Wednesday, March 25, 2009

Dash for Cash

Everyone in business knows that cash is king in a recession.

You'll first notice not a drop in sales but a decrease in your bank balance or increase in your overdraft. To survive you should focus on one or more of the following:
  • Improve your debt collection process, ensuring it is systemised and consistently applied
  • Reduce the amount of your resources consumed in servicing slow payers
  • Allocate scarce inventories and services to your best customers
  • Clear surplus inventories
  • Extend trading arrangements with your suppliers
  • Trim your expenses

The difficulty with this process is easily identifying and substantiating the potential problem areas that could be tackled. Business Intelligence (BI) Reporting, including Dashboards provide you with real time information that compare current results in the form of Key Performance Indicators. KPIs are simple metrics (such as Stock Turnover, Days to Collect Invoices, Liquidity) that you can compare against a benchmark (e.g. your own past results or an industry standard).

You should consider BI Tools that have both a financial and sales KPIs to help you identify missed opportunites to grow your business. Why? Because to Thrive in a tough market you need to grow your market share at the expense of your competitors. The best way to do that is to surround yourself with smart people and systems so you make powerful informed decisions to take your business beyond the pack.

For further information: Axsapt

Wednesday, March 18, 2009

Accounting for Hard Work

Accounting is hard work... ask any Accounting Undergraduate.

It takes a long time to fully grasp the principles of accounting to the extent that debits and credits make sense and transactions are correctly recorded in groupings (Revenue, Expenses, Assets, Liabilities, Equity) to produce meaningful reports to guide Business Managers.

There are many areas of accounting that rely on the judgement of the practitioner, such as revaluation and depreciation and amortisation of assets. Other examples are calculations of provisions for bad and doubtful debts and the estimation of contingent liabilities.

In my many years of business consulting, I'm surprised by how many mistakes are made in operating accounting systems and the lack of understanding of basic accounting principles. Only this month I was asked to explain why a client's accounting system produced an incorrect Business Activity Statement (BAS).

When faced with this sort of problem, I usually go back to first principles and perform a manual reworking of the computerised report to compare against. The first thing I did at this client was scan a listing of Sales for the month for unusual entries.

Near the top of the list was an $800,000 transfer from the customer's bank for the funding of a piece of equipment. This amount should've been treated as a loan but was incorrectly coded as income! A very costly error as profit and tax payable would've been overstated had the error not been detected.

The Axsapt help desk seems to be overwhelmed at times by operators confused by Bank Reconciliations. In many cases, errors made are "corrected" with entries that make the problem worse. In some cases, we recommend our customers prepare a manual bank reconciliation for comparison purposes, but very few people these days remember or have ever known how to do this?

When faced with these sorts of problems, operators should acknowledge their limitations and post unusual transactions to a Suspense account rather than often guessing incorrectly. In this way, the Company Accountant can review and advise appropriate postings rather than spending even more time and money fixing errors.

More training is also a great investment. Classroom courses will help new staff come up to speed much quicker and will help experienced users make better use of their systems. "One-on-one" training sessions are also recommended to help operators really nail complex aspects of their operations.

For more information: Axsapt

Thursday, March 12, 2009

Modular Accounting Systems vs ERP Systems

Growing companies that find they are straight-jacketed by their current accounting systems, typically are faced with the difficult decision of upgrading. They can choose to implement either an all encompassing system or bolting on smaller applications to add capabilities to what they already have.

The first approach, typically an ERP (Enterprise Resource Planning) system, deals with every aspect of business: from controlling marketing campaigns and sales reps, order collection, product warehousing and distribution, payroll and HR, workflow, reporting, financials and more. ERP systems are excellent but be prepared for long and costly implementation projects.

The second method: adding functionality to a core accounting system, is usually much less stressful and costly to implement. The pitfalls may include: duplication of data (such as customer records) which may be overcome with newer systems designed with seamless links. In many cases, the modular approach ends up a better solution as the individual modules are purpose built with more capabilities than ERP systems.

Which approach is best? Firstly you must list and prioritise your requirements and note which are not adequately achieved by your current solution. The modular approach is only ever a viable option if you are relatively happy with your core accounting system and there are a range of available bolt on applications (to satisfy the missing needs) that link seamlessly with it.

In evaluating both options include all costs including additional hardware and system software costs, data conversion, configuration, testing, training and on-going support and maintenance costs.

The selection process is complex and often risky especially in recessionary times like today. You may choose to seek the advice of a Business Consultant with deep knowledge of a number of popular Modular and ERP Business Accounting Systems.

For more information, please contact: Axsapt

Monday, March 02, 2009

Servicing Equipment and Warranty Tracking

Many of Axsapt's customers are in the business of installing equipment such as air conditioners and then providing a warranty service and preventative maintenance services to ensure the equipment is operating efficiently.

You can use standard Job Costing systems to account for the initial implementation of the equipment, but typically you will need a purpose designed Service Management solution that knows about your Technicians and their skills, their availability (in terms of territory and idle time). A good Service Management system also knows about the Models of equipment you sell and service and allows you to maintain a Knowledge Base of common faults and solutions.

Other aspects to consider include automating the recurring billings, recording of equipment usage (for example, photocopiers and some coffee machines have meters that need to be polled to determine service charges).

Hand held devices are very popular with service organisations as they allow new jobs to be sent immediately and invoices to be generated on the spot. Another benefit is stock levels are more accurate as van stock allocated to the job is recorded at the time the job is done.

Another area to be aware of is that Service Management systems should be fully integrated into the base accounting system of the customer, otherwise you end up with a reconciliation nightmare where Customers, Suppliers and Inventory just don't match up over time.

For more information, please contact: Axsapt