Modern businesses cannot operate without a financial system, but how often do you look at your financial system and measure its effectiveness within your business?
It is important to review your financial system at least annually and consider the following potential indicators of an ineffective financial system:
- Accounts team have no capacity
- Executive team have blind spots in information
- Monthly reporting is always late
- Accounts team chasing missing information
- Doubling handling data
- Processing documentation not modified in 2 years
All financial systems, whether they are entry level accounting systems such as Xero or mid-market financial ERP systems like NetSuite, all have the ability to integrate with productivity applications known as add-ons. For example, an accounts payable add-on such as Lightyear integrates with both Xero and NetSuite and provides for a central point for accounts payable staff to code, approve and process high volumes of supplier invoices emailed into the Lightyear cloud system.
Whether your accounts team is a team of one, five, or more, it’s important the database underpinning your financial system matches the volumes of transactions your team needs to manage.
The review of transaction volumes can give an indication you are outgrowing your financial systems transaction limits. Other limits such as limited cost category allocations or number of lines limit on journal line imports can place constraints on your accounts teams processing and reporting capabilities.
Sometimes you find accounts staff don’t know what they don’t know. For example, when was the last time you read the release notes for your financial system?
In this modern age of cloud systems, often new features go unnoticed and end users aren’t even aware an upgrade of the software has occurred. If you find processing bottlenecks are taking capacity out of your accounts team, then reviewing release notes for new features or enhancements is a good place to start.
Whilst staff attrition in the accounts team is never something you want to think about, process documentation around your financial system is the first thing you think of when it happens. Any review of your financial system should also cover off on the process documentation that supports it. If documentation has not been touched for two or more years then it is likely the processes around your financial system have not been challenged for some time and are perhaps not as streamlined as they could be. Best practice documentation should be sort from your financial system’s vendor to ensure you have adopted the leading practice for your specific processes.
One of the primary purposes of your financial system is to help the executive team make informed decisions. Are you moving data from your financial system for reporting?
When reviewing the effectiveness of the financial system, the overuse of Excel for decision making is often overlooked. Moving data from your financial system to Excel costs time, often results in errors (88% chance according to Google!) and adds complexity. Rarely will you find staff in your business who have the capability to truly automate data handling and error checking within Excel.
If you find deficiencies in your financial system and wish to compare an alternative system, consider the following:
- Volume of transactions per month and size of static data lists such as customers / contacts / vendors
- If you are using a built-in payroll consider the practicalities of the payroll size
- Add-on application integration options
- Role based & custom security
- Multiple cost segmentation
- Workflow automation
- Built in business intelligence (BI) reporting
- Is your financial system scaling with you? Is it time for Financial ERP?
The Cutcher & Neale business system team has performed many reviews of business financial systems detailing functional gap, system constraints, streamlining of existing processes and alternative product analysis.
If you believe this type of review could benefit your business, then please talk to our team.
Michael Graham is a Partner specialising in business systems, operational workflows, and cost accounting. Direct, honest, and analytical, he helps clients optimise their systems, improve operational efficiency, and make informed financial and strategic decisions across diverse industries.
