Finance Departments Implement Cloud Accounting
Finance and accounting functions are not exempt from the cloud computing paradigm shift in today's business world. According to a recent survey on cloud accounting practices of nearly 200 public and private finance departments, a significant 11 percent of companies in the $1 billion to $4.9 billion range are using Software-as-a-Service (SaaS) as their primary financial system, in addition to other common functions such as data storage and networking.
This figure doubles last year's number, which is not a surprise considering cloud accounting's many operational benefits. Chief among them is the leasing model, which allows finance departments to avoid the commitment and high cost allocation associated with purchasing a software application or building one's own. And since a SaaS financial system runs on a vendor's data center instead of a company's local (on-premise) servers, the maintenance and support cost is built into the subscription price, which makes for a welcome increase in budgetary consistency.
Logic PD Inc., a technology manufacturer in Minnesota, is one company experiencing lower costs and increased efficiencies. "Currently we operate our budget and planning, payroll, travel and expense reporting in the Cloud," says CFO Frank Hallowell, who may soon add his company's time billing to this list.
Slow to transition
While our survey results indicate an industry trend, the majority of finance departments still utilize traditional methods for reporting. Specifically, 18 percent of similar-sized companies work with an in-house financial system, while 71 percent use enterprise resource planning (ERP) systems for all business functions within the organization. Oracle/PeopleSoft is the top vendor choice for the latter group, with 43 percent; SAP and Microsoft Dynamics GP trail with 20 percent and 14 percent, respectively.
Many financial executives are hesitant to adopt cloud accounting systems for such an important business function. "We're waiting for the technology to be more tested and seasoned," says Melanie Litoski, vice president of finance and controller at ENMAX, a $3.1 billion utility company in Calgary.
Because of this reluctance, several companies embrace a hybrid approach that locks down key financial data in a controlled fashion. This lets users extract said data for reporting in other applications such as Microsoft Excel, which two-thirds of U.S. respondents still use for budgeting and planning.
Taking a hybrid approach
One firm that's been successful without a full-on ERP system is Canada's Western Bank Group. Prior to a general ledger conversion in 2009, its finance team maintained more than 12,000 Excel spreadsheets. Now, these records can be securely accessed for analysis and supplementary financial info.
"We found a mid-tier product that allowed us to significantly reduce our risk," says senior VP and chief accountant Carolyn Graham. "While the new general ledger system uses Excel for reporting, we're able to lock down the reports. And so while you can run the report and filter it, you can't actually change the underlying data."
Excel also remains a widely used tool for budgeting in this hybrid configuration for companies like Employee Benefits Corp., a Wisconsin-based financial services administrator.
"We have purchased a SaaS general ledger system and plan to move some of our reporting to it," says VP of finance and CFO Don Tuscany, who may also purchase an executive dashboard tool. "In my previous role with a much larger company, we moved away from Excel to an integrated package, and we did see improvements in efficiency and data management."
Before deciding on a cloud accounting system or ERP upgrade, a company should do a deep dive of its current processes. The time spent on validating reports and the logistics of training staff on a new financial SaaS system will help reveal the right fit. Most important is calculating the measureable benefits of a move to the cloud, which will help keep team members motivated until they cross the finish line.
To learn more about trends affecting private and public finance departments, read our full 2013 benchmarking report.