriously consider taking forward cover on their accounting software package in order to cope with the future cost of upgrades and add-on modules.

"It is no easy task to switch the business to another accounting package. It`s just not that simple and it is costly in terms of business disruption, training and so on. We have to accept that our currency is volatile, as demonstrated by the fact that the rand very recently lost 10% of its value in just two weeks. The upside is that businesses can reduce their future devaluation risk exposures on accounting software by buying local."

Corrigan adds that renting software is a trend that is gathering momentum internationally and one that holds significant benefits for both customers and software vendors: "It allows companies to optimise their cashflow management and, as the software does not become a company asset, there is no depreciation process. With the rental model, users will always operate on the latest version and therefore reap the benefits of technology advancements."

Firth says he also believes support costs on solutions sourced overseas are "killing local customers". SA businessmen should look at solutions supported by SA vendors, he says.

Cohen believes that in the lower end of the market, the software rental model is essential.

One of the most telling issues for vendors in the lower end of the market has to be how to counter the current upgrade rate.

Steven Cohen, CEO, Softline

"One of the most telling issues for vendors in the lower end of the market has to be how to counter the current upgrade rate. The year 2000 issue flushed a lot of customers out as many had to upgrade to compliant software in order to stay in business. Now the upgrade rate stands at between 10% and 15%. Which effectively means that most vendors in this market that bring out new releases on a regular basis are over-delivering to an extent.

"The big boys, such as Oracle and Great Plains, get at least 20% of their retail price back through maintenance agreements, which means each new customer brings them recurring revenue. The lower end of the market never saw the need for recurring revenue issue coming. The rental model will allow vendors to keep supporting their products and funding future research and development."

Meanwhile, Accpac has gone off in a new direction by launching Accpac Online, an application service provision (ASP)-based service that offers users full access to Accpac products online.

The service, launched together with partners UUNet, IBM, Microsoft and Korbi.net, also includes access to Microsoft office applications as well as Accpac`s CRM tool, e-CRM.

Waterman says that while the service is "particularly relevant to start-up companies not wanting to go through the pain of investing in complex IT products, and the skills needed to keep such solutions running, Accpac Online is also proving attractive to small to medium-sized businesses wanting to rationalise IT expenditure".

Ultimately everything comes down to the bottom line - whether companies are looking at which pricing model best suits their pockets or how best to make sure their financial systems add value to their business. Different companies will use different solutions. The challenge for any CFO is to select one that fits their requirements best.

Metropolitan goes for speed

Life assurer Metropolitan Life has chosen to implement Comparex Africa Mainstream`s SmartStream "Analyst Financials" solution at a project cost of R1 million to slash its reporting turnaround times.

"We needed a best-of-breed solution for current-state reporting," says Nicky Beukes, head of systems support in the finance and human resources division at Metropolitan. "Many of the 1 200 reports we produce on a monthly basis are business-critical for Metropolitan companies. This product enables us to cut the current reporting cycle by several days."

Analyst Financials integrates into SmartStream GL, which also consolidates all subsystem transactions. Analyst Reporting automates the production and delivery of the monthly management pack within hours of the ledger closing. Reports available include expenses, revenue, actuals and budgeted amount. Some 150 users will run and execute their own reports, on an as-needed basis, using predefined templates.

"Metropolitan Life managers need to be able to monitor performance on an ongoing basis. Problem identification, meeting targets and following up on discrepancies are far more effective when done in real-time, not days after the event," emphasises Beukes.

Comparex Africa Mainstream and Harvey Jones Systems provided consultancy services with assessment, project definition, design, delivery and documentation.

The first phase of the project provides current deliverables with much improved delivery lead times. The second phase identifies value-add reporting such as that needed for human resources management and asset management. The ability to create separate databases underpins the delivery of these widely differing requirements.

Sappi opts for accuracy and consistency

Sappi, a global producer of coated fine paper and forest products, has rolled out a Hyperion Enterprise financial consolidation, reporting and analysis solution to more than 150 users around the world.

Executives at Sappi use the product, distributed in SA by Global Technology Business Intelligence, to consolidate financial information from more than 330 000 accounts across 429 entities around the world.

Laurence Newman, group financial controller at Sappi, says the group has a complex set of financial reporting and consolidation needs, including the consolidation of financial information in euros and US dollars. He cites improved accuracy and consistency of financial information and time-savings as the major benefits enjoyed from the implementation of Hyperion Enterprise.

The company uses a range of operational systems across its business units and regional subsidiaries, including SAP R/3, Microsoft Excel and some legacy systems. Hyperion Enterprise extracts and consolidates information from these systems and presents it in a standard format through a uniform reporting tool.

Sappi runs four worldwide versions of the Hyperion application, which users access across its wide-area network. The group has begun developing the product`s Web-based reporting functionality to give mobile users and executives access to Hyperion information across the Internet/intranet.

Wouter van den Heever, group systems accountant at Sappi, says: "Hyperion Enterprise ensures that Sappi executives, from middle through to senior management, have access to the same up-to-date financial information. End-users have found it to be intuitive to use and have reported that it saves them a great deal of time."