In Black & White (7)

Is your finance department prepared for these 5 colossal changes?

Jamie Black
Finance Evolved
minute(s)Perhaps the biggest failure of corporate governance today is its emphasis on short-term performance. Corporate Governance 2.0 - Harvard Business Review You may not realize it yet, but your organization is in the early stages of being hit by massive, interconnected and occasionally opposing global changes. These changes are likely not going to reach full strength for 10 or 20 years. None the less, it will take time, planning, and some hard work to get prepared. If these changes turn out to be as big as predicted, being ready may mean the difference between an organization that prospers and one that perishes. In our blog series "Finance Evolved", we consider major trends & forces and how they may affect the finance department to aid in your planning & preparation. Here are the big 5 looming trends: 1) Demographics The population of North America is aging in a way not seen before. This will cause havoc for businesses, governments and the economy generally. 2) Skills Recent surveys reveal gaps between the finance skills required by organizations and those possessed by entry-level management accounting and finance professionals. As the pace of change increases, the successful individual finance professional and the successful finance department will need perpetual skills development. 3) Productivity Despite technological improvements, the pace of growth in productivity has been slowing globally since the 90s. This has already impacted wages and may contribute to income/wealth inequalities and job insecurity in the future. 4) Budgets We see increasing levels of pressure for finance to accomplish more, faster with stagnant or decreasing budgets. Given the other big forces in this list, there is every reason to believe that this pressure will intensify. 5) Technology To say we are living in a time of rapid, continuous technological change is a cliche. There are signs that while the current rate of technological improvement may be slowing, the effects may well be poised to more dramatically affect the finance department than ever before. Be ready for the future Train & mentor staff - The difficulty you have today finding qualified, appropriately skilled staff is going to become much worse. Your best bet is to retain and develop your current team. Document & standardize - Expect the loss of a significant percentage of your most experienced, knowledgeable workforce in the next 2 decades. Without excellent organizational supports, this will come with a consequent decline in organizational productivity. Plan ahead - Governments at all levels will see reduced revenue growth and increased expenses, further straining budgets. You can expect reduced governmental services and/or increased taxation. Streamline & automate - Organizations of all types will be under growing pressure to increase productivity. Software and automated systems are your best tool to do more with less. Upgrade your skills - The requirement for greater productivity will mean that your value will be increasingly tied to your ability to lead, to streamline, to automate and to improve. Conversely, if your skills are primarily data entry/bookkeeping, you are likely to be automated into the unemployment line. Do you have the skills to leverage technology to help you address the dramatic staffing, efficiency, and budget challenges we will see in the next 10 to 20 years? Watch for future articles in our Finance Evolved series which will dive deeper into these topics and explore additional strategies designed to aid the transition to world-class finance organization.

To function effectively & efficiently in the coming decades, your finance department must plan for these 5 major changes right now.

CaseWare Feature Spotlight: Audit Trail

James Goligher
CaseWare Feature Spotlight
minute(s)Our CaseWare Feature Spotlight blog series highlights some of the ‘game changing' features offered by CaseWare Working Papers. This article focuses on the Audit Trail. You bring data in from a source system, make adjustments and then issue final reports. You need to know who did what and when. When something changes, you want to know exactly what changed without having to manually compare documents. CaseWare gives you a complete, robust audit trail with these 4 features: 1) Import Analysis When you complete an import into Working Papers, a "Change in Chart of Accounts from Import" report is automatically produced & presented; a copy of which is saved to your engagement directory. This report details: who did the import, what was imported, where the source of the data was located, when the import completed, and a list of all new and changed accounts in your data file. 2) History CaseWare uses History Settings to define what information is recorded. Want a complete history of who accessed a document & when? How about when a document is modified or an adjustment is made? No problem, just check that off & you’re done. You can review engagement history on a document-by-document or event-by-event basis. 3) Milestones Sometimes seeing the fact that changes have occurred is not enough. In those cases, a snap-shot of a report at a specific moment in time allows you know exactly what has changed. If you are currently saving multiple copies of spreadsheets to achieve this today, you will immediately understand the value. CaseWare refers to this as a Milestone. You can manually save a Milestone of a document at anytime, or you can have them automatically created by the software using the history settings. You can compare the current document to a milestone, or even compare between two previous milestones. The comparison tool shows you exactly what has changed by striking out older figures and highlighting the current values in red. You can even revert the document back to the Milestone version if you determine the previous configuration of the report was more correct. All the identified differences are highlighted in red. 4) Track Changed Values Want to track all changes in your CaseView reports (financial statements, MD&A, etc.) since your last review? Use Value Changed Flags to have all modifications clearly underlined. Once you have reviewed, you can accept (clear) the change flags one-by-one, or for the entire document. Below we see how an adjustment to the 'Benefits on wages' line item has affected Cost of Goods Sold and the Gross Profit in an Income Statement.. Keeping a handle on the changes in your Working Papers file is easy with the Audit Trail features outlined in this article. But it can be tough for finance professionals to keep up with the latest features and techniques of using CaseWare Working Papers. Let us help! Sign-up for our Blog and we will keep you up to date with the trends, tools & best practices to ensure your work is as efficient, effective, and reliable as possible.

Save preparation time & reduce audit fees. These 4 CaseWare Working Papers' features provide an automated audit trail with analysis tools.

How to Use CaseWare's Document Manager to Diagnose Problems

James Goligher
Tips and Tricks
minute(s)CaseWare Working Papers has thousands of options, features, and functions. So, you’ll be forgiven if you overlook some of the program's capabilities. In our Tips & Tricks blog series we highlight quick changes you can make, or steps you can follow, to save time and optimize your use of Working Papers. Getting the most out of the Document Manager By default, CaseWare’s Document Manager only displays 2 of the available 20 columns. You can show these columns in any combination and sort their order, allowing you to customize your view to complete tasks more efficiently. How to modify the Document Manager To set which columns are visible (Active) and in what order, access the "Reorder Columns" option on the "View" ribbon. Move columns from "Hidden Columns" to "Active Columns" to make them visible. Highlight an active column (like "Roll Forward as Placeholder" is in the screenshot below) and use the up and down arrows to the left to change the ordering of the columns. When to modify the Document Manager Often knowing how to use a feature isn't enough. Sometimes getting some examples of when to use it is even more valuable. Here are a few examples of when you might want to customize columns in the document manager to find problems in your file: You want to find documents that have not been signed-off: Make the "Completed by" & "Reviewed by" columns active. Note - columns can be renamed by the user, so these columns might have different names in your file. You want to find any documents with outstanding issues: Make the "All Outstanding Issues" & "Uncleared Issues" columns active. You need to see if any documents have been incorrectly configured for Roll Forward, Clean Up, or Lock Down: Make the "Roll Forward", "Clean Up" and "Lock Down" columns active. You want to ensure that all PDFs are set to use CaseWare's internal image viewer so you can annotate them: Make the "Viewer" column active. You need to quickly review and change the tags assigned to your documents: Make the "Tags" column active New CaseWare enhancements are always being released. Keep informed, subscribe to our blog.

CaseWare Working Papers' allows the addition of Document Manager columns which will save time & increase the effectiveness of your year/quarter/month end.

City of Burlington automates their financial statements with CaseWare

James Goligher
Success Stories
minute(s)Boasting over 1,400 acres of parkland, Burlington has been consistently ranked as one of Canada’s “Best Places to Live.” This year, MoneySense magazine named Burlington the best mid-sized city (population of around 175,000) in which to live in Canada, the best place for new immigrants, and the fourth best place to retire. The city supports 47 service lines, which are represented by 15 departments and 6 local boards. The Challenge Improve accuracy and efficiency in the preparation of year-end financial statements for the City. The Solution Switch from Excel to CaseWare Working Papers & Financials for financial statement preparation. The Results Automated preparation of financial statements and enhanced relationships with auditors. Less than Excel-lent Before implementing CaseWare, the City of Burlington's Finance Department created their annual financial statements in Excel. While spreadsheets can be useful for analysis, they found that efficiently converting large volumes of data into financial statements was challenging. Another significant issue with Excel was the time-consuming process of creating the financial statements. They would often take weeks to complete, and require several attempts to get in balance. If a change was required, it needed to be entered manually across the entire statement. Since the numbers were hard coded into the spreadsheet, rather than being linked directly from the source data, the process was tedious and prone to inaccuracies. Impact on the Audit Upon switching to CaseWare, the Finance Department found that the time spent preparing year-end financial statements was dramatically reduced. “We usually didn't have our financial statements ready until the end of the audit," explained Michelle Moore, Coordinator of Accounting at the City of Burlington, "but now we are producing them before the auditors even arrive. That is a huge win for us.” Moore continued that last-minute changes would previously take hours to apply throughout the financials, but with CaseWare now only took a few minutes. Getting the financial statements to the auditors early in the audit has provided the Finance Department with more time to assist with any requests while the auditors are still on site. “Our auditors were extremely happy when we told them that we were implementing CaseWare,” Moore shared. CaseWare has allowed both the Finance Department and the auditors to be more confident in the information they are working with, which can be attributed to creating reports directly from a central database with referencing to the original source. Time for a Change Change is never easy, and implementing a new software is no different. Due to the numerous account groupings and cost centers used by municipalities, it can be a tedious process to make sure that all of the groups are set up appropriately from the onset. Although the initial setup took some effort, the City of Burlington remained positive. Moore noted, “It was a good educational process for us to learn and really understand how we have developed our financial structure.” F.H. Black & Company Incorporated to the Rescue F.H. Black & Company Incorporated (FHB), Canada's sole authorized consultant for CaseWare's governmental solutions, stepped in to aid in a smooth implementation. “[They] were great support for us especially when we started out,” says Moore. Moore also commented that FHB consultants were always available whenever they were needed and were happy to answer any questions. “They have so much knowledge and they know how to do things instantly.” To have that level of support available was comforting. Two of the Financial Department associates attended basic and advanced training on CaseWare provided by FHB and liked how hands-on the training was. Some of the training materials provided are still used today when any questions or issues arise. Continuing with CaseWare The City of Burlington is interested in continuing to explore the many additional features and add-ons available with CaseWare, such as quarterly financial reports and the FIR add-on. Moore expressed, “I think the opportunity to grow with (CaseWare) is pretty endless at this point.”

The City of Burlington automates their annual financial statements with CaseWare, saving 2 to 3 weeks of work per year. Next step - Automate the Ontario FIR!

How to use CaseWare's Filters to save time

James Goligher
Tips and Tricks
minute(s)In our Tips & Tricks blog series we highlight many efficiency-boosting techniques. Here is another one designed to save time. CaseWare Working Papers' document manager is a powerful tool that we have written about. The ability to drag & drop, sort, create placeholders and view sign-off/issues related to a given document, are just a few commonly used features that simplify and improve year/quarter/month end file preparation. Adding 100+ supporting documents is great, but it can make it difficult to find particular documents later. Fortunately, CaseWare gives us Filters to make this simple too! Filters allow you to hide those documents that are unnecessary at a given time. This ensures you see the information you need, exactly when you need it, without having to search through dozens of folders and hundreds of documents. Some examples of great use cases for Filters: To Be Reviewed List: Hide documents that are not ready to be reviewed yet (not signed off in all roles) Special Topic List: Only show documents related to the FIR / LGDE (filter on Tags) Problem Areas: Only show problem documents (have issues assigned that are not cleared) Task List: Only show documents for a specific user (filter on Tags) Outstanding Documents List: Only show supporting documents that have not been uploaded yet (filter on placeholders) Watch the video below to learn how to use and modify Filters in CaseWare’s document manager.

CaseWare Working Papers' allows the addition of extensive supporting documents. This Tips & Tricks post teaches creating & using Filters to increase efficiency.

The quick & easy way to import into CaseWare

James Goligher
Tips and Tricks
minute(s)To take full advantage of CaseWare's power to automate your reports, you must first import your data. There are numerous accounting software packages that CaseWare imports from directly. Even if your package is supported, however, we do not typically recommend you use the "Accounting Software" method. Instead, we advise using the "Excel File" import feature. Why? There are two key benefits: Consistency. Perhaps you work in an accounting firm and need to import from dozens of different accounting packages. Rather than learn different processes for each, you can learn just one - Excel. Data Integrity. Working with Excel you can review data and ensure it balances before you import. Many folks identify a drawback, however - speed. With Excel, users must specify numerous options before import, which can be both confusing and time-consuming. If that's your experience, this blog is about to save you that most valuable of assets, time. Most users don’t know about the ‘Record Layout File’ option. Simply put, it’s a way for you to automatically populate all options in the Excel Import Wizard. Making the import a 4-second process. No more identifying rows to be excluded, no more labeling columns, no more selecting advanced options every time you import. Instead define these criteria a single time, save a record layout file and apply it subsequent imports. NOTE - to take advantage of this process, you will want to have the Excel file in the same format every time you import it. So, it is best to find the right report in the accounting software, and export that same one every time. For more information on importing from Excel to CaseWare Working Papers, including a demonstration of how to get from import to draft Financial Statements in under 3-minutes, see our CaseWare Feature Spotlight: Importing Data blog.

There are many ways to import data into CaseWare. But, only one applies to all users, takes under 5 seconds, and can be reliably executed time after time.

How to prepare a better solution requirement list for IT project ...

Jamie Black
Efficient, Effective and Reliable
minute(s)Many of our articles address factors related to IT project success and the significant rate at which these projects fail. There are many causes for failure; first among them is choosing a solution that does not meet the needs of your organization. Typically, selecting an IT solution begins with the Request For Proposal (RFP) process. The process seems logical—state your needs and ask vendors to supply a price to meet those needs. If you're buying a commodity with little differentiation among options, developing a list of requirements is important. But if you're buying an intangible like an IT solution, with unlimited variables and options, that list becomes absolutely critical. Unfortunately, it is very common to see software requirement lists for Comprehensive Annual Financial Report Automation or Continuous Controls Monitoring (CCM) systems with requirements: That are very broad Derived exclusively from a vendor's list of features Copied from another, theoretically similar organization's RFP To see the error in this approach, imagine buying an expensive suit. After seeing it hanging in the store and being impressed with what you see, the next step is always to try it on. Why? It is the only way to guarantee it fits you. Even though the tag says it's your size, that is no guarantee of fit, is it? Take that suit home without trying it on and it might fit exactly (unlikely); it might need some alterations, or it might be completely wrong for your body. Why do so many organizations have such ill-defined requirements? The most common reasons include: The team disagrees that implementing a new IT system is like buying a suit; they see it as more like the purchase of socks—one size fits all. The team did not have time to formally document their needs, but felt that a good compromise was to use someone else's. The team did not have a clear idea of how to document their needs, so they chose to leverage those published by vendors or peers. How to document your needs If you fall into the third category above, you can improve the probability of your IT solution's success by applying these seven steps: Document your current business processes. Start by writing down each step. Visit the people who perform each step and ask them what they do, in what order, and why. Be prepared for some surprises. There will be steps you did not know about and shortcuts you never imagined. The benefits of this documentation process can go beyond selecting the right new system. For example, it can be the critical first step to updating your internal controls risk assessments or training materials. Prepare process diagrams. There are many ways to create this material, but we firmly recommend modeling your business process graphically. Business process diagrams (or models) are excellent at displaying process gaps or errors in understanding in a way that descriptions like those gathered in Step 1 will not. We recommend swimlane diagrams like this: Many applications can be used to create these diagrams. The most commonly used is Microsoft Visio but we also like Lucid Chart and Creately. Gather copies of any inputs (forms, authorizations, etc.) or outputs (reports) of your business processes as attachments to your documentation. Be sure to label the diagram to show where in the process they apply. Consider what could/should be improved: What is difficult today? What takes a long time with the current process? What would the value to the organization be if you could eliminate or shorten this time? Are all steps necessary? Could we remove some of them and still achieve our desired results? Often these opportunities will jump out at you in the diagram. They may appear as many steps that loop back on top of themselves, for example. Create new diagrams of the optimal future process, incorporating the items identified in Step 4. This improved process is a better representation of what you want your new system to support. Transform the steps in the business process into a requirements list. For example, if a step in your diagram is, "Batch email statement," the need might be, "Ability to email statements to all accounts that have an outstanding balance without any manual intervention." Finally, now is the time to consider vendor feature lists or the needs documented in other, similar organizations to see if there are any items you may have overlooked. By applying these seven steps, you can tailor your software requirements list to your organization, and more likely find the solution that provides the greatest value.

Follow these 7 steps when preparing a technology requirement list to ensure your next solution meets your needs.

Improve your Internal Controls to Lower Audit Fees

Jamie Black
In Control
minute(s)If you're a typical finance department, discussions about Internal Controls are probably not part of your daily work day. In our experience, accounting teams start thinking and discussing Internal Control when they have: found an alarming incidence of error in their business processes are subjected to a performance audit (if they are a local government) heard of another organization falling victim to fraud Outside of these scenarios, the strength of internal controls systems doesn't often get a lot of finance's attention while they take care of payroll, budgeting, management reporting, financial reporting and so much more. There is a large, but often overlooked reason to focus on your internal controls system, an opportunity to reduce audit fees. Audit Fees Increase with Poor Internal Controls Poor internal controls and/or poor documentation of existing controls directly lead to increased audit fees. Why? Auditors must increase the amount of testing performed (sample size) when they determine that internal controls can not be relied upon (International Standard on Auditing - 530 Audit Sampling) to reduce audit risk to an acceptable level (International Standard on Auditing - 330 Auditor Responses to Assessed Risk). Specifically: "Deficiencies in the control environment, however, have the opposite effect; for example, the auditor may respond to an ineffective control environment by: • Conducting more audit procedures as of the period end rather than at an interim date. • Obtaining more extensive audit evidence from substantive procedures. • Increasing the number of locations to be included in the audit scope. The evidence of this direct relationship between audit fees and internal controls abounds. In December 2016, the Financial Executives Research Foundation (FERF) survey of more than 6,000 organizations found that reviews of internal controls continue to be one of the three major driving factors behind rising audit fees: More than 20% of the respondents that had audit fee increases cited a “review of manual controls from [Public Company Accounting Oversight Board] inspections.” Companies that cited ineffective internal controls as adding to audit fees experienced a 5.1% median increase, almost two percentage points higher than the median increase for all other filers. 3 Recommendations to Reduce Audit Fees In their follow up article "Mitigating Increases in Audit Fees" the FERF interviewed preparers and auditors to understand causes and develop recommendations. Several recommendations focused specifically on Internal Controls improvements that drive lower audit fees including: Align key controls with key risks: Ensuring the organization has strong controls to address the most significant risks will give management and auditors increased confidence. Document internal controls: If an organization has very light or poorly organized documentation, or hasn’t thought through all the branches in a process, attestation becomes difficult for the auditor — and more costly for you. Evaluate the latest technology: External and internal auditors are both using data analytics and continuous controls monitoring technology to increase audit quality, work smarter and potentially reduce costs. There are many great reasons to focus on improving your organizations' internal controls. Lower Audit fees is another good one.

Finance professionals know the importance of strong internal controls for managing but overlook the opportunity to reduce audit fees.

7 Steps to Avoid the Cheap IT Solution Selection Trap

Jamie Black
Efficient, Effective and Reliable
minute(s)According to information technology research firm Gartner, between 50 and 75 percent of IT projects fail. We've written a number of articles offering guidance for achieving better outcomes through the solution selection and implementation processes, but there is one trap we haven't addressed—and we see clients succumb to it all the time. Price Clouds Everything Consider the Canadian government's recent Phoenix payroll software debacle. They elected to have a payroll system custom developed by IBM and have had nothing but problems with it. According to one assessment: "... the Harper government put so much emphasis on saving money that it undermined efforts to ensure that the system would function well...instead of saving the government 70 million Canadian dollars this year, as promised, Phoenix has cost the government an extra $50 million (about USD$ 37 million), including $6 million in additional fees paid to IBM to fix it." When participating in an IT system evaluation, if you find your team leaning toward the low-cost choice instead of the high-value solution, beware. No one wants to pay more for something than they need to. In government in particular, you may even have the obligation to choose the low-cost solution. This default preference/requirement is understood by IT solutions sales representatives and is often relied upon to accelerate the sales cycle and "close the deal." Even if you're not being exploited by sales teams, the Phoenix case shows how this low-cost bias can lead to dysfunction. Here are two questions to ask yourself to avoid a bad deal when considering the "cheap" IT solution: 1) Is it truly cheaper? In one respect it is obvious; if the number at the bottom of the RFP response or quote is lower, then it's the less expensive option. While technically true, that is only a valuable assessment if you are comparing apples to apples. Before you look at the price, you need to know whether you'd be getting the same thing for the money. With an intangible product like software, it can be difficult to ensure you're making an apples-to-apples comparison. If you bought the Chevette above based solely on the price, you could be stuck with the wrong car if acceleration and top speed are necessary features. Alternatively, you might decide you do not need a Corvette, that a Chevette will do. The point is, they have different features and capabilities, and comparing the two options based solely on price obscures those differences. RECOMMENDATION: Before assessing products, explicitly and formally define your needs/requirements and evaluate your choices based on fit first. Don't allow the price to hijack the process. Use ROI instead of price to select among solutions that fit some/all of your requirements. 2) Why is it cheaper? There's no such thing as a free lunch. - Milton Friedman You've assessed the options based on fit. Then you calculated ROI. The cheaper solution comes out on top. What now? RECOMMENDATION: Treat the low-cost solution with extreme suspicion. This is your warning sign to bolster your due diligence. We recently watched one "low-cost" vendor in the reporting automation industry cease operations and advise their existing clients that they are on their own. For some of these folks, this happened while they were implementing the software. The Action Plan: 7 Steps to Better Due Diligence Double-check fit-assessment. If you have any doubt, have the low-cost vendors re-demo the product to confirm it meets your needs. Double-check standard pricing variables: Modules/features Number of users Number of people being trained Duration and extent of support period These are all variables that might account for significantly reduced cost. Remember, you want to compare apples to apples. Also, recall that skimping here may cause cost overruns later when you determine you did need more training or support. Assess the vendor track record. How many clients do they have? How many times have they solved the problem(s) you have? Ask about failed implementations and what caused them to fail. Be suspicious of anyone who says they don't have any. Closely assess their implementation team. Does the vendor have in-depth knowledge of not only the tool but your business process? Have they been "on your side of the table"? Have they been an HR manager or comptroller or auditor or finance officer and done the tasks that their tool addresses? Contact numerous clients that are currently using their product. Spot check the specific features you are counting on using to see if the reference is using them. We have seen vendors provide references that did not even use the product being evaluated! If the vendor can not provide an extensive list of clients who use the product, or they do not have extensive experience solving your exact issue, determine whether your organization is prepared to be a guinea pig. We have seen numerous organizations stuck in limbo for years while their vendor tries to build what was promised. Go back to the expensive vendor(s) and ask why they are so expensive. Do they charge a premium because on their brand? Did they consider something the others didn't? Was there an error in one of the pricing variables (point 2 above)? Assess the low-cost vendor's stability. One way to do this is to consider their financial health, if possible. If the company is publicly traded, have they ever shown a profit? Do their financial statements look like those of a stable, successful company? If the vendor provides their software as a service (SAAS), there may be other considerations for evaluating performance. You can find some interesting articles on SAAS performance here and here. If the company is not publicly traded, it can be hard to perform this analysis, and you may need to rely more heavily on steps 1–6 above. It's a good idea to follow these steps even when there is no major pricing disparity. They become absolutely essential when you're presented with what seems like a sweetheart deal, and you want to avoid the cheap solution trap.

During selection of a new IT system beware of defaulting to the low-cost solution. 7 easy steps steer you away from project failure.

How to Improve IT Project Success with One Calculation

Jamie Black
Efficient, Effective and Reliable
minute(s)Information Technology projects can be the most complex and high-profile you will encounter as a finance team member. Perhaps you have read about the trouble with the Phoenix payroll system implemented by the Canadian public service. Or maybe you have direct experience with severely compromised IT investments at your place of work. There is no shortage of such examples. So, what can finance do to help? In October of 2016, the Auditor General of British Columbia made some suggestions in their report "Getting IT Right: Achieving value from government information technology investments." A 60-Second Overview Regardless of your industry, the report is a valuable read for accountants, and we recommend reading it in full. Here is a quick summary of its major points: IT is important because "every aspect of government depends on IT." Only 29 percent of IT projects globally are rated "successful." Success is defined as: On Time On Budget AND Value Success depends on: People Planning Consultation Governance The report is an absorbing read, but it fails to elaborate on a significant element: What is "value" and how do you calculate it? What about "Value"? The report uses the word "value" 57 times without defining it explicitly. The only comment on how to achieve it is to assess: Alignment of the project with the organization’s specific needs, priorities, and strategies Contribution to the organization’s desired outcomes Cost Level of risk While these are good points, they provide no particular direction to those attempting to assess a project's value or measure the success of a project during or after completion. ROI to Assess Value Before & After Perhaps it's because we believe that numbers are the key to all universal truth (no really, we do), but we argue that finance should calculate proposed and achieved value for IT projects. The accountant in us is very comfortable with Return on Investment (ROI) calculations: This type of calculation should be used to determine optimal use of your organization's investment. But in our experience, these calculations are rarely utilized when considering IT solutions, particularly in the public sector. Why? There are at least two problems with the word "profit" in the context of public sector IT projects. Public sector organizations typically do not think in terms of profit. Even if you work outside the public sector, you may reasonably ask, "How does an ERP system (for example) generate profit for any organization?" "Profit" (and therefore "ROI") may seem like a non-starter. But with a minor change in terminology—replacing "profit" with "calculable benefit"—the concept is applicable to the public sector. The "calculable" part is important; you don't want this exercise to dissolve into imprecise speculation about intangible benefits. Those may also warrant a discussion, but you should not give up the important quantitative analysis. You should focus on those aspects to which you can assign a real dollar value. There are two broad categories of calculable benefits that you should consider: Efficiency of Staff Resources Your staff spends their entire working lives involved with IT systems. A more efficient, convenient, and highly automated solution will help them do their work faster, more reliably, and with less cross-checking and manual review required. If you estimate the hours that a new IT system might save, and multiply it by your staff's hourly cost, you can measure the economic impact of those time savings. Reduction or Avoidance of Direct Expenses There are many direct expenses that a new IT system can help reduce or eliminate. You pay fees to an external accountant—would those fees be reduced if you automated a significant portion of the work they performed? What if your new system could help avoid late payment of invoices and thereby reduce your late fees and penalties to vendors? Perhaps a new system would provide a reduction of ongoing annual maintenance and support costs. An Example Consider a scenario where your current ERP system is no longer supported. You determine that the risk level of continuing with an unsupported system is unacceptable. You have identified three possible solutions and are working through the selection process. You have seen demonstrations and received fee estimates. You have contacted references and determined each option's strengths and weaknesses. Clearly, there are many considerations (some of which are intangible). But don't underestimate the value of performing an ROI calculation. Calculable Benefit: How much money will we save with each solution? For example, estimate the following separately for each solution: Hours of staff time saved by reduced data processing Hours of staff time saved by automating report creation Estimate avoided late payment fees to vendors due to improved A/P processing abilities Decreased finance costs due to accelerated AR collections Cost: What is the cost of each solution including all features/modules etc. necessary to facilitate the above benefits over a 5 or 10 year period? 3 Advantages of This Approach 1) Forces Detailed Assessment: All too often we see clients who have only a general understanding of how a particular system will help them. Vendors often do little to help, aside from offering marketing double-talk: "Work Smart", "Improve Productivity", or "Improve Efficiency." These aspirational comments are great, but you need measurable results. 2) Easy Comparison of Alternatives: You can immediately begin to see some interesting relationships between the options that were hard to see at first: Solution 3 is four times as expensive as Solution 1, but it provides 4.5 times the value. If all else is equal, and the organization can find the $100,000 budget, Solution 3 is the better choice for your organization. Solution 2, while more expensive than Solution 1, does not provide a commensurate increase in benefit. Thus, if the budget did not allow for $100,000 investment, the next best option is Solution 1. 3) Clear Monitoring of Performance: Another advantage of this approach is that your team has identified very specific, measurable goals to monitor the project and assess success. For example, you estimated a calculable benefit value based on specific time savings in report creation and data entry. These time savings should be measured to determine whether you achieved the benefit. Moreover, if your vendor is confident in their abilities to deliver these time savings, you can attempt to include attainment of the advantages into the contract. "IT-enabled projects aren’t just about technology—they involve substantial changes to an organization’s culture, business processes, and customers. These projects are really IT-enabled business change. A successful project improves services and allows for more effective use of taxpayer money. And their success or failure is about more than just being on time and on budget, it’s also about achieving expected value." –Carol Bellringer, FCPA, FCA Auditor General, British Columbia In sum, ROI calculation is an important tool that allows finance teams to estimate, measure, and demonstrate the value of their IT project.

From replacing your ERP to implementing a new payroll system we illustrate just how powerful ROI is for setting & measuring IT project success.

In Black & White

Freeing Finance & Budget Departments from Drudgery One Article at a Time