# In Black & White

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

### 4 remote work benefits that should not be overlooked

• Jamie Black
• Efficient, Effective and Reliable
Finding ways to improve finance & budget department efficiency is challenging. We implemented a remote work option for our team. Here are 4 big benefits.

### How to prepare better RFP requirements lists for IT Success

• Jamie Black
• Efficient, Effective and Reliable
Follow these 7 steps when preparing your RFP list to ensure your next Comprehensive Annual Financial Report or CCM solution perfectly reflect your needs.

### 7 Steps to Avoid the Cheap IT Solution Selection Trap

• Jamie Black
• Efficient, Effective and Reliable
• minute(s)Given that we continue to hear about IT projects failing at an alarming rate (according to some surveys, more than 50% fail), there are a lot of topics that we could discuss respecting the selection and implementation processes. We have discussed a number of them but there is one trap we see 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 and 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 particular in government, you may even have the obligation to choose the low-cost solution. This default preference/requirement is understood by the 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 that you are getting the same thing for the money. With an intangible like software, it can be difficult to ensure you make 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. Alternatively, you might say I do not need a Corvette, that Chevette will do. The point is, they have different abilities and merely comparing on price hides 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 fit first. Then you calculated ROI and the cheap solution comes out on top. What now? RECOMMENDATION: Treat the low-cost solution with extreme suspicion. This is your warning sign to increase your due diligence. We are currently watching one such "low-cost" vendor in the reporting automation industry cease operations and advise their existing client base they are on their own. For some of these folks, this is happening DURING their implementation of 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 to confirm they meet your needs. Double check standard pricing variables: modules/features, number of users, number of people being trained, duration and extent of the 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 more 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 causes their implementations 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 if your organization is prepared to be a Guinea Pig. We have encountered numerous organizations that have been 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 of 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 a stable, successful company? Now, if the vendor provides their software as a service (SAAS) there are (arguably) some other considerations when 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 do this analysis, and you may need to rely on 1 through 6 above more heavily. Many of the steps outlined above are a great idea even when there is not a major pricing disparity. They become absolutely essential when it seems like there is a great deal to be had, 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 are some of the most complex and high-profile that you will encounter in your professional life as a finance department team member. Perhaps you have read about the trouble of the new Phoenix payroll system being implemented by the Canadian public service. Maybe you have direct experience with severely compromised IT investments where you work. There is no shortage of examples. So, what can finance do to help? In October of 2016, the Auditor General of British Columbia made some suggestions when they released their report "Getting IT Right: Achieving Value from government information technology investments." The Report in 60 Seconds Regardless of your industry, it is a valuable read for accountants, and we recommend reading the full report. In case you don't have time, here is a quick summary of the major points: IT is important because "every aspect of government depends on IT." Only 29% of IT projects globally are rated "successful." Success defined as: On Time On Budget AND Value Success depends on: People Planning Consultation and 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 with no explicit definition. 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 the level of risk While these are good points, they provide no particular direction to those attempting to assess the possible value of a project or measure the success of a project during implementation or after completion. ROI to Assess Value Before & After Perhaps it is just that 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 likely very comfortable with Return on Investment (ROI) calculations: This type of calculation should be used to determine the optimal use of your organization's investment. But our experience is that 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 of the public sector, you may reasonably ask, "How does an ERP system (for example) generate profit for any organization?" Thus, profit (and therefore ROI) seems like a non-starter. But with a minor change in terminology - replace "profit" with "calculable benefit" - the concept retains its applicability 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 benefit 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 saved that a new IT system might enable, 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 which a new IT system can help to reduce or eliminate. You pay fees to an external accountant - would it reduce fees if you automated a significant portion of the work they performed? What if your new system could help to 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 the 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 they each have 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, Estimated late payment fees to vendors avoided 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 that have only a general understanding of how a particular system will help them. Vendors often don't do anything to help except provide 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 the100,000 budget, Solution 3 is the better choice for your organization. Solution 2, while more expensive than Solution 1, it 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 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 see if you got 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.   The AG-BC included in her report this clear statement of the importance of measuring value: "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 The ROI calculation is an important tool that finance department staff should use 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.

### Is Self-Implementation right for you?

• Jamie Black
• Efficient, Effective and Reliable