An Executive s Guide to Driving ERP Efficiency in a Multiple Entity Environment

Transcription

1 An Executive s Guide to Driving ERP Efficiency in a Multiple Entity Environment for Optimal High-Level Performance # Lozells Avenue Burnaby, BC V5A 0C sales@binarystream.com

2 About this ebook This ebook has focused on the responsibilities an Executive plays as a major stakeholder in how the ERP (Enterprise Resource Planning) system for their company allows him/her to make optimal high level decisions in a multientity business environment. In order to make this come to life, the ERP system used must have superior multi-entity capabilities or foundation to (1) provide the data and (2) report on the data in a less time consuming and less expensive manner. While it sounds simplistic, in business practice it can be quite challenging for an Executive who wants good and accurate multi-entity data to base sound decisions on at the tip of their fingers.

3 Who Should Read This ebook? This ebook was written from the perspective of an Executive their needs and responsibilities in a multi-entity business model. It is a compilation of best practices as described to Binary Stream Software from our user base focusing on the Executive role and its requirements. The Executive reading this ebook does not need to be an accountant or finance professional, however, they must understand how to read and interpret financial statements and reports. This is a ebook based more on the business requirements an Executive s need to manage a multi-entity organization with data that is provided by the organizations ERP system. Objective of this ebook The objective of this ebook is to impart our knowledge of what we have seen as best practices and cost effective solutions for Executives who manage multi-entity organizations and require ERP tools and software solutions to optimize their business environment. This ebook will investigate what a Executive might look for in an ERP system to better manage and enhance their multi-entity organization from the perspective of a Executive.

4 Definitions Let s clarify the following standard definitions before we begin. Entity can be a single company or business unit. It may or may not be legally separate from other managed entities. Multi-Entity managing multiple separate entities as one related business. For instance, a company may have a number of separate legal entities they want to manage centrally. It is important for legal purposes to keep them as separate legal entities but optimally they are managed better as one. Alternately, one company (one legal entity in this case) may have different business lines which are not separate legal entities, however, again are better managed centrally. ERP an acronym for Enterprise Resource Planning. It is a term used to encompass the accounting and operational software an organization needs in order to do business. ERP is a cross-functional enterprise system driven by an integrated suite of software modules that supports the basic internal business processes of a company tied together by ERP applications and a common database. Leading a Multi-Entity Enterprise Many multi-location/multi-entity organizations struggle with the challenges of optimizing operational efficiencies and control while providing true organizational valuation in their distributed organizations. The unique challenges in each entity makes multi entity management more difficult versus a company with one central good or service. What may be successful and considered a best practice in one entity may not necessarily mean success in another entity. The role of today s Executive is very complex and far reaching. Long term strategy, short term tactics, risk management, return to shareholders, reporting and control of business entities, internal and external communications as well as a host of other responsibilities must be continually evaluated. Evaluation can take both qualitative and quantitative forms but it eventually boils down to measuring business success Accordingly, many Executives now lean to evaluating the company by quantitative measurement as much as possible. The old saying how do you know if you are winning if you don t know the true score is just one of the many adages that now promote quantitative measurement of all business goals within an organization

5 Multi-Entity ERP The importance of ERP software to an enterprise has never been more critical as when optimal financial performance is required. The true measurement of success for an organization becomes a combination of its financial scores specifically financial statements which measure income, profitability and balance sheets. As we all know, the ERP software market is a mature product space with many different vendors. Some of these products are very simple and inexpensive (called Tier 3) but fail to provide the depth needed for more complex business models. Some are extremely complex but scale only to very large organizations. These products are typically rigid, very expensive upfront and often times shackling with maintenance and upgrade costs (usually labeled Tier 1). The middle ground offers some complexity and a mid-range value proposition (called Tier 2).

6 What to Look for in ERP What does a good Executive look for in an ERP product? The most common areas are: industry expertise overall cost / value flexibility time to implement what reporting can be derived outside of standard financial statements. It is recognized that CFOs usually have more say in the decision, however, the Executive is a very key stakeholder. While a product may have good functionality for accounting and/or operations staff, if it cannot offer the reporting capabilities needed by an Executive quickly and efficiently, then is it the right ERP for an organization in a more holistic sense?

7 More Considerations Two other considerations need to be addressed. First, the most common foundation pieces of all ERP systems are the financial core, general ledger, account payables, accounts receivables, etc. Given the amount of competitors in this mature marketplace, these foundation pieces are now becoming a commodity regardless of the Tier classifications we suggest here. The difference of a Tier 1 Accounts Receivable (A/R) and a Tier 2 A/R module may be so slight that either would work for an organization. The second consideration is whether the ERP solution supports multiple entities. Lower Tier, lower cost ERPs are usually not designed with multi-entity capabilities in the initial architecture but have, in some cases, developed the functionality over time. The common delineation of these designs is whether they work in one ERP database or many. Many separate databases covering all the entities - translates to more manual work, workarounds, and error prone processes for organizations to consolidate centralized reports. Where many entities in one integrated ERP database offer more convenient, accurate and cost-saving alternatives for fast consolidation of data and reporting. $ General Ledger Financial Core Account Receivables Account Payables

8 Dashboards Dashboards are a very convenient way to gather, compare, share and analyze real-time data. Executives can view important metrics immediately without running long reports and building series of complex spreadsheets. These dashboards are usually made up of a number of important, day-today metrics key to an Executive. For instance, for seasonal businesses, an Executive might be very interested in seeing the organizations current cash and A/R position daily particularly in the slow seasons or downturn. While this metric might be more functionally relevant to the CFO of the organization, the Executive must keep an eye on this important metric as the risk of not having cash to run the business could have negative consequences to the longer term success of the company. Gather Compare Analyze Share

9 Business Intelligence Tools Business Intelligence (BI) tools are different from dashboards. They are normally separate applications that run independently of the data stored in ERP system. Their goal is to allow for greater reporting and analysis of data that may be available in the current ERP systems reporting capabilities. In its infancy, BI tools needed to have their own data areas called data warehouses where data was copied from the ERP and then manipulated into its needed reporting form. And while the concept of data warehouses is not always needed with newer BI tools in today s marketplace, the fact is that BI tools can be very expensive to purchase, set up, and maintain. The primary reason for the existence of BI tools was the inability of current ERP systems to slice and dice the data to low enough levels particularly at the entity level so that more meaningful reporting and analysis could occur. This magnifies the importance of good multi-entity capabilities in the ERP foundation of the organization. A good ERP system with multi-entity capabilities may negate the need for expensive BI tools with huge and separate data warehouses to maintain. The Executive can still step back and analyze operations managed within their ERP without the heady costs and separate systems.

10 Reporting - Slice and Dice Some describe reporting in an organization as a bottomless hole where managers are always searching for the next great, relevant report. This is even more magnified within a multi-entity environment. An Executive is not like other managers in the organization. The volume of reports is not always the most important aspect of reporting it is having the RIGHT report, at the RIGHT time with the RIGHT (and valid) data. If your ERP system cannot report information in finite enough terms by entity, slice and dice may not be possible. This makes the consolidation of data from different data sources / databases mandatory. But as we discussed, using BI tools, the consolidation of this data and its warehousing to produce the necessary breakdown of data can be time consuming and expensive. Accordingly, best practices would suggest that a system (1) have access to the data at its lowest / most finite levels by entity, and (2) the data is warehoused in one consolidated form.

11 Business Valuation Other than profitability, there is usually no more important metric to an Executive than the value of the business. Answering to the shareholders, the Executive must always keep a watchful eye on the real value of the organization now and into the future. Sooner or later, when considering a major business deal, the Executive will arrive at a Rubicon moment. The go or no-go decision will depend on the information they use to value the organization to calculate the bottom-line (tangible and intangible).

12 Valuing Tangible Assets Valuing tangible assets in multi-entity organizations poses a great challenge. The assets and liabilities of a multi-entity organization may be attributed to separate legal entities requiring maximum control or can be shared across different business units all under the same corporate ownership. This latter structure would seem to require less control but can complicate issues should a business unit be sold off and assets are not totally attributed to the business unit being sold. The real value in this scenario would prove either inaccurate or incredibly difficult to valuate. So, while business valuation usually demands a clean balance sheet across entities, it may not always be the case. The general ledger may balance in a consolidated total but the net book value of those assets may be hard to separate on an asset-by-asset basis to any given entity. This again cries out for good multi-entity sub-ledgers that can break down these capitalized costs over time and allocate them to the correct entity.

13 Aiding in Long Term Strategy Decisions Long term strategic decisions have tangible, intangible and quantitative, qualitative aspects to them the unknown future always being the key factor of uncertainty. As suggested above, more and more Executives want quantification to help justify forecasting. This quantification while it may come from sources such as Customer Relationship Management systems (CRM), analytics, excel etc. is usually mainly driven from financial ERP data. While ERP is typically thought of as a historical record keeping system, Executives now use it to look for trends in historical data. By measuring data over time periods, trend analysis becomes a far more objective way to justify long and short term decision making. Accordingly, the issue then again becomes how time consuming and costly is it to get multi-entity data in the proper form to forecast trends? Is the data all in one easily accessible data warehouse, is it finite enough to report on specific issues by entity and will it allow for the mining of this data and extraction of meaningful trends?

14 Transparency Versus Data Security Transparency of information including previously secure financial information is now generally on the rise in organizations. This trend is based on the belief that today s employees need to know more about their organizations to empower them to be both better and more informed workers and managers. The more they know about the company, the more likely they will stay with the company longer term (increasing employee retention) and buy into the direction that the company is taking. But not all organizations buy into this concept. There may be regulatory, reporting or even competitive reasons why some information cannot be shared. Even the question of how much transparency is needed is a deeper question on its own. Optimal high-level performance is not achieved with a cookie cutter approach.

15 Transparency of Data For multi-entity operations, transparency of data from one entity to another may not be practical. Take an example where each entity is its own legal entity, owned by different shareholders and may compete with another entity in the marketplace. In that case, it is important to secure the data and ensure that the RIGHT data is seen by the RIGHT people. Consequently, an Executive may want to investigate what his data visibility is now and in the future. For instance, while an Executive may want an organization to share its vendors across all entities, they may not want their customers (and their transactions from the entities) to be visible to all entities. This implies that multi-entity ERP systems need to differentiate between master file data and transactional data and offer multi-entity companies a flexible way to either be transparent across entities or secure the data to a specific entity.

16 Best Multi-Entity Practices and Binary Stream This ebook looked at the responsibilities of the Executive as a major stakeholder in how the ERP system for his organization stores, collects, shows and reports on data in a multi-entity business environment. We have tried to illustrate that true, multientity ERP system best practices tend to (1) have data in one central location / database (2) tag data to the lowest entity level, making reporting, analyzing and dash- boarding easier, economical, accurate and secure. These are the foundations that Binary Stream s Multi Entity Management solution (MEM) for Microsoft Dynamics GP is built on. Working within one database structure, all the data is in one easy-to-access location. Tagging all data by entity, the data is at its lowest level ready for entity by entity analysis. The great number of reports, Smartlist queries and SSRS reports can also be used without time consuming and endless report creation and modifications. With data security both at the user and entity level, data can be as transparent to users as is deemed appropriate by upper management

17 The Bottom Line Optimal high-level performance is not achieved with a cookie cutter approach. How does your organization gather quantitative data? Are you able to access data at its most granular for the most meaningful reporting and analysis? Do you know the true value of your organization now and do you have the ability to track and analyze trends in your market industry to better enable long term strategic decisions? Binary Stream s Multi Entity Management provides the Executive with the foundation to deliver optimal high-level performance in a multi-entity environment, improving financial reporting time and quality. Binary Stream s Multi-Entity Management meets and exceeds the challenges that many multientity organizations face in their pursuit of optimizing operational efficiencies and control. What is optimal for your organization? Gather quantative data Meaningful reporting + analysis Realize value of organization Enable strategic desicion

18 About Binary Stream Binary Stream Software is a Microsoft Gold Certified provider of ERP solutions Binary Stream Software is a Microsoft Gold Certified provider of ERP solutions that extend that extend the functionality of Microsoft Dynamics GP by assisting clients the functionality of Microsoft Dynamics GP by assisting clients with deep and complex requirements with deep and specific complex to their requirements business needs. specific Binary to Stream their solutions business are needs. fully integrated Binary with Stream Microsoft solutions Dynamics are fully GP and integrated provide end with users Microsoft with streamlined Dynamics workflow, GP and maximized provide operating end users efficiencies with streamlined and conjunction workflow, with maximized Microsoft Dynamics operating GP, efficiencies provides Tier and 1 in functionality conjunction without Microsoft the Tier 1 cost. Dynamics GP, provides Tier 1 functionality without the Tier 1 cost. Our solutions span several industries including healthcare, property management, distribution, financial and professional services. With over 900 customers, including several billion Our solutions dollar companies, span several our solutions industries are an including integral part healthcare, of a complete property ERP solution. management, distribution, financial and professional services. With over 900 Learn customers, more at including several billion dollar companies, our solutions are an integral part of a complete ERP solution. Learn more at sales@binarystream.com # Lozells Avenue Burnaby, BC V5A 0C4 Copyright 2018 by Binary Stream Software Inc.