Archive for October 28, 2015

CFOs – Tired of Doing Bookkeeping? Learn How to Become More Strategic

Cloud Accounting Blog LogoFor many years, CFOs were burdened with antiquated finance systems that had one core focus, closing the books and producing a set of historical financial statements for the month.

In many companies, finance and operational systems, such as manufacturing, customer service, payroll, time and expense and project accounting were run on completely different platforms. This created significant silos of information that too often could not be easily combined into a unified view of the company.

For any type of ad hoc or operational reporting, CFOs had to rely heavily on the IT department that was tasked with maintaining, supporting and backing up all of these disparate systems. Too often IT was far too busy to be able to turn around these requests in a critical time frame.

How did finance respond? Spreadsheets. However, too often these spreadsheets were filled with errors.

In fact, Ventana Research estimated that thirty five percent (35%) of all spreadsheets used in corporate finance had errors. You can download the full Ventana Research report here.

With the advent of new tools and technologies available through cloud accounting, the role of the CFO has transformed from a reporter of past results to a strategic resource. How?

  • Real Time Insightscloud accounting systems are real time, providing up to the minute data
  • Seamless Integration – all critical operational system feed data into the finance systems in real time so that all operational results and metrics can be seen at all times
  • Robust , User Driven Reporting – financial and ad hoc reporting tools are easy to use and enable finance users to easily develop critical management reporting
  • Workflows – help streamline previously inefficient manual processes and reduce errors
  • Dashboards and KPIs – provide real-time metrics for Board level and upper management, so that the CFO can proactively inform, rather than reactively respond.

Interested in learning more? Click here to schedule a brief call with one of our recommended experts.

Drive Your Business with a Dashboard, not Intuition

Business Owners and Senior Management should be constantly monitoring the performance of their business.  Some managers may accomplish this by talking to the people who work for them.  Ultimately, however, management is called upon to make decisions, and they do so with the information they have available to them.   Often the biggest challenge is bringing all of the data together into something which can be understood.

Most business leaders want to base their decisions upon clear, reliable information.  But, this can be a challenge.  Information can be difficult to obtain in a timely manner.  The accuracy of the data contained in reports is sometimes questionable.  Management reports may be extremely detailed without providing critical metrics which are easy to locate.  So what do you do?

If you are a manager with some of these issues, I would urge you to clear your head for a moment and go for a spin in your car.  That’s right – turn on the ignition, be careful in the parking lot, put on your favorite music and go for a 30 minute drive.  While you are there, take a moment to appreciate the amazing information solution right in front of you – your car dashboard.

A car dashboard exhibits three powerful concepts.

Consolidation– my dashboard prominently shows me my speed, my engine temperature, the gasoline remaining in my tank, among other things.  Where does this information come from? Generally, I know – but not specifically, and frankly, I’m not that interested.  But to answer the question, the data feeding the three dials I mention above each comes from three distinct components, undoubtedly manufactured by three separate vendors.   Can you imagine if your car started behaving the way most IT departments do? “I’m sorry, but we can’t tell you how much gas you have left, because that information is in a different system.” I know what I would do. I’d get a new car.

Context – I’m not an auto mechanic. I have no idea what the correct oil pressure should be in my car, or at what temperature my engine overheats. Fortunately, my dashboard is color coded. When the dial goes Red, that is bad. I need to take corrective action to move the dial out of the Red, into the Yellow or Green.

Relevance – for some pieces of information, any kind of numeric measurement is not useful. I simply want to know if I should be concerned or take action. For example, the alert that tells me that I don’t have my seatbelt on (and the car is moving). Or the one that tells me that I need to check my engine.  Fortunately, the dashboard does not provide me with a diagnostic code – because I would not know how to interpret it.  But I do know how to respond to a Check Engine light.

Operating a business is not very different from operating an automobile.  In both cases, you are working with a sophisticated, complex system which has a lot of moving parts.  Further, you need to keep your eyes on the road in front of you.  Driving or operating your vehicle is not the time to be looking for information, and getting that information can mean having to take your car out of service, costing money.

Unlike automobiles, it’s up to you as the manager of the business to decide which metrics are Key Performance Indicators – the ones you need to keep your eye on to ensure optimal performance.  Therefore, recognize that you will need to address your organizational readiness to begin monitoring your business in the same manner.

  1. Define your strategy – have a clear understanding of what the critical metrics are, and remove data and information which is not important to monitor.
  2. Embrace Data Driven Decision making – organizations which have committed to data driven decision making take good care of their operational data, attending to data quality issues as they arise.
  3. Keep it Actionable – Your envisioned dashboards will need right-time access to operational data – depending upon what you are looking to accomplish, you may or may not need “real-time information”. What is important is that you have information in time to make a correction, and don’t spend time and money investing on technology capabilities which your organization does not need.
  4. Keep it simple – You’ll need easy to use tools, both for IT and Management – and there are plenty of them available today!

By implementing a dashboard, or set of dashboards for your business, you can expect to be able to apply better focus to the critical processes that drive your business, because “What gets measured gets done”.  You’ll make better decisions, and also make these good decisions in time to take impactful action.  Finally, dashboards can help you communicate your strategy and performance to your management team.

 

 

 

4 Key Risks of Using Spreadsheets to Track Revenue Recognition

Cloud Accounting Blog

For companies that sell physical goods, recognizing revenue on sales is very easy and straightforward. Depending on the shipping terms, once the product is shipped or received by the customer, the revenue and costs for those goods are recognized.

However, if your business sells software, services or other intellectual property, then the rules, as well as the accounting for revenue recognition, can be a nightmare.   There are a myriad of revenue recognition standards that must be applied over the period of the contract or agreement. Most importantly, many companies are not aware that these rules are expected to undergo substantial changes over the next few years.

Revenue recognition is a significant problem for Software as a Service companies (SaaS). They process hundreds or thousands of orders every month. Each element of their contract, including subscriptions, support and professional services must be accounted for and tracked separately.  Many times, these orders can span three to five years.

Faced with these challenges, how do the majority of firms we speak with handle their revenue recognition?  Spreadsheets.

Read more on the Cloud Accounting Blog

3 Tips to Jump Start your Data Science Plan

Are you looking to form a Data Science capability at your company?

If you answered, yes, then you probably already get the Machine Learning concept (The 4 Machine Learning Problems).  Maybe you are coming from either a Statistics or Computer Science background.  Either way, you see the potential of Data Science and Predictive Analytics and you’re ready to demonstrate some tangible benefit to management.

How are you getting started?  I’m hearing about two core hurdles:

  1. We’re looking for a great business problem to solve, one which could reasonably be solved with data the business already collects
  2. Our internal resources have very little practical experience working on a formal data science team, and don’t understand how it aligns to more traditional project teams

Time to Value is critical, but you need to do it in a way that has a formal process for managing risk, one which can be communicated inside and outside the team.  Here are the things you want to have in place, in order to launch your first project.

Establish Your Data Science Methodology – every project has a project plan and data science projects are no different.  What should the Data Science one look like?  Several teams of very smart people have already asked this question and independently arrived at the same conclusion.  My favorite is the “Cross Industry Standard Process for Data Mining”  (CRISP-DM) because it calls out the need for basic Business Understanding of the problem first.  Basically there are 6 phases of the process

  1. Set the Business Objectives
  2. Find the Data
  3. Prep and Cleanse the Data
  4. Do the Machine Learning Work
  5. Evaluate the Model You Created – does it meet the Business Objectives?
  6. Deploy the Model

Need a picture?  Note the backwards arrows – Data Science is an iterative process.

Assess your Data Capabilities – Data Science needs Data.  Teams that try to predict outcomes without relevant data are setup for failure.  An example: let’s say that you would like to forecast demand for your products, in order to reduce your inventory.  You might start with basic sales data and find that you are not getting the  level of prediction accuracy you expected.  What other factors might be driving demand?  Customer Satisfaction might be one you decide to include.  But what if your company is not measuring customer satisfaction in any quantifiable way?  Data Science leaders need to understand the capabilities of their company (in effect, the Data Science customer) with respect to data assets, in order to effectively determine which business problems are ripe for prediction.

Outsource the Team – Data Science requires a very specialized set of skills.  You probably have some of those skills yourself: Computer Science, Statistics and an understanding of the principles behind Machine Learning.  These three are important, but equally important is Business and Domain Knowledge.  Do you have a team of resources which possess all four?  If you are working with a technology provider who already understands your business and who also has demonstrated capability in  delivering data science value – then outsourcing the work to that team becomes very attractive.  If you don’t have such a resource, consider a business and technology consulting partner such as Blum Shapiro Consulting.  Provided you already understand the CRISP-DM process, you’ll be able to effectively manage a seasoned team of business and data science pros.

Can Data Science increase your bottom line?  Improve Customer Loyalty?  Drive down costs?  Yes it can, provided you have a methodology to manage the work as a project, data to support it and a capable team.  If you’re convinced the opportunity is there, follow these tips and Data Science will have a strategic role within your company after your first big win!