IT Lifecycle Management 9-Point Series: Blog #8 ACCOUNTING
Here’s a scenario that plays out in most enterprises once a year. It’s the annual budgeting cycle. Your CFO invites you, the CIO, to a couple of budget meetings to discuss last year’s IT expenditures and forecast next year’s IT budget. Accounting sends you a report from the company’s AP platform. The accounting report shows total spend by vendor with no detail on technology, and certainly no details on one time vs. monthly charges or usage. You ask your team to pour over service provider invoices to try to give you the details so you can make heads or tails of your IT spend, so you can predict how the next fiscal year will look.
For a fleet second, you wonder whether you should have had your assistant track every invoice you approved on a spreadsheet or an Access database to get the necessary level of detail that you need. But you quickly realize how difficult that would have been, considering the number of monthly invoices you get. You remember that it was difficult enough to manually GL code each invoice, and because of how cryptic each one was, you opted to just use a couple of General Ledger codes, to avoid paying a late fee, or worse, having a service suspended due to late payment. After weeks of preparation, you think you have enough of a picture that doesn’t differ too much from the last couple of years. You’re ready, but you dread your CFO’s questions: “Why was this invoice coded incorrectly?” or “Where can we cut costs?” or “How can we make this process more efficient?”
1. Automated GL Coding
When we originally built our IT Lifecycle Management software platform, vManager, we were focused on making IT spend more transparent. After all, we’d heard from countless executives across multiple industries about how much they hated their providers’ cryptic terminology and lack of charge tie-back to inventory. After solving those problems (read our blogs on Asset and Invoice Management), we learned how much IT professionals hated the process of manually cost-allocating invoices on a monthly basis. We’d walk into a CIO’s office, and she’d point to the dreaded “stack of invoices in the corner” that she’d hoped we’d help her reduce or eliminate.
We collaborated with one of our customers to build an engine that allowed them to take a circuit and tie it back to multiple cost centers, thereby automating the cost-allocation process on a monthly basis. Once the invoice hit our software, any existing charges that were previously allocated got automatically coded, and the user was prompted to assign cost centers to new charges. Today, we have a Banking customer who breaks down a single circuit charge into 20 components, allocating each component by percentage to various departments. Our GL-coding engine has become sophisticated enough to enable automated cost allocation by percent allocation, location, department, business unit, or even partnership (which was needed for some of our professional services customers in the Legal or Health-care industries), with efficiency and self-service as key guiding principles. We literally had a CIO’s assistant reach across the table to give us a hug for saving her so many hours doing manual GL coding.
2. Automated AP Posting File
Automating cost allocation was the first step in creating efficiency for IT. Next, we tackled what their counterparts in Finance hated: Processing so many invoices on a monthly basis, a byproduct of creating carrier best-of-breed networks, the proliferation of technologies, or simply due to geographic distribution and being forced to leverage multiple providers. That same Banking customer I mentioned received 250-300 invoices per month; a person in AP spent hours every day entering those invoices into their ERP platform, keying each charge to the corresponding GL. So we built an import file that conformed to their ERP system’s requirements, thereby reducing a task that took multiple hours per week down to 2 minutes. Over the years, we have built file outputs for most major ERP platforms, enabling IT and Finance organizations to focus on analyzing their spend in lieu of mundane and manual work month-after-month. We had one Analyst say that she would pay out of her own pocket for the automation, because it saved her so much time and saved the company for her over time; needless to say, she was elated when we told her that the automation was included in our subsidized software fee.
3. Budget Management
The automation of cost allocation and creation of AP Posting files opened the opportunity for IT and Finance to seek more granularity of their spend, to monitor trends and make more informed decisions. Prior to leveraging our platform, most IT or Finance leaders we encountered admitted that they approved invoices, and therefore budgets, “eye-balling” a 10-15% variation from one month (or year) to the next mainly because of time constraints and the lack of real visibility. Once we gave them back time and visibility, they not only wanted to expand their GL coding to make it more meaningful and relevant; they also wanted to track their expenses against their budgets to monitor their progress during the year, and to easily create reports at year end. This gave rise to our Budget Management tool that enables the upload of expected expenditures in a specific GL, and tracks progress on a monthly, quarterly or annual basis against those expectations. As one CIO put it, instead of spending weeks preparing budget reports, with a few clicks, he could prepare reports that are far more meaningful for his meeting with the CFO.
Time is the most precious commodity that we all have. Thanks to tools like automated GL Coding, custom-built AP Posting and budget reconciliation, IT and Finance organizations can now focus their people on far more important and business-impactful tasks that enable them to more effectively manage their IT environment and spend, significantly impacting the bottom line.
Post your comments or questions for Sameer below to dive further into accounting.
Author: Sameer Hilal
Chief Operating Officer
Sameer Hilal is the Chief Operating Officer and co-founder of vCom Solutions. He effectively leads vCom to be a market leader in the implementation and support of advanced telecommunication solutions. In 2005, vCom was ranked as the # 1 Fastest Growing Private Company in the San Francisco Bay Area. In 2006, vCom was ranked as the #51 Fastest Growing Company in the United States (Entrepreneur). LinkedIn