A well written plan should address the different requirements of the particular project and foresee many of the problems that may arise. A plan should be dynamic and change when assumptions change.
The four major steps to Planning are:
The Mission Statement
Planning begins with the preparation of a mission statement. The mission statement sets forth the objectives and intent of the project. It is the reference point to which all managerial actions in the project refer. The mission statement is dynamic, ch anging when environmental factors change.
A mission statement should not be general, such as "Computerize Acme Widgets"; a statement that lacks any specific goals. A better, more complete mission statement might be "Computerize Acme Widgets' Accounting and Manufacturing Divisions. Pro vide Marketing and Sales with timely statistical information, and the company with additional productivity and office automation tools". This revised mission statement tells more to the reader than just "Computerize". It has provided Management and employees with concrete intentions or objectives. These objectives can now be further defined so they are results oriented, reachable, and measurable.
Goals, Objectives and Milestones
Our model company, Acme Widgets is a $3 million assembler and distributor of Widget Tidbit's, The Company requires an integrated accounting system, where all manufacturing and distribution data is linked to the financial accounting data. The procurement and implementation of an appropriate integrated accounting system is the primary objective of there project.
An objective requires a specific, measurable, challenging goal that must be achievable during a specific time frame. Acme Widget's mission statement clearly sets forth a defined specific, and measurable goal, but no time frame. The major objective, in addition to any secondary objectives, requires an operational time frame. Each objective and/or milestone must have a completion date, which may or may not affect the performance of the next objective, milestone or task.
Secondary objectives can be determined by the implementation team. At Acme Widgets, these secondary objectives will be determined by the major departments that need to interact with the MIS system. The issue will be the information needs of the departme nts that can be satisfied though the management information system. As the company implements new techniques in production and inventory control, (i.e., Material Requirements Planning or Manufacturing Resources Planning) more and more departments will wan t to interact with the entire MIS system.
Acme Widget's accounting department needs the integrated accounting system that includes accounting programs to cover all facets of the five areas of accounting: General Ledger, Accounts Receivable, Accounts Payable, Payroll, and Inventory. An integrated accounting system was chosen so duplicate General Ledger postings would not have to be made. It would also provide up to date and accurate information was available to all users. Lastly, if possible, accounting would like to install a Job Costing syst em, in conjunction with the manufacturing departments, so that expenses and cost of production can be properly allocated to individual products and profit centers.
In addition to monthly, and quarterly financial statements, management requires summary reports concerning marketing, sales, production, and inventory control. The Marketing and Sales Manager requirements necessitate specific marketing and sales informat ion to provide Acme Widgets with much needed data concerning trends in customer sales, geographic and territory sales, distributor and outside agent productivity.
Manufacturing and Distribution must maintain Inventory, Order Processing, Purchase Orders, Bills Of Materials and Shop Floor Control. They should also utilize Material Requirements Planning (MRP) and Master Scheduling to plan purchasing of material to ma ximize inventory turnover and increase the capacity of the facility.
The last part of the mission statement required productivity tools on the computer system. Such tools could include word processing, databases, spreadsheets, and a CAD system for designing new products. Acme Widgets has placed a lower priority on this a spect of their mission statement.
Participants, Resources and Costs
It now becomes necessary to locate an initial resource group whose job it will be to:
This group should be marketed to the company. By utilizing a cross section of employees, the new systems or plan will belong to the users, not to management. It is the users who will make the plan or systems work, not management.
The Plan must be marketed to the company. The term marketing is used in the same sense as marketing the company's products to its. Every member of the company should understand the who, what, where, why, and how of the new system and the impact on the w orkplace.
Resources will also be needed from outside the company. Individuals or companies will be hired based on the examination of the 'expertise' factor of company personnel. A careful review of the employees will determine whether there are individuals in the Company with the background in computers, or those familiar with the installation and implementation procedures. Use of independent Implementation Consultants should also be considered. The role of the Consultant can be multi-faceted, from Catalyst t o Team Leader. Most companies require an outsider whose expertise in system integration will allow the smooth transition from a manual to a computerized accounting system. In addition, hardware and software vendors, maintenance companies, electricians, cable installers, trainers, etc. must be found.
Another major resource that needs to be discussed is the current manual systems and files. These files and/or systems are the basis of the creation of the Companies new data bases. These data bases, such as the Vendor File or the Open Customer Order Fi le will be used during the implementation of the accounting system. Great care must be given to the accuracy of the information gathered and entered into the new databases.
The Action Plan
With the resources identified and assembled, the objectives and mission statement defined, the Planning Committee/Implementation Team must set forth the specific steps to accomplish the objectives. This action list will most likely be further sub-divided into sub-projects. Again, each sub-project requires a mission statement, objectives, resources, and an action plan. Sub-projects could include: Selecting the Hardware Platform and Hardware Vendors; Accounting Software and it's Vendors; and Consultants and Trainers. These sub-projects will be treated as part of the entire project.
The development of a Action Plan is made easier when the Planning Committee utilizes Project Management techniques. Use of Gantt Charts or the Performance Evaluation and Review Technique can make the process of defining tasks, assigning resources, setti ng time frames and determining predecessors and successors to each task and milestone much easier. Project Management is the basis for evaluating the Action Plan against the performance of the Plan. Remember, each goal, objective, milestone and/or task requires measurability. Project Management provides the instrument to gauge that measurability. See Table 1.
For purposes of this discussion, it is assumed the Planning Committee has decided that the hardware platform best suited for the company is or microcomputer based (PC). The Planning Committee must determine what type of PC Acme Widgets should purchase. To determine the type of PC and what operating system or network to use, the Committee must understand the marketplace. This is the area in which the Independent Consultant can be most helpful to the Company.
Most companies have four different choices when selecting software for their accounting system. The first two are either horizontally or vertically marketed programs. The third choice is a custom programmed software package. The last option is a hybrid system, or re-writing large amounts of "off-the-shelf" software. Each type of software package offers certain limitations that must be considered. Such limitations, if not entirely explored could lead to investing in a software package which just won't work, or will only work with a great deal of customizing. Good "off-the-shelf" software has a degree of flexibility with features that can be turned on or off are user defined.
One of the most important factors in choosing a high end accounting system is the ability of the client company to obtain source code, the original text of the program. This is accomplished by either purchasing the source code directly, or having an outs ide company to make program modifications. When spending considerable amounts of money on software, you should be able to modify the accounting system if your circumstances require it. Remember, no two companies are exactly alike, nor do even the best o f accounting systems do everything you need to do.
There are three types of high-end software publishers. The first type permits end-users access to the source code. The second group allows distributors and other 'certified' individuals, developers or group's access to the source code. The last group d oes not allow any access to source code. This last group of software publishers prohibits any modification what so ever to their software. I find this last group of software publishers difficult to recommend (high-end systems only).
A modification is a change in the computer program. For example, making the description field for inventory items longer or shorter, would be a major modification that would effect almost every program in the Inventory system, Purchase Order system, Cust omer Order system and possibly the Accounts Payable system.. Modifications should only be made after the system is operating.
When you have the system working in real time, you may find that those "must have" requirements are no longer essential for the business. Many high end accounting systems provide enough reports and with a report generator can make as many different repor ts as necessary. Report Generators do not modify source code, they only present the information already at hand in a new form.
I strongly recommend against a custom designed and programmed accounting system. Customizing a system involves extensive development time, is quite expensive, is a re-invention of the wheel and requires additional maintenance costs. A software package s old "off the shelf" that has been installed in a number of locations is a safer bet. Odds are most of the serious bugs have either been found during testing or by those customers who were the first to purchase the package. Before buying any accounting package, the track record and stability of the manufacturer should be investigated. The cost of updates should be considered. More significant upgrades or changes in versions would have a more substantial charge. All new upgrades should come with a compl ete new set of documentation.
In the microcomputer market, business accounting software, is broken into two markets, low-end and high-end. A mid-level accounting software market is just emerging. Most times, those packages designed as mid-level systems are outgrown soon after impleme ntation. Mid-level packages are offered by some manufacturers with the expectation that the user will gravitate to the next offering in that particular software publisher's line of accounting systems.
The major consideration between low and high-end is the price point, with most low-end systems going for under $500 for the entire system. Low-end systems are limited in features and vary in difficulty of implementation, quality of documentation, and sup port from independent consultants, dealers, and the software publisher. Normally, source code is unavailable, making modifications impossible. Some low-end systems have built in report generators and the ability to import and export data and graphs.
Low-end systems are limited by the number of transactions they are able to process efficiently. Large quantities of data in these low-end systems will take inordinate amounts of time to process. Also some low-end systems can not be networked. They do n ot possess the ability to have file and record locking. File and record locking prohibit other users from changing data on the same record or same file at the same time.
High-end systems start at a minimum of $295 per module (not an entire system) and going up to over $4,000 per module. High-end systems offer a greater number of features, with most control modules (A/R, A/P, Inventory and Payroll) able to stand alone.
Stand alone systems enable companies to purchase groups of modules and implement them in small projects. For example, a company with a purchasing problem, could implement the purchase order and accounts payable systems first while organizing themselves f or the implementation of the inventory module.
Better systems are able to automatically copy or link shared data among applications instead of having to reenter the same data. Many high-end systems have third-party software houses developing industry specific or specialized modules.
High-end systems have file and record locking, while some even have field locking. High-end systems are being re-written to utilize the most modern advances in database systems. They also come with report generators, import and export capabilities and a host of other features.
High-end systems should be reviewed for their auditing capabilities, level of integration and speed of processing. Again, support is a key element, especially when your software will be the key to the company's information system and likely to cost in th e neighborhood of $20,000. Most accounting packages have a few strong points or emphasis on certain features. The software manufacturer might have originally written the software package as only a financial accounting package and then added other appli cations.
How many versions does the software house currently support? Does the software version have multiple releases, or multiple versions (i.e., Lotus 1-2-3 version 2, 2.2, 3.1) and Windows versions. Does the publisher constantly update the software when bugs are discovered or conditions such as as payroll taxes change? How does and what type of installations does the software company have? How many different accounting systems do they publish? These are some of the important questions that should be asked of the consultant and software vendor.
One of the key strategies in implementation is "keep it simple." For instance, during the "load phase," only necessary information should be entered.
For example, Acme Widgets, currently has little or no marketing data. It would be foolish to take an inordinate amount of implementation time and enter into the customer file every customer that Acme Widgets has ever dealt with. Data entry can be a tedi ous process, and by blindly adding hundreds or thousands of extra entries will increase the chances of error, eat up what might be crucial disk space, and increase the maintenance time.
The easier and simpler you make your inventory number schemes, customer numbers, bills of materials, while still keeping control, the simpler it will be to maintain your data base. Data base maintenance is an ongoing function. Companies evolve, personne l change, and complex procedures and policies make it ever so difficult to keep data pure. Another potential for improvement is the Chart of Accounts. This is the opportunity to establish a new Chart of Accounts or modify the old chart. The questions t hat should be asked are whether the current Chart of Accounts addresses the needs of management.
The first step in the implementation process is the entering of the Chart of Accounts in the General Ledger. Most high-end accounting systems permit the Chart of Accounts to be downloaded, linked, or copied into sub-modules as required. Normally the Ac counts Payable, Accounts Receivable, Job Costing, and Payroll modules require their own copies of the Chart of Accounts. Remember, most high-end systems allow for the A/R and A/P modules to be used as stand alone packages. Specific information can be ex tracted from the software's documentation. See Table 2.
Running Dual or Parallel Accounting Systems
It is conventional that before you change over to a new accounting system it is necessary to run dual or parallel accounting systems. This is done for an extended period of time to make sure that the output of the new system is the same as the old system . Dual or parallel systems permit the company the time to check all programs and procedures of the new system and make sure they are fully debugged and working properly. Unfortunately, running dual or parallel systems from three months to a year a signi ficant overhead is added to the entire project. There is also an element of decreased morale due to pressure placed on managers and employees of all departments for an increased period of time.
An easier way to run dual or parallel accounting systems is to enter all the data which occurred as a result of the last fiscal quarter during the training phase. This will provide:
To accomplish this dual or parallel system, all outstanding items: Accounts Receivable, Accounts Payable, Purchase Orders, Physical Inventory, and Customer Orders; as well as the trial balance from the ending period of the quarter prior to the test quarte r, must be made available. At the proper time, this information will be entered into the computer and will be verified prior to the operational training phase.
Training consists of three major areas; database training, operational training, and system administration.
Database training covers all the necessary steps that are required to prepare and enter all the appropriate information into the system. Future information, such as new customers or inventory items will be based on the decisions made during this portion o f the implementation. Specific one time training is necessary for the loading of the starting or base financial data.
Operational training includes the development of all data entry policies and procedures that will be used on a daily basis to run the system. The procedures developed during the start up phase will be proven during the operational phase. By utilizing a ll the records from the test fiscal quarter, the training process will utilize every aspect of the computer system. The tests require the accounting and supporting staffs to initiate purchase orders, receive inventory, build product, enter customer order s, invoice orders, receive and make deposits, enter vendor invoices and pay them, and post all the resulting information ultimately to the General Ledger, after verification. Finally, at the conclusion of all activity for the given test month, month-end procedures will be run along with financial statements. Results will be verified again. When the control data and the training data agree, you are ready to enter the new month's data. It is usually possible to complete an entire month's activity in a fraction of a month.
System administration training
System administration training consists of acclimating all company personnel to the network operating system. Training includes logging on to the system, use of the menu system, and setting security measures such as passwords. Employees designated admini strators should be trained in creating new users, and security groups, loading new programs, maintaining backups and creating disaster recovery procedures.
The first full module that should be implemented is inventory. A major task in this area is the development of a numbering system for each component of inventory. Another area of concern is the development of appropriate item description files.
Once the Inventory file is created, including all raw goods, work in process and finished goods, attention should be directed to the Bill of Material module. The last step before starting the Bill of Material is to load the inventory quantities (prefera bly based on a physical count) at the beginning of the period that is going to be used for training.
Accounts Receivable & Accounts Payable Systems
While the implementation team members involved in the production area of the company are working on the Inventory and Bill of Materials system, the Accounting and Sales department team members should start on the Accounts Receivable modules. Also the Pur chasing department team members should help implement the Accounts Payable modules.
Before starting, the installation of the customer base, the Credit department members must set either default credit limits or specific credit limits for each customer. Most high-end accounting systems provide multiple stage credit checking on customers. The usual credit checks are done at order entry and again at the time the picking lists are created.
Marketing should spend its time determining how they wish to code those fields reserved for marketing purposes. It is always easier to code the customers for credit or marketing purposes during the creation of the account versus after sales have been mad e. It is this period of the implementation that is most important to fulfilling part of the Mission Statement. The customer file is one of the core areas that will give Marketing and Sales timely statistical information.
With the necessary customer base installed, the open A/R items from the beginning of the period being used for training should be entered. There is usually a quick entry feature used for this purpose. This sub program is normally only used once. Great care must be taken to make sure that the Accounts Receivable figure is the same as the live data it is taken from.
The next step is implementation of the Customer Order Processing system. Each accounting system is different, and this area may be one or two different modules. The key to this module is the pricing matrix and the entry of open orders as of the beginnin g of the training period. Again, great care must be taken to be sure all open orders are entered correctly, that the purchase order numbers, old order numbers, items, sales price, and discounts all match.
Similar procedures should be performed at the same time for the Accounts Payable system. All A/P open items had to be entered from the beginning of the training period. All open Purchase Orders must be entered as of the beginning of the training perio d. Again, the system demands these orders to be correct in all respects, as the Cash Requirements Report and Cash Projection Reports will utilize this data.
The General Ledger
The General Ledger module is installed after all the other modules are finished. All G/L accounts not yet activated should be created and entered along with their beginning balances. An opening trial balance should be run and agreed to the prior ending balances. The last check is to make sure that the control accounts in the G/L equal the subsidiary accounts. Financial statements can be run and checked against the training period's beginning financials for accuracy.
One module not mentioned here is Payroll. For the average company, Payroll is best done by an outside vendor. If that is the case, payroll distributions will be entered into the General ledger through manual postings from journals provided by the payrol l vendor.
Once all the modules have been loaded with initial data, and beginning balances have been entered and verified, each department will organize its records and data in a sequential fashion. Each department will enter operational training by entering days' documents, by batch. The General Ledger must be updated in relation to the transactions entered by each of the other accounting modules and normal G/L transactions.
At this point, all entries have been made in every module; repeating in a matter of days what took the company a month to perform. These entries have been double checked and verified. Verification is always done against source material and existing jour nals and reports from the test month. The last action to the complete the month is to run financial statements. These statements should mimic the financial statements made in the test month (allowing for change in the Chart of Accounts, if any).
The reports and journal that are produced by the accounting program are not always required. Companies with insignificant inventories may not require or need ABC inventory reports, or all managers within the Company may not require access to the report. All journals and reports are management tools, to help the Company manage its growth, production, cash and expenses. If these tools are not used or the data contained on the reports is not valid, then the management information system is not working.
The processes should be repeated for all the months in the test data range.
When the training period has ended and all the data has passed the company standards your system is now ready for 'live' data.
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