Cloud Technology is the Future – Time to Upgrade (Part 2 of 2)

This is the sixth in a series of six blogs, which attempt to provide airport accounting managers with information on how they can improve their financial management processes.  The previous blogs covered the following topics:

• Blog number 1: the benefits of using a multi-dimensional accounting system like Microsoft Dynamics NAV 2017
• Blog number 2: the key to improving productivity and accuracy of data by integrating your accounting system with other airport systems
• Blog number 3: how to improve your reports by capturing key statistical data and combining this data with your financial data.
• Blog number 4: implement a new data visualization product like Microsoft Power BI
• Blog number 5: Cloud Technology is the Future – Time to Upgrade (Part 1 of 2)

This blog continues the discussion from blog number 5 on cloud computing and describes how airports can take advantage of advances in cloud technology.

In addition, readers are encouraged to read my white paper (Modern Airport, Modern Tools) that covers the same topics in a summarized form.

What about Security? Is my data secure on the Cloud?

Security is a big issue whether you are using on-premises or cloud computing. Many companies think their data is safer on-premises, but the opposite is usually true.  There are many issues that impact security, including:

• Firewalls to prevent hackers from getting into you network
• Data backups, including storing some backups off site
• Disaster recovery and business continuity
  • What happens if your IT server room catches fire and burns to the ground? How do you recover your data even if you have an offsite backup? You would need another server to restore your data onto and bringing up a new server can take time.
• Anti-virus protection
• Manage and control user access and identity
  • Comprehensive identity management is the linchpin of any secure system. You must ensure that only authorized users can access your environment, data, and applications.
• Encryption of data as it travels between devices and your server
• Protection against malware and phishing emails

The chances are that your local IT services do not offer the same security as a multi-million dollar data center, let alone the billion dollar data centers operated by Microsoft.

My favorite analogy to the question of whether your data is safer on-premises or on the Cloud is whether your money is safer in the bank (Cloud) or under your mattress (on-premises).

The Future of Accounting Software…

Microsoft launched a new cloud service in late 2016 called Dynamics 365.  I decided to include some information on this new service in this blog post since it is a great example of cloud computing and represents the future of accounting software. If you haven’t already heard about this software as a service, read on….

There are two flavors to this service, Dynamics Enterprise and Dynamics Business.  The Enterprise version is intended for larger companies and is based off Microsoft Dynamics AX 7. The Business version is based on Microsoft Dynamics NAV and is intended for smaller businesses with up to 250 employees.  Dynamics 365 adds accounting software to other services that are already offered by Microsoft such as Office 365 or new services that are being created such as sales and marketing applications. The Business edition would be suitable for most airports.

Microsoft Dynamics 365 is the next generation of intelligent business applications in the Cloud. Microsoft Dynamics 365 for Financials is the accounting application within the Business edition and is priced at around $40 per user per month, making it very competitive and compelling for many airports.

Dynamics 365 for Financials includes the following:

• Workflow Management
• Financial Management
• Purchasing
• Sales
• Inventory Management
• Project Management
• Requisitions and Quotes
• Timesheets
• Personal Information (HR)

The menus are very simple and the system is designed to be easy to install so that you can get up and running very quickly.

Dynamics 365 is integrated with Power BI, which was discussed in a previous blog, and can be accessed from a laptop, tablet or smart phone.

The system also integrates with Office 365, so that you can create purchase orders within your email system and send them to suppliers – this is extremely cool!  If you would like to see this, contact me.

Microsoft is updating the software every month so users are constantly using the latest version of the software. This software is only available on the cloud. We have developed an airport version of this product – contact me for more details.

What are the Economics of Cloud Computing?

In order to decide between a Cloud or on-premises solution, I recommend you take a look at the cost of the two different models.  When I prepare a quote for a customer, I usually do this for them and look at the total cost of ownership over a period of 5 years.  Why 5 years?  Because some of the costs are monthly or annual costs (monthly subscription fees or annual maintenance costs) and some are up-front initial costs (consulting fees for implementation). Once you decide to implement a new system, it is going to last you for at least 5 years, if not longer. Most companies stick with their system, good or bad, for a number of years since the cost and disruption of making a change can be significant.

Let’s take a look at an example. The following table shows the cost of an on-premise system compared to a PaaS and a SaaS Cloud service. These numbers are made up and there may be other costs that should be included in a real cost-benefit analysis, but this example illustrates how you could compare the different solutions.  The big difference between an on-premises and cloud solution is the cost of local IT personnel and other IT costs relating to an on-premises system such as the cost of the servers, disk drives, data center costs and other hardware and software costs.  If you outsource your system to the Cloud, these costs will mostly go away since you could re-deploy these resources or eliminate them.

In a SaaS solution, you will pay for the software on a subscription basis, which means you will not need to pay for annual maintenance of the software and you won’t have to pay for the up-front purchase cost of the software.

The cost of the PaaS and SaaS models needs to be looked at carefully. It may be less expensive to purchase the software and have it installed on a cloud server rather than pay for the monthly subscription for the software over the next 5 years. However, if you purchase the software, you will be responsible for any upgrades.

Ask your vendor to help you with this cost analysis.

Take Action…..

There are many advantages to implementing a cloud solution, and you could reduce the cost of your system while improving the performance, services offered and security of the system.  Contact me if you need help with understanding the benefits of cloud computing, or help with any of the other topics covered in this series of blogs.

Paul Fernandez B.Sc., ACMA, CMA
SBS Group Pacific Canada

About Paul
Paul Fernandez is the general manager of SBS Pacific Canada, which is part of the SBS Group. He has worked as a professional accountant in industry for 25 years in various senior financial positions. He founded his consulting practise 15 years ago and has worked as a consultant implementing accounting systems at many companies, drawing on his own experience to advise clients on the design of their chart of accounts and multi-dimensional reporting structures. Contact Paul at pfernandez@sbsgroup.ca.

 

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Looking for a modern financial management solution for your airport?

Modern Airports Need a Multi-Dimensional Accounting System

What is a “dimension” and what is a “multi-dimensional accounting system”?  A dimension is a piece of information about your business that you want to store.  For example, it could be a department, a market sector, a cost center, a product code and so on.  Older accounting systems used the account code to store information in segments in the account code. For example, the first segment was the actual account code, the second segment was the department code, the third segment was the market sector and so on.  Typically these “segment-based” accounting systems used 3 or 4 segments in the account structure and this led to thousands of accounts in the chart of accounts, while limiting the number of analysis segments to 2 or 3 (the first segment was the account code).  The modern approach is to create independent fields to store this information, and these fields are called “dimensions”.  A multi-dimensional accounting system is simply an accounting system that has multiple dimensions.  An example of a multi-dimensional accounting system is Microsoft Dynamics NAV.

Chart of Accounts: Meeting Complex Reporting Requirements Without A Complex Account Structure

Modern airports require their accounting system to support basic concepts of natural account organization as well as more advanced aspects of chart of account organization to support reporting requirements.  The segment-based approach, unfortunately, leads to the development of complex structures of account coding with, typically, thousands of accounts in the Chart of Accounts.

A “natural” account is used to collect revenues and expenses by their type such as revenue, salaries, rent, office supplies and other expense types.  These are natural accounts and a typical organization typically only requires 250 – 350 natural accounts in your Chart of Accounts to fully categorize the different elements of revenues, expenses, assets and liabilities, depending on the complexity of the business.

In addition to the natural account, an airport may also need to report by one or more organizational or responsibility units. Examples of these reporting requirements include:

• Department
• Market
• Product
• Project

A segment-based accounting system combines the natural account with the organizational reporting segments to concatenate the codes as shown in the following example:

When a new code is created, it is linked to each account-code combination that may require this code. If a new Department is created and attached to 50 natural accounts and also has to be linked to 10 Divisions and 10 Products, this will result in the creation of 5,000 new account combinations!  It is easy to see why such a system typically results in the creation of thousands of accounts in the Chart of Accounts.

The disadvantages of such a system are obvious.  Apart from the complexity of maintaining thousands of accounts, the learning curve for new accounting staff is unnecessarily long.  As new accounts are added, the financial reports need to be maintained and this can sometimes take a long time at month-end to update the various financial reports so they balance.  Coding invoices also becomes over-complicated and prone to errors.  As a result, many companies try to minimize the number of new account codes they create to try and minimize the resulting negative consequences.  This leads to a reduction in the usefulness of such a structure and achieves the exact opposite of the original objective.

The modern solution to this problem is to use “dimensions” to track the “segment” codes.  In the above example, there are 4 dimensions in addition to the natural account number.  These dimensions are Department; Market; Product; and Project.  These new accounting systems are called “multi-dimensional” and they facilitate complex reporting structures with a simple chart of accounts.  Each dimension is an independent field, separate from the natural account code and the other dimensions.  If a new department code is added as per the above example, just one code is added to the department dimension and no other codes are required.  If an expense is entered into the accounting system, the expense can be posted to any natural account, and if that account requires the department dimension, then the department code is added when the expense is entered.  The requirement for each account to require or not require a dimension is set up in the Chart of Accounts by setting a simple flag for each dimension.  Once set, this structure requires little or no maintenance.

Multi-dimensional accounting systems use relational database concepts rather than the old hard-coded segment structure.  As such, they are simple and yet more powerful in their reporting and analysis capabilities than the old segment-based accounting software.  Any system that is simpler to use, and at the same time more powerful in its reporting capabilities, offers many advantages to the accounting staff.

The maintenance of reports in a multi-dimensional database structure is also simplified.  In the above example, one new department code was added.  This means one code needs to be added to the reporting structure, or, depending on the reporting software, this may be automatically picked up by the reporting software resulting in no maintenance at all.

Many organizations have a primary reporting structure, usually based on organizational lines such as Departments or Divisions.  They may also require additional reporting by product line, geographic area or by market.  Such diverse reporting requirements can be met by setting up different dimensions for each reporting requirement.  Some systems also allow a specific dimension to be grouped in different ways to reflect the current organizational structure, for example, sales regions may be grouped one way and then re-organized a different way the following year.  The ability to re-group the codes within a certain dimension provides the flexibility to do this without changing any of the underlying transactions.

Finally, having 250 to 350 natural accounts simplifies the Chart of Accounts enormously and makes it much easier to work with.  New staff can learn the account numbering system in a fraction of the time, and coding invoices to the right account is also easier resulting in more accurate accounting records.

During the implementation of a multi-dimensional accounting system, the reporting requirements of the business are analyzed in order to identify the dimensions that will be needed.  The dimensions are then set up and populated with codes that facilitate the reporting and analysis requirements of the business.

By implementing a new multi-dimensional accounting system like Microsoft Dynamics NAV, you will be able to improve your reporting and analysis capabilities and take advantage of powerful data visualization products like Microsoft Power BI.  This is the first of five blogs on how to improve the financial management of your airport, and I will be discussing Microsoft Power BI in a future blog as well as other topics including integrating your accounting system with other airport systems; how to use key performance indicators; and cloud technology.

Paul Fernandez B.Sc., ACMA, CMA
SBS Group Pacific Canada

About Paul
Paul Fernandez is the general manager of SBS Pacific Canada, which is part of the SBS Group. He has worked as a professional accountant in industry for 25 years in various senior financial positions. He founded his consulting practise 15 years ago and has worked as a consultant implementing accounting systems at many companies, drawing on his own experience to advise clients on the design of their chart of accounts and multi-dimensional reporting structures. Contact Paul at pfernandez@sbsgroup.ca.

 

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Looking for a modern financial management solution for your airport?

New Video Release: Collections Functionality for Microsoft Dynamics AX (2 min, 22 sec)

This brief video demonstration for current and prospective Microsoft Dynamics AX customers seeking a solution to manage their collection process and reporting.

Unfortunately, all companies have customers that don’t pay on time. Those late or missing payments need to be categorized and tracked for your collections or accounting department. On the new Microsoft Dynamics AX, there is a new collections and credit functionality for accounting departments to take advantage of. Create custom collection letters, run customer aging reports over a certain time period, and calculate interest on overdue payments in this new collections module. AXIO Enterprise Solutions take the collections functionality on Microsoft Dynamics AX and makes it easier for you to navigate.

Watch as an AX expert from SBS Group demonstrates the collections and credit functionality on the new Microsoft Dynamics AX.

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To learn more, check out our on-demand video series featuring Microsoft Dynamics AX and AXIO.

> VIDEO SERIES :: AXIO Enterprise Solutions

Simplifying Compliance Regulations for Discrete Manufacturers

Manufacturing companies today face a myriad of challenges to remain successful. Advancements in technology and shipping resources have enabled global sales expansion, but also worldwide competition from industrial countries that don’t necessarily have to comply with the environmental and material regulations imposed on American and European producers.

Discovering and incorporating new supply chain management tools that offer your business a better means of meeting regulatory guidelines while streamlining the administrative efficiency of your staff, provides security from expensive fines and lowers your labor expense. This will help you improve profits while also start to level the playing field with your global competitors.

Parts and Materials Compliance

For production companies that fabricate goods using restricted materials, either in the purchasing requirements, or the parts themselves, managing the compliance paperwork and tracking parts can be time-consuming and tedious. Even accidental errors can result in hefty governmental fines that can diminish your cash flow and interrupt your production process.

Innovations in supply chain management and reporting software have enabled manufacturing companies to achieve better compliance performance through enhanced certification and specification tracking procedures. Working with your suppliers, the crucial information can be transmitted electronically, and then sorted, organized, and filed according to shipment dates and parts numbers.

Administrative Advantages

In addition to the tracking improvements, your administrators will spend less time entering data, and if audits are performed, retrieving the necessary documentation on regulated parts is simple and effortless. These compliance solutions allow your staff members to focus their energies on other, profit centric operations, such as new marketing strategies and better client services.

By introducing new supply chain management and reporting software, your discrete manufacturing business can discover ways to ease compliance burdens, which perpetuate growth and ensure your production success. To learn more about SBS Group’s Discrete Manufacturing solutions, contact us today or visit our Media Center with free seminars and resources.

Related articles

• Supply Chain and Risk Management: Learning to Piggyback to Get Budget (spendmatters.com)
• What is Supply Chain Management? (ASU-WPC-SCM) (mscisackleyakpanidiok.wordpress.com)
• 4 Creative Ways to Add Innovation to the Supply Chain (iviewlogixblog.com)
• Supply Chain Management – an Introduction (rayfranklin10.wordpress.com)

Homebuilders: Is Your Accounting Software Up to Par?

Successfully managing job operations in the homebuilding industry requires a host of dependable, experienced personnel performing their tasks with diligence. Everyone involved in the homebuilding process, from your project managers, to your sales and marketing team rely on up to date information. And although with continued advancements in technology it’s easier than ever for your team to stay connected, outdated homebuilding accounting software can hinder your professional progress, costing you time and money.

Understanding the need for an upgrade is great, but as a homebuilder, it may be difficult to determine if your current system isn’t operating at the level you need it to.

If you want to be sure that your accounting software stacks up, ask yourself these questions:

• Can it compare standard costs estimates with the actual costs accrued on the job-site

• Can it offer real time information from site superintendents on current labor costs and the subsequent worker’s compensation codes for certain activities?

• Can it organize sub-contractor data, work agreements, and certifications according to specific jobs?
• Is it able to direct accurate billing information to the proper personnel for efficient approval?

If you answered no to any of these questions or are unsure of your software’s capability, it may be time to do some research and look at something new.

The answers to these questions will ascertain how much time and money your company can save by using an efficient homebuilding accounting software and will determine the level of advantage you can gain over your competitors in attracting, signing, and constructing new contracts.

 

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