Though these strategies inevitably evolve along with technology, companies can easily become locked into systems that are unable to adapt as the business changes and grows. Financial management technology strategies can be classified into the three broad categories.
- The big ERP approach
Enterprise resource planning (ERP) systems have long been a challenge for many companies. They:
- Offer name-brand credibility
- Promise robust functionality
- Seem like a safe choice in a sea of options
However, a primary source of ERP’s failure to meet expectations is the one-size-fits-all approach that big ERP companies take—and that size is large.
- ERP solutions are expensive to buy, implement, and change
- ERP solutions are inflexible and unnecessarily complex
- They ultimately fail to meet industry-specific requirements
- The line-of-business approach
Line-of-business applications can be defined as systems developed to address a particular business process or need, but they frequently have broader functionality (e.g., financials) built in. These systems can be vendor-provided, home-grown, or some combination of both.
- Focus on complex, industry-driven needs
- Provide deep functionality and industry expertise
- Rarely provide robust functionality outside their area of expertise
- Become obsolete once companies grow
- Best-in-class financial management system + line-of-business application approach
Best-in-class financial management applications can be defined as systems that address a single, core business area (e.g., financial management) that is common across industries. These solutions:
- Are developed from the ground up to address their area of focus
- Have robust functionality
For some companies, a hybrid approach that combines a best-in-class financial management solution with line-of-business applications has generated positive results because:
- Financial executives get a highly flexible system that can keep pace with changing business needs
- Others get the systems they need to manage complex, industry-specific business processes
- Dependence on IT to operate the system is greatly reduced
The only issue with this strategy is integration across other applications. Thus, companies should pick solutions that have common technology platforms to facilitate integration.
After learning about these financial management strategies, do you still think using ERP is effective? Or is it time to change? Find out more in the full white paper “Financial management in the era of change: Five key requirements that every CFO should know.”