Three Ways ERP Can Help Manage Risk and Prevent Fraud

Business is all about taking risks. But intelligent managers know how to manage risks, thus preventing accidental losses as well as other operational, financial, and strategic risks—including fraud.

To manage business risks by using technology, we must first understand and prioritize the risks a specific business faces, and then understand how IT can help that business. Then we can come to understand how those risks intersect with the IT systems a business might already have in place.

One risk within your business may stem from operating in an e-commerce environment. In that case, you want to know how IT is supporting the Web portal. Do people simply view a catalog, or do they order online and log back into your system later to view their order status? How does that portal tie in with your back-end systems and business data?

Or maybe you have multiple business units, several running on a top-tier enterprise resource planning (ERP) system like IFS Applications. But a Mexican unit is still running a homegrown application, passing its data to you in spreadsheets modified to reflect currency exchange. The manual processes involved in this data transfer and data alteration represent a business risk that could be mitigated by the built-in security features of an ERP system.

So, while technology might be designed to assist in risk management, that technology must still be configured and used intelligently to deliver this business benefit.

Indeed, intelligent use of an ERP system can not only help ensure compliance with legal requirements and accounting rules, but it can also help prevent fraud. An ERP application and its user permissions settings can prevent theft. Aggressive and intelligent use of an ERP system's safeguards can save time during auditing. Properly configuring an ERP application can help protect your company from fraud and costly corporate mistakes in a number of ways. Following are three practical approaches a business can take to protect its assets through its ERP system.

1. Use a top-down approach to identify risks.

Business risk management requires a top-down approach. Senior management often focuses its efforts on creating competitive advantages and might not see one in spending extra money on compliance. But even companies not immediately affected by regulations like the US Sarbanes-Oxley Act (SOX) and the Health Insurance Portability and Accountability Act (HIPAA) of 1996 can benefit from applying some of the principles required for compliance to their business. Efforts to comply with basic data security and risk prevention guidelines can even further reduce the risk of financial loss through administrative mistakes or fraud. The specific steps necessary to ensure compliance with these guidelines will differ from one company or business model to the next, but any company needs to pay attention to such basics as good financial statements, data security, privacy, and housing of key information—and how that information affects things like ensuring accurate financial reporting.

Part of this top-down approach involves identifying what information is key to your business. For a manufacturer, this data might consist of accounting, payroll, and health insurance information, plus things like physical plant assets and inventory. In contrast, a professional services environment is much simpler, with key information consisting of things like customer service and payroll data, with the only other real assets consisting of phones and perhaps leased office space.

Your Reference Guide to SMB Accounting Software Features

So, you're looking for an accounting system.

This reference guide provides insight into the accounting features and functions currently available on today's market for small to medium businesses (SMBs). It will help you determine which features your organization needs—or doesn't need.

You can also download an extended guide in Excel format at TEC's Accounting Software Request for Proposal (RFP) Template page.

But first, here's a brief overview:

What Are Accounting Systems?

Accounting systems manage procedures for accurately entering, tracking, and maintaining information related to an organization's financial operations. These accounting applications typically support general ledger, accounts payable and accounts receivable, payroll, job and project costing, and multinational accounting.

Many SMBs require that other functions (such as inventory control, manufacturing management, and financial reporting) also integrate with their accounting system.

About This Guide

Although a full accounting system RFP can contain upwards of 4,000 features and functions, we'll focus on the "big picture" features for now, for (obvious!) considerations of space.

You'll notice that we've grouped accounting features by broad category. These categories correspond to a high-level functional breakdown of software features. In this reference guide, we provide a brief explanation of how each category impacts your accounting processes.

If you'd like more information about a full listing of accounting software features and functions, please visit TEC's RFP Templates page.

Reference Guide to SMB Accounting Software Features

1. General Ledger

Chart of Accounts
The chart of accounts is, for all practical purposes, the business management system. If revenues and costs are not captured and segregated into the best suited categories, the financial statements you produce will be useless.

Transaction Processing
This category describes features that address typical journal entry processes, including general transaction processing, workflow period closing, batch layout configuration, and job cost adjustments.

Month- and Year-end Closing
While you can bill revenue and collect cost information, if this information is not published in the form of financial statements in a timely manner, the statements themselves are essentially useless.

Control Reports
All business management systems must have some form of controls to make sure information is input correctly. Software features covered in this category are designed to accomplish this task.

Financial Statements
Financial statements drive the company. However, for smaller companies this may not be true to the same extent, since the owner or manager should have a "feel" for operations rather than relying on printed reports. Larger companies cannot do this, simply because they are too big.

2. Accounts Payable

Vendor Master File
Master files are the starting point in any application. For accounts payable, the vendor master file must be set up first, as that drives the rest of the accounts payable functions.

Purchasing Controls
While anyone can issue a purchase order, the process should be controlled. This category covers the purchasing process as well as control systems you can use.

Data Input
Once a purchase order has been sent and goods received, the obligation for that purchase needs to be recognized. This category reviews the various steps required to actually get information into accounts payable.

Payables Analysis
Once an invoice has been input, it needs to be approved and scheduled for payment. This category covers those steps.

Check Writing
Once an invoice has been processed and approved, it needs to be paid. This category addresses various check-writing features, including bank account assignment and check formats.

Control Reports
While you may choose to assume that information has been input correctly, that is not always the case. The features in this category address reports that give users the ability to check information to make sure it has been input correctly.

Financial Reports
Once data has been input into accounts payable, users will probably need to review slices of that data to determine if costs are in line, where costs are being incurred, and how those costs compare against other benchmarks.

Employee Training in a Recession

Get the RFP Templates that List up to 4,100 Software Feature Functions!

As organizations reassess their staffing levels, many employees are being asked to do more with less. Aside from reducing headcount, many organizations are cutting back on employee-related expenses, even if they can provide long-term benefits. Examples include application training and travel to user groups in which employees can network and exchange best practices. This article discusses the increased importance, benefits, and risks related to employee training in a recession with respect to enterprise systems.

Growing Organization Risks

While understandable and often imperative for the continued survival of an organization, the aforementioned cutbacks promote a vicious cycle of increased organizational risk:

* Organizations reduce or eliminate formal training and informal opportunities for users to learn how to better utilize enterprise systems.
* This solidifies many users' bad habits and suboptimal processing methods.
* At the same time, organizations trim staff, resulting in more work among fewer employees. This means even less time for cross-pollination where employees are trained in multiple jobs.

Organizational risk is compounded if key employees leave the organization and, as is often the case, user documentation is lacking. For example, incumbents may scramble to figure out how Alex ran regular interfaces, Neil matched invoices, Julian filed tax reports with the government, and Nancy created database backups. If Alex, Neil, Julian, and Nancy are no longer with their organizations, then they are, in all likelihood, unable or unwilling to assist their former employers in the event that their help is needed.

Often, the best case scenario is that jobs performed by ex-employees are partially understood by their replacements. Nonetheless, this may very well result in increased risk of error, financial irregularities, expensive engagements with external consultants, or some other highly undesirable outcome. In the extreme, a single employee's departure may result in a missed payroll, an eventual government audit, or security breaches.

Opportunities and Benefits

Organizations with tight budgets may not need to reduce headcount at present. There is a fundamental tension between lean staffing levels and organizational bench strength. Lack of widespread end user application and technical knowledge is dangerous in the event that a key employee decides to walk. Yes, even in these economic times some employees voluntarily leave their jobs for whatever reason.

To this end, organizations should consider expanding employee training, not cutting back. Whether employees are being cross-trained in different functions or learning new technologies altogether, the benefits of training can more than offset their costs. First and foremost, training mitigates the risk of key employee turnover. Second, the mid- or long-term savings of training may more than pay for itself. Two super users with substantial skills and a global perspective may be able to do the work of three or four limited end users, especially if they are skilled in different automation methods. Finally, while hardly tantamount to reassuring nervous employees about their employment futures, training can send a strong message to attendees: the organization wants you to develop your skills. And the message becomes "despite current economic challenges, we are committed to growing our employees' skills and abilities." This attitude may reduce the likelihood of voluntary employee attrition.
Once the organization has decided to move forward with training, it has a fundamental decision to make. Where will the class be held?

Organizations that want to build internal expertise in new applications have two choices: They can either send their employees to public or private training classes. Public classes typically take place at vendors' offices or at vendor-approved locations. These classes cost in the neighborhood of $500 per day per student. Many organizations in different stages of an implementation send users to public classes to learn how their systems work in a generic sense. In other words, a payroll manager should not go to a public class intent on learning how to set up and process payroll at her company, although she should walk away with more than a few ideas from the class. Because payroll personnel from other organizations attend public courses, the instructor will discuss the payroll application in general terms.

For public classes, clients travel to vendor sites, sometimes incurring significant travel costs. To the extent that client end users are out of the office, they should be able to focus exclusively on the class and the applications being taught. From a technical perspective, vendors should have sufficient computer terminals and training data areas. In other words, clients need no organizational IT involvement to attend a public class, nor do they necessarily need to bring laptops with the applications already on them.

Private classes are very different than public ones, both in terms of costs and content. For one, it's not uncommon for a vendor to charge upwards of $3,000 or more per day for a customized class at the client's site, because vendors know that client end users will not have to incur travel costs. Thus, from a strict cost standpoint, a private class with more than six people will probably be cost-effective for the organization. As for content, instructors will typically customize agendas specifically for each client. In a private payroll class, for example, the payroll manager can ask many specific questions related to her company's payroll setup and processing.

While, it may be less expensive for clients to host private classes in which trainers come to them, understand that employees attending private classes are in the office. Crises or emergencies can take them away from the class, reducing overall learning. Also, from a technical perspective, the trainer is not going to bring laptops configured with the software and training data areas. Consequently, the amount of IT involvement is much greater than that of a public class. The organization that brings in an instructor at $3,000 per day should ensure well before trainer's arrival that its hardware and software are "up to snuff". Nothing inhibits a class and frustrates all concerned more than "buggy" software and the lack of a proper training data area. The last thing that a client's management wants from a public class is a disaffected end user base.

Outside of a formal class (whether public or private), independent learning has become more populate. Recent advents such as web-based training (WBT) have become increasingly popular. While the cost savings are obvious and the convenience factor is high, remember that employees at their desks are often distracted by daily calls, e-mails, and old-fashioned door knocking. Consequently, the cost of a public course can sometimes be justified by the additional learning that tends to take place in an isolated environment.

Considerations and Caveats

Training for training's sake is fruitless. Organizations need to ensure that their training investments will result in tangible benefits. Users may learn a robust new technology over the course of a three day class. However, this certainly does not equate to mastering it or deploying it in the organization, even for highly motivated and skilled attendees.

HR Software Selection: It Ain’t Rocket Science

So … you're either in the market for your company's first human resources management system (HRMS), or you're ready to move up to a more sophisticated system, and you're struggling with whether to bring in the consultants or tackle the evaluation process by yourself. Can you do it yourself? The answer is yes, and maybe. It all depends on whether or not you can commit the time and resources to doing it right.

Be prepared for a fairly time-consuming process, ranging from at least three to nine months or more. You'll also need to recognize that it will require a considerable outlay of capital and staff resources to bring the project to fruition. Your company will have to live with your decision for the next eight to ten years or more, so you want to make sure that you do it right—the first time.

For starters, it will be extremely helpful to begin with a clean slate and an open mind. The less biased you are regarding a specific software vendor or application (either “for” or “against”), the easier it will be to make an objective evaluation and decision. In the last five years or so, vendors, software applications, and hosting options have undergone significant changes. Making a decision based solely on past experiences (good or bad) may be a disservice to your organization. Try to remain unbiased throughout the evaluation process. Whether you use a consulting firm to help you in your quest, or decide to strike out on your own, following a rock-solid methodology is the key to success.

User-Needs Assessment

The process begins with a user-needs assessment (UNA) to develop a wish list of features and functionality you expect the new system to deliver. In this phase, brainstorming sessions with each group of functional and technical users are scheduled to discover what they like about the current system, what they dislike about the current system, and what they are looking for in a new system.

There are various ways to build this information. Some people use questionnaires and surveys to collect this information, and some use the tools that software evaluation companies like Technology Evaluation Centers (TEC) offers to help organizations build their requirements. In addition to these tools, the interactive nature of face-to-face meetings with small groups of users allows useful information to be exchanged to help the decision process along. Some users may know exactly what they want out of a new system, while others may have difficulty envisioning their future needs. You'll have to facilitate the discussions and prod the users by asking such questions as “What are you doing manually today that would save you time if it were automated?”

While you're conducting these sessions, be sure to ask how new features and functionality will affect efficiency and productivity. This information will help you later when you prepare a cost-benefit analysis to justify the expense of the new software.

Next, take a look at some of the software vendors present in the marketplace. In the mid-market, there are no less than 20 vendors that could be considered “players” (prominent in the industry), and there are many more that are trying to enter this market. There is no way that you can evaluate all of them in depth, but there are some shortcuts that you can use to narrow down the choices.
One option available is to see what the analysts have to say about the major players in the HRMS software arena. Gartner's Magic Quadrant for HRMS, Forrester's Wave, or TEC's eBestMatch™ are all effective decision support systems offered by software evaluation organizations that can help you evaluate different vendors.

Another option is to attend conferences, such as those held by the Society for Human Resource Management (SHRM) and the International Association for Human Resource Information Management (IHRIM). These conferences usually have an exhibit hall, and the major HRMS vendors will each have a booth and product specialists on hand to discuss their offerings and to provide demos of their solutions. Often they will arrange a vendor shoot-out, where each vendor demos its solution to the assembled attendees, and the attendees decide for themselves which offers the best solution.

You can also use the Internet to research the vendors, but beware: this could turn out to be the equivalent of looking for a needle in a haystack. On the day I wrote this article, I did an Internet search on “HRMS software vendors,” and it returned 728,000 hits. You are going to either have to narrow your search, or be prepared to do a lot of surfing.

One other way is to do some sleuthing and try to find out what your competition is using. There are several vendors that have carved out a niche in the marketplace, and that have specialized solutions tailored to specific market verticals (such as health care, professional services, manufacturing, etc.)—a case of “birds of a feather …” This research should allow you to narrow your choices down to a handful of promising vendors. Call each one to request a copy of its company's current product information, and see if it has an online demo to provide a high-level familiarity of its products. This should help you come up with a shortlist of perhaps three or four prospective vendors.

Breaking with Tradition

Traditionally, the next phase of the project would involve issuing a request for proposal (RFP), in which you would draw up a list of high-level requirements and submit it to a large list of HRMS software vendors. After reviewing your requirements, interested vendors would notify you if they were interested in competing for your business.

This approach is time-consuming because you have to wait for vendors to complete their reviews of your requirements and contact you with their intentions. The next step would be to draft a request for information (RFI) to send to those vendors that chose to compete. The RFI should describe your requirements in more detail, list your project goals and objectives, provide a high-level project timeline, and request background on the vendor (including information about its proposed solution, the technical architecture employed, implementation approach and methodology, hosting options or partners, references, testimonials, and pricing strategies).

I recommend skipping the RFP, and start contacting the three or four short-listed vendors that you feel may have the best solution for your needs (based on your research). Your goal is to determine their willingness to conduct a scripted demonstration (versus a canned sales demo). This requires the vendor to “script” (prepare with detail) the demo according to your specific needs and scenarios.

Once you have the vendors' commitments, you can then send them a detailed RFI, and schedule the scripted demos. By skipping the RFP process, you can reduce the project timeline by as much as a month.

Your Reference Guide to SMB Accounting Software Features

This reference guide provides insight into the accounting features and functions currently available on today's market for small to medium businesses (SMBs). It will help you determine which features your organization needs—or doesn't need.

You can also download an extended guide in Excel format at TEC's Accounting Software Request for Proposal (RFP) Template page.

But first, here's a brief overview:

What Are Accounting Systems?

Accounting systems manage procedures for accurately entering, tracking, and maintaining information related to an organization's financial operations. These accounting applications typically support general ledger, accounts payable and accounts receivable, payroll, job and project costing, and multinational accounting.

Many SMBs require that other functions (such as inventory control, manufacturing management, and financial reporting) also integrate with their accounting system.

About This Guide

Although a full accounting system RFP can contain upwards of 4,000 features and functions, we'll focus on the "big picture" features for now, for (obvious!) considerations of space.

You'll notice that we've grouped accounting features by broad category. These categories correspond to a high-level functional breakdown of software features. In this reference guide, we provide a brief explanation of how each category impacts your accounting processes.

If you'd like more information about a full listing of accounting software features and functions, please visit TEC's RFP Templates page.

Reference Guide to SMB Accounting Software Features

1. General Ledger

Chart of Accounts
The chart of accounts is, for all practical purposes, the business management system. If revenues and costs are not captured and segregated into the best suited categories, the financial statements you produce will be useless.

Transaction Processing
This category describes features that address typical journal entry processes, including general transaction processing, workflow period closing, batch layout configuration, and job cost adjustments.

Month- and Year-end Closing
While you can bill revenue and collect cost information, if this information is not published in the form of financial statements in a timely manner, the statements themselves are essentially useless.

Control Reports
All business management systems must have some form of controls to make sure information is input correctly. Software features covered in this category are designed to accomplish this task.

Financial Statements
Financial statements drive the company. However, for smaller companies this may not be true to the same extent, since the owner or manager should have a "feel" for operations rather than relying on printed reports. Larger companies cannot do this, simply because they are too big.

2. Accounts Payable

Vendor Master File
Master files are the starting point in any application. For accounts payable, the vendor master file must be set up first, as that drives the rest of the accounts payable functions.

Purchasing Controls
While anyone can issue a purchase order, the process should be controlled. This category covers the purchasing process as well as control systems you can use.

Data Input
Once a purchase order has been sent and goods received, the obligation for that purchase needs to be recognized. This category reviews the various steps required to actually get information into accounts payable.

Payables Analysis
Once an invoice has been input, it needs to be approved and scheduled for payment. This category covers those steps.

Check Writing
Once an invoice has been processed and approved, it needs to be paid. This category addresses various check-writing features, including bank account assignment and check formats.

Control Reports
While you may choose to assume that information has been input correctly, that is not always the case. The features in this category address reports that give users the ability to check information to make sure it has been input correctly.

Financial Reports
Once data has been input into accounts payable, users will probably need to review slices of that data to determine if costs are in line, where costs are being incurred, and how those costs compare against other benchmarks.

SalesLogix Version 6.0

On the same day, Best Software announced the availability of version 6.0 of SalesLogix, one of the leading small business and mid-market CRM products, which is reportedly built on a new architecture and with more than 200 product enhancements. The SalesLogix architecture was reportedly enhanced to increase developer productivity, enable quicker customization, and lower implementation time and costs, since the product is based on a 3-tier architectural environment with a standardized toolset for open development and possibly a rapid deployment. The architecture should facilitate data integration with applications built in Microsoft's Visual Basic, Visual Studio .NET (VS.NET), or any other development environment that supports Microsoft ADO (ActiveX Data Object) data access.

The new architecture should also allow for backward compatibility with existing customizations and add-on products, simplifying thereby the upgrade process for customers and partners. SalesLogix' administrators running SalesLogix 6.0 should also reduce the time spent on manual tasks by using the streamlined new-user entry process with user profile templates and the simple, flexible user and team security controls. Other enhanced processes include: account permission configuration for teams, advanced territory realignment with scenario analysis, improved integrity checking to eliminate "orphan" accounts, and easy identification of users and teams that have access to an account. In addition to the new architecture, users should benefit from the following enhancements:

* Sales Client User Interface — Users should now be able to manage multiple addresses within account and contact records, create account hierarchy and navigate among parent and subsidiary accounts, and launch customer and prospect location maps, websites, and e-mail with one-click web access. In addition, SalesLogix 6.0 will also ship with Crystal Reports version 8.5.

* Tighter integration with Microsoft Office — SalesLogix 6.0 reportedly offers one-click export to Excel for analysis and reporting. In addition, the product offers Word integration for �mail merge' facility and advanced Outlook integration.

* Significant Mail Merge improvements — This feature should be easier to use with template management; merge at contact, account, opportunity, or group level; and the ability to automatically exclude individuals based on their solicitation preferences. Users can now also attach a record or copy of the e-mail and attachments to a recipient's history records and automatically schedule activities as part of sales or marketing workflow.

* New AutoSync feature — For mobile employees, the product will now automatically synchronize in the background when a web connection is available, while employees can work without disruption, and no longer having to remember to manually synchronize their data when returning to the office.

* Enhanced Web Client functionality — SalesLogix customers should enjoy Outlook and Excel integration, Crystal Enterprise web reporting, mail merge with customizable e-mail templates, and the groups and query builder. The Web user interface has been updated with an improved design and additional functionality to mirror the rich functionality of the SalesLogix Windows client.

* Improved Support WebTicket — Designed to improve ticket workflow management, the Support WebTicket has a look and navigation that is very similar to the SalesLogix Support Client. Enhancements include: integrated knowledge base with keyword highlighting and automatic creation of frequently asked questions (FAQs); customer self-service portal with two-way communication; addition of activities and attachments to tickets by both employees and customers; and employee visibility to defects, return material authorizations (RMAs), and ticket changes.

Payroll Services Checklist

Before talking to a payroll services provider, you will need to know the following about your current situation:

* How many employees are in you
* organization?
* Will you
* company be in growth mode ove
* the next ive years?
* How quickly are you looking to introduce a payroll solution?
* What have you budgeted fo
* a payroll solution?
* Does you
* company have the IT resources to support an in-house payroll solution?
* What kind of lexibility in payroll timing does you
* company demand from a solution?
* Are you looking to gain insight from employee earnings data?
* Is linking payroll functionality with compensation analysis a business priority?
* How much control of private data are you comfortable relinquishing to a third-party provider?
* Does you
* company lay claim to stringent data security controls?
* What degree of customization do you expect from a payroll solution?

Stay on top of the software comparison process.

Just because you heard that one software application worked wonders for your competitor doesn't mean that the same software will help for your small to medium business.

And just because you heard that one software deal saved your competitor heaps of cash, it doesn't mean that the very same software will be a fantastic software deal for your small to medium enterprise.

Find out what you need from business and accounting software.

Want a little more help creating a handy list of your business and accounting software comparison criteria

Understanding the Ideal Candidate Page

For each high-level criterion in the TEC ERP Evaluation Center's knowledge base, there are four graphs. The first two graphs are baseline graphs. In the baseline graphs TEC normalizes all criteria to an equal relevance, which allows you to see how a vendor's product scores on its own merit, without regard to any one module taking precedence over another. By checking the vendor's results against a normalized baseline, you clearly see the modules and functionality on which the vendor puts the most emphasis.

The second set of graphs is prioritized according to groups of criteria. TEC adjusts the baseline in these graphs so that it corresponds to each vendor's focus. The prioritized graphs make the vendor's strengths stand out against its weaknesses. A group of criteria increases or decreases its contribution to the vendor's scores according to the type of support the vendor provides.

When you go through the graphs for a vendor, notice that in each set of graphs (the baseline pair and the prioritized pair) there is a global priority bar graph and a contribution analysis spider graph. You can look at the global priority graph and by glancing at the height of its bars, see the criteria that are the vendor's greatest strengths. By comparing the baseline graphs to the contribution analyses you will see what the vendor supports in relation to a benchmark of the criterion's optimal contribution.