Finance departments are playing catch-up in switching to cloud-based accounting systems, as Miya Knights discovers
With internet-connected PC and mobile devices running cloud-based consumer software and services, such as e-mail and social networks, it is easy to see why company finance departments want to capitalise on the same cost-savings, accessibility and convenience afforded their staff at home.
However, this vital line of business has been comparatively slow to realise the benefits of cloud computing, compared for example to its sales, marketing or human resources counterparts, with their highly distributed and increasingly mobile workforces. A global survey of 2,041 business executives, commissioned by Microsoft and conducted by 451 Research, confirms that 32 per cent of organisations now include a formal cloud computing plan as part of their overall IT and business strategy.
A financial services sector study published by Oracle, Accenture and Longitude Research also reveals 68 per cent of 1,275 executives are either planning to use a cloud-based financial accounting system or are already doing so. But they are only likely to subscribe or apply cloud-based software or services in selective situations.
“Cloud is the single most disruptive force in technology,” says Steve Cardell, president of enterprise services and diversified industries at HCL Technologies, who runs the IT software and services provider’s enterprise application software practice. “But I would also say that finance has been at the back of the bus. And for good reason – they have a lot more legal and regulatory compliance considerations than some other parts of a business.”
This cautious attitude is slowly beginning to change in response to emerging challenges. Speed of deployment and lower capital costs, for example, are often the primary reason a finance department begins to evaluate what the cloud can offer. Hosted IT infrastructure services, for instance, are helping finance departments manage seasonal peaks in demand for computing power.
“Budgeting and planning often need a huge amount of IT capacity,” says Mr Cardell. “In some cases, the month-end processes can cause IT-based systems to grind to a halt. So most build for the peak and don’t use that spare capacity the rest of the time or struggle to meet demand during peak periods.” Where data governance and security is often written into service contracts, he adds, “cloud infrastructure can be most helpful for cost-effective operational speed and agility”.
The finance department also has a range of options when it comes to cloud-based software, including those developed for time and expense reporting, for example. “I call these input applications,” says Mr Cardell. “They are usually the first area of cloud-based finance software adoption.” Used by management and staff to provide finance with vital operations data, these applications, which can often be accessed through a browser or mobile device, can streamline the gathering and dissemination of accounting information in real-time.
Mr Cardell highlights the core finance function itself as the place where cloud adoption has so far failed to keep pace with the rest of the business. “These applications tend to be highly transactional and are therefore more liable to risk and regulation, such as payroll or statutory financial accounting packages,” he says.
We can now spend the time saved on value-added areas rather than churning out the accounts
This is because enterprise resource planning (ERP) software has historically required significant investment and in-house management where “there are just not as many cloud products on the market,” Mr Cardell says. Major vendors, such as Oracle and SAP, have introduced large enterprise cloud-based ERP offerings. But cloud-based vendors, including NetSuite and Salesforce, are also making headway in the mid-market.
The finance department of Broadway Malyan made the move to cloud-based accounting software early. Anne Howard, head of UK finance for the international architecture practice, says it has enabled more effective resource planning, as well as cost-savings and improved productivity.
“The business had already made a move into cloud with Google Apps a couple of years ago,” Ms Howard says. “So we were open to cloud solutions where finding a fit with our global business made cost, flexibility and scalability paramount. It means we have no hardware costs and that the software is constantly upgraded. And we can expand access to the systems to our people anywhere in the world.”
She adds that, although security is a major consideration, cloud providers’ systems are often more secure than businesses whose core purpose is not IT related.
Broadway Malyan migrated to Twinfield, integrating the provider’s online, cloud-based accounting suite with the company’s existing customer relationship management system in 2012. Ms Howard says the company worked with Twinfield to develop some specific local functionality, which included handling BACS (Bankers’ Automated Clearing Services) and cheque payments. But this was preferable to buying a larger enterprise package with “more functionality than we needed”, she says.
“It’s just been so easy. We have better visibility of what’s happening internationally, where before that would only happen when we physically visited each office to do an audit. And we can now spend the time saved on value-added areas rather than churning out the accounts.” This includes more business-facing analysis of operations, to reveal the least and most efficient projects or most valuable clients, for example. “And we can run reports knowing the data is automatically refreshed,” she adds.
Ms Howard agrees with Mr Cardell that the main opportunity cloud now offers is around reporting and analytics. “Different business functions can pull external data sources and unstructured data into cloud-based analytic platforms or tools,” he says.
“You can run finance data through Power BI, for example, to produce tables and integrate this dynamically with a presentation, so that the content of the slides changes whenever the underlying data changes.” With benefits like these, it is easy to see why 47 per cent of organisations, surveyed by researchers at Gartner, plan to move their core ERP systems to the cloud within five years.