Monthly Archives: July 2017

The Power of Software Integration

 

ERP Software Integration
Maximize the impact of your CPM software with automatic integration to your ERP

Users of popular consumer software applications, especially mobile ones, are used to performing daily tasks such as scheduling activities on their calendars in their e-mail applications, either from their home or office computers, or most often, from their mobile devices.  In fact, many take the results of these activities for granted, not giving much thought to how data moves from one application to the other.

With a push of a button, or, more accurately, a touch of the device’s screen, your e-mail meeting invite creates an entry into your calendar with all needed details. These activities would not be possible without integrating two or more applications, either locally or in the cloud, to create a seamless workflow, with minimal user data entry, promoting accuracy and completeness of data possible only with automation.

Business software applications are no different. Their users perform daily tasks such as processing receipts of inventory into warehouses, guided by existing and approved purchase orders and suppliers’ packing lists with bar-coded bags or boxes of items that upon scanning automatically update inventory records, PO records, inventory sub-ledgers and GL control accounts. Posting a customer payment on an open invoice causes this invoice balance to be eliminated or reduced, while automatically updating the AR sub-ledger and the GL control account balance.

These automated activities are possible because of integration between the inventory and accounts receivable programs in an ERP solution and the system’s general ledger. There is minimal data entry users must perform, and with that, accuracy and completeness of data and other information improve dramatically.

CPM (corporate performance management) software is a good example where integration is important in achieving the desired results, with minimal user interaction and no data input errors.

Here, the data from the ERP or accounting software is integrated with the CPM solution and periodic account balances, or even transaction activity, in each period are automatically provided. The planning and budgeting software is integrated with the reporting or analytics solution, and both the actual and budgeted data is displayed and analyzed as soon as a financial period is closed. Gone are the days of exporting GL data to a text file that must be uploaded to the CPM solution, mapped to the solution’s databases’ various data fields, and then independently mapped to the analytics software to obtain the desired reports and formatting.

A good example of integration between popular SMB (small and medium-sized business) GLs and a CPM solution is Centage Corporation’s Link Maestro. With Link Maestro, a user can obtain all GL account balances, and even transaction activities, for many popular GLs.  The process is entirely automatic and accuracy and completeness of data is guaranteed every time the process is run.

Once the GL data is in the Budget Maestro CPM application, analysis can take place immediately using Analytics Maestro. Actual accounting data and budgeted data automatically flow to the analytics application and are displayed in the predetermined format for every accounting period. This, again, is possible with integration–two software applications, the ERP and Budget Maestro, tightly integrated by Link Maestro.

Now even SMBs can achieve that level of automation afforded by integration, previously available only to very large organizations and through lengthy and expensive customization of the company’s software. Let your computer and software do all the tedious work in an error-free environment while you spend more time analyzing the data which ultimately allows management to make timely and informed decisions.

A Reasonable Approach to Headcount Forecasting

head count forecasting
Don’t make the process more complicated than it needs to be

A while ago I saw a discussion on Proformative.com centered around the topic of headcount forecasting and people looking for advice on implementing a super-powerful model (in Excel, of course) to allow their finance and HR departments to forecast the need for employees in various areas of the business and when those employees would be needed.

HR needs this information in order to plan their recruiting efforts; when to advertise for open positions, when to schedule interviews and several other activities that must be planned in advance in order to successfully hire the most qualified persons for all open positions.

Finance, on the other hand needs this forecast in order to budget payroll and payroll related expenses. These forecasted expenses, an integral part of every corporate budget, must be reasonably accurate and reflect growth and any changes contemplated and communicated through planning and budgeting.

Designing and implementing a headcount forecasting model is no trivial task using a common spreadsheet application such as Microsoft Excel. In addition to the many global assumptions and a myriad of formulas, functions and links, the model must be capable of expanding as needed and be sufficiently documented so any reasonably skilled Excel user can take over and continue to maintain it. Another requirement, hardly ever present in most companies, is periodic audit of the model plus the need for a set of internal controls, designed to mitigate potential risks to the model resulting from formula errors, broken links and other assumption related errors.

This is no different than using spreadsheets to build other pieces of the corporate plan and various budgets, but may actually be even more challenging due to the dependency of the headcount on other areas of the plan, such as revenues, inventory requirements, etc.

For example, in a manufacturing environment where the direct labor force represents a large percentage of the total headcount, the number of production employees is directly dependent on sales budgets, or more accurately the making of inventory in the budget periods driving sales revenue, since making of inventory is the activity that requires the labor force.

Is there a reasonable approach to forecasting headcount?

The only reasonable approach is to abandon the use of spreadsheets for all kinds of forecasts that are incorporated into corporate budgets. Many organizations, even SMBs (Small and Medium size Business) have already come to the realization that use of spreadsheets for budget work is a bad idea. This has been covered here in this blog in much greater detail Replace Excel with a Dedicated Planning, Budgeting and Analysis Solution and Forecasting a Balance Sheet in a Spreadsheet World.

Forecasting headcount is no different. You need a system with built-in business logic, giving you the ability to make the headcount dependent on other factors (e.g., sales forecasts and their dependent inventory requirements).

By using existing, company developed KPIs, such as production employees per unit of revenue (e.g., number of production FTEs per $1MM in gross sales of manufactured inventory, number of FTEs per $1MM of inventory (at cost), produced in a period, etc.), you can link your needed manufacturing headcount to the sales forecasts. If required, inventory production can be made dependent on sales forecasts, allowing you to have a forecast of production FTEs in each period of your budget.

A popular SMB software solution, Budget Maestro from Centage Corporation can accommodate all these needs and will allow even a small organization to forecast its employee headcount requirements with tight dependency on inventory production needs or any other drivers applicable to its business. Of-course, the entire corporate budget should be prepared using this software solution, and there is not a single formula or link that must be provided by the users since all business logic and accounting rules are already built-in and ready to use Business Logic and Accounting Rules Built into the Budget.

With such compelling reasons to abandon spreadsheets in favor of a dedicated solution in the preparation of a corporate headcount forecast and all other budget elements, the whole process can be moved into an environment specifically designed for this purpose.  Struggling to scale and maintain a set of unwieldy spreadsheets and with limited output usefulness will become a thing of the past.