Hidden Profits Blog

Finding the Gold in Your Business

Hidden Profits Author:

Lynda J. Roth

As the president and founding partner of Woodland Hills-based LJR Consulting Services, Lynda advises clients on ways to improve profitability and productivity through both technology and business processes. She also works with companies and private equity firms on the role of information technology in mergers and acquisitions.



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How To Evaluate the Financial Supply Chain

Filed under: ERP Selection, Information Technology, Uncategorized, business process, finance department, lean accounting — Lynda Roth at 5:51 pm on Monday, May 31, 2010

We have discussed the Financial Supply Chain and the importance to cash flow and profitiabilty for optimizing it.  Optimizing the Financial Supply Chain is a function of optimized business process and effective information technology.  In my last post, I recommended that business process be addressed before selecting new information technology systems. You want to optimize in this order so you can define requirements for the systems needed and the functionality required in each system.  So how to go about evaluating the effectiveness of the current Financial Supply Chain, selecting and prioritizing the processes to be optimized and creating the new system requirements. I  recommend the first step is an assessment to determine where your problems are and cost to the company of the current Financial Supply Chain processes. 

What is involved in an assessment.  A good assessment will address 4 key areas:

  1. Information technology infrastructure
  2. Information systems - ERP, Operations, Reporting, Document Management etc.
  3. Business Processes
  4. Organization - Finance and IT

The first step is to evaluate the business processes in operations, finance, sales and other supporting departments.  Inefficient processes that you are looking to identify are:

  • Duplicate data entry
  • Extensive use of Excel spreadsheets
  • Duplication and multiple filing of paper such as invoices, purchase orders, employment applications etc.
  • Manual processes to support lack of system integration
  • Non-standardized processes due to multiple systems i.e. multiple ERP or accounting systems
  • Lack of integration with customers, vendors & bank
  • Processes that employees feel are inefficient
  • Departments that do not have access to ERP, CRM systems
  • Month- end close process that requires more than 3 days

The second step is to evaluate the information systems and technology infrastructure.

  • What ERP or CRM system is being used, is there more than one
  • When was the last time ERP system was upgraded & what is the technology platform
  • What processes are a result of issues with the ERP, CRM or other key operational systems
  • What custom in-house developed systems are being used, how old are they, how are they supported
  • What systems are used to create financial reports/information for finance, outside organizations, operational management
  • What are the issues the frustrate the IT organization
  • Is there a consolidated data center
  • Do all employees have access to the core systems and servers
  • How are applications integrated
  • Are applications outsourced

The third step is to evaluate the Finance and IT departments

  • How are the departments organized - are there multiple IT and/or finance departments
  • Who heads the IT department and do they address strategic business issues
  • What skill sets do each of the members of the IT department possess
  • What functions are outsourced and with what organizations

These are the key components of an assessment.  By evaluating these areas you can define functions within the organization that are inefficient.  After you have identified inefficient processes the next steps are to create continuous improvement teams to define solutions to improve efficiency.

Often a consultant trained in lean methodology may provide key insights in the business processes and be able to recommend technology solutions.  If you would like assistance with your assessment or process design please contact LJR Consulting Services at 818-227-5025 or email me at lynda.roth@ljrconsultingservices.com