Sticking with an outdated accounting system comes with a cost, too

Staying with an outdated accounting system is not a zero-cost option. Workarounds, integration debt and slow month-end processes drain finance team time, increase the risk of errors and make accounts harder to audit, while limited visibility leaves decision makers working with out-of-date figures. Moving to a cloud-based system has costs too, but customers such as P. Johnson & Sons and Active Learning Trust have won back time for strategic work and used dimensional analysis to find savings.

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Key takeaways

• An outdated accounting system that cannot cope with the growth or complexity of your organisation can cost you a lot of time and money
• Workarounds to deal with “integration debt” make the whole process less efficient, make it more likely there will be errors and make your accounts harder to audit
• Moving to a cloud-based system with added functionality can free up the finance team to spend more time on business strategy
• Dimensional analysis allows you to uncover savings and efficiencies across your organisation

There are costs associated with switching to a new accounting system. But sticking with what you have is not a zero-expense option. It can be an expensive mistake if your organisation has outgrown the system and it can no longer efficiently do the job it was designed for.

When companies are looking at whether to change their accounting system, unsurprisingly there is a lot of focus on the costs of making the switch. But there are costs to not making that switch, too.

Some of these are easy to see – the headline figure is the cost of the subscription fee or licence fee that you’re paying, but it’s unlikely to be the whole story.

If you’re hosting servers on your own premises (see article two in this series for more information about that), there’s the cost of the servers themselves, as well as the ongoing IT support and maintenance costs. Then there’s the opportunity cost of the space hosting the servers, the need to keep them secure and to ensure that they are backed up regularly because that is not done automatically.

Why workarounds are such a drag on the finance team’s productivity

Many financial teams will be working with a system that has been insufficient for their needs for years, but they have coped by introducing add-ons and workarounds that allow them to get by, says iplicit Solutions Consultant Catherine Thompson.

That’s a significant drain on resources, both time and money. The finance team that has to spend hours dealing with workarounds, chasing down missing information and doing manual calculations could be better employed doing other things. There is also an ongoing cost to “integration debt” – the struggle to deal with incompatible systems and support the integration of separate tools. This creates extra work for your IT team, which we talked about in the first article in this series. It doesn’t just create more work as your organisation develops. That work gets more complicated as well, which makes the process less efficient and increases the chances of human error.

Think about the hours your team spends on manual reconciliation, repeated exports of data, spreadsheet rework and chasing numbers that should already be available. You might not think about this too much as it could have evolved over time, but when you add up just how many hours of extra work is involved, this time can be a very real cost, in the form of overtime or even extra staff.

On its old system, the Active Learning Trust (ALT), which runs 21 schools in the east of England, had multiple purchase ledgers rather than a single document, and needed add-ons for a host of basic tasks including reporting and remittances. It had to do 19 separate payment runs and if it wanted to add new academies to the system, it had to ask the software vendor to do it, at the cost of extra upheaval, time and expense.

How do legacy systems reduce business visibility?

A legacy system can also be a drag on the organisation because it makes it harder for the CFO and management team to make decisions if they don’t have accurate, up-to-date figures. iplicit research, surveying 1,000 finance decision makers in medium-sized UK organisations, showed that more than half of them (55%) said month-end accounts took over a week and almost a third (30%) said they took more than two weeks. That means finance teams are spending more time looking backwards than forwards, reducing the time available for planning and budgeting – and anyway, that data can be weeks out of date. “How are you going to get anything done based on the data? You can’t,” says Catherine.

Some contracts include leaving fees and some vendors will quote for “right-to-use” licences that allow you to access your old data after switching systems – although you should check out any vendor’s claims that those are necessary.

Don’t ignore the cost of switching

That’s not to say that switching systems is cost-free. Of course, there are costs to moving, including implementation and migration costs, the expense if you choose to run two systems in parallel for a while and the subscription or licence cost.

But an upgrade to a cloud-based system can bring significant benefits in both the finance team and other parts of the business.

One of these is that finance teams can spend less time working on month-end and more time on business strategy.

Property firm P. Johnson & Sons has saved seven days a month that it has refocused on the business, says managing director Adam Johnson. “The financial controller is now much more commercially focused because she can now redirect over a week a month of time into the acquisitions side of the business – assisting in finding and evaluating new farms to add to the portfolio, rather than being consumed by manual tasks,” he says.

“This isn’t only good for the business but also for the morale of the team, as no one likes to spend their time performing mundane and repetitive tasks. It means we can be much more commercially focused because we’re not inundated with admin.”

Another advantage of switching over to a cloud-based system is the dimensional analysis it offers, which can uncover savings in other parts of the organisation.

ALT not only saw huge efficiency gains when it switched, with year-end workload being at least halved, but was also able to make improvements in the classroom. By using iplicit’s reporting and analysis to review its staff costs and structures, it was able to save £300,000 on supply teachers. And by working out how much of its maintenance bill was related to vandalism, it could also improve how it dealt with challenging students.

Everyone knows that moving to a new accounting system can be disruptive and that there are expenses to the process. But the cost of sticking with what you’ve got is not zero. In terms of time, money, lack of visibility and even staff morale your current system could be costing you more than you think.

See for yourself

Take a quick tour of iplicit to see how dimensional reporting, built-in consolidation and automated workflows could change your month-end. Or if you’re ready to talk specifics, book a demo with iplicit and we’ll show you exactly what it would mean for your organisation.