Middle Market Companies Must Modernize Their Accounting Systems
The accounting department is often seen as a cost center, and not typically a function buzzing with innovation and new ideas. As a result, many of today’s middle market companies have seen little investment and curbed advancement in their accounting systems, putting them at an operational disadvantage.
Too often, our team engages with companies who are using a legacy accounting system, over a decade old, with no available support. An under-invested accounting and finance function will often include:
A financial close process that takes weeks to complete, often containing errors. The untimely and inaccurate reports end up ignored by decision-makers.
Financial statements that usually lack supporting documentation or deep dive analysis, which management could use to influence business operations.
Financial statements that do not align or show the results by business segment or division.
Excessive manual data entry.
Budgeting and forecasting that is non-existent or detached from company strategies.
Limited availability of real-time information on how the business is performing outside of a few key numbers such as booked or shipped orders and cash balance balances.
When you are a $100M firm creating invoices by hand and seeing a lot of mistakes, or a company operating off of a static budget process that is isolated from a strategic plan, the solution is to treat the disease, not the symptom. By modernizing your financial functions, you are realizing numerous benefits that can significantly impact your business. The automation of repetitive tasks and streamlining processes will reduce the likelihood of manual errors and take far less effort from your finance staff. This efficiency frees up hours and days of time that your finance team is able to concentrate on more strategic activities, such as variance analysis and sensitivity planning. Furthermore, these systems offer robust analytics and reporting capabilities, enabling you to gain deeper insights into your financial data and make more informed decisions.
The real-time data and connections to other platforms modern financial systems provide ensure that decisions rely on the most accurate and up-to-date information available. These real-time reports can contain the company-specific KPIs that allow you to know exactly how your business is performing. Upon receiving the financials, the leadership team wants to dig into them because they contain meaningful analysis and reports. They are also able to confirm what they already know based on real-time reporting, which can always be changed and improved to align with needs.
If you are considering upgrading your accounting system functionality, where should you start?
An Enterprise Resource Planning (ERP) platform is an advanced system that offers a multitude of benefits for businesses. From enhancing operational efficiency by automating tasks and providing real-time access to financial data to integration capabilities that ensure a seamless connection with other business applications, ERPs foster a productive and unified view of operations. The robust reporting tools and analytics features enable deeper insights into financial performance, supporting better decision-making and forecasting. Scalability is a key advantage, allowing the platform to grow with the business. Enhanced security features protect sensitive data, and mobile access facilitates flexibility and remote work. The systems also aid in compliance with regulatory standards and often integrate with Customer Relationship Management (CRM) tools, promoting efficient communication across teams. With user-friendly interfaces, these platforms streamline processes, reduce training time, and contribute to overall operational excellence, aligning businesses with the demands of the modern digital landscape.
If you’re not ready to dive into a large software upgrade there are many other changes you can implement that will have a positive impact on your business. An easy start is to automate accountants payable, and bill pay capabilities. These programs can eliminate a significant amount of labor and human error. Additionally, they can talk directly to your accounting system and update accounts payable and cash ledgers automatically; learn where to correctly code vendors and types of expenses; read vendor invoices to eliminate data entry; and based on machine learning they will code and schedule the vendor for payment. All approvals are done digitally, as is the payment process, which eliminates the need for check runs and signatures. By adding a positive pay process to this process and your banking system, you can greatly improve your fraud prevention. You can also link customer invoicing and cash receipts to these modules and eliminate the need for cash application data entry and accounting system cash and accounts receivable updates.
Another option is automating cash planning. AI algorithms can analyze historical cash flow data to predict future cash flow patterns and identify potential cash flow gaps. This allows businesses to better manage liquidity, optimize working capital, and mitigate financial risks.
One of the most impactful areas we encourage our clients to consider is the creation of a data warehouse. This allows the Company to use data visualization tools such as Power BI or Tableau to automate reporting. The linking of financial and operational data together gives management visibility of strategic objectives and KPIs in real time. Dashboarding and data visualization is an iterative process that can take several cycles to perfect. Once trust has been established by company leadership we find that utilizing the reporting becomes an integral part of the company’s daily operations and in planning for their long-term.
Ultimately, modernizing your financial functions provides significant advantages to business leaders, empowering them to make faster, more informed decisions by providing access to real-time data and advanced analytics. In today’s fast-paced market, this agility can give your business a compelling competitive edge, contributing to its ongoing path to growth and success.
