Anyone working in finance long enough has probably heard nightmarish stories about every financial system out there—as well as something great about the same systems. So, how can both perspectives be true? A financial system's success—or failure—depends on selecting the right system for the organization and making sure the implementation goes well.
How finance leaders should approach a system selection
There are many factors to consider when developing the request for proposal (RFP) or financial system selection process.
Develop a tailored list of systems to consider
How do you decide which financial technology systems to look at? Most people go by reputation or default to considering systems that members of your teams have used in the past. Be careful with this approach, as different systems are designed to work with a certain company size or specialize with a particular industry. I would recommend starting with a neutral source to develop your shortlist of suitable financial systems. A simple internet search can provide you with a list of vendors, available features, and estimated costs.
Gather cross-functional input
Next, you want to put together a written questionnaire. To ensure you're looking at the solution from all required angles, assemble a team from each of the different stakeholder groups. This may include Accounting, FP&A, Treasury, HR, IT, Sales Operations, and other key stakeholders. This collaborative step is essential, but it's often skipped, which usually leads to an inadequate system that works for one department, but not the entire company.
Refine and analyze your technology needs
Once you have the questions gathered, vetted, and consolidated, group them into specific themes (such as set-up/maintenance, hierarchy management, reporting, forecasting, etc.) to make it easier to analyze the results. The next step will be to send this questionnaire out to roughly 10 vendors and give them approximately two to three weeks to respond.
Review and rank system vendors' responses
Once the responses are in, consolidate the answers by question in a single document. Then each member of your stakeholder committee should rank the answers from best (10) to worst (1). This will allow you to weed out several vendors and show which vendors scored the best.
Invite a shortlist of vendor finalists to showcase relevant capabilities
When your list of vendors is down to three or four, it's time for the demo. If you ask the vendor to do a demo, they will use their own data, and everything will work perfectly. This is not how it will work at your company, so it's important to provide the vendor with additional guidance to make the demo more meaningful to your organization. This usually involves providing each vendor with "dummy data" from your company. The data could include a few months of GL data, some business metrics, and cost center/legal entity hierarchies. To ensure you are not providing confidential information, a simple trick is to multiply every other line of data by 0.9 and the others by 1.1, which enacts changes that can keep your company financials confidential.
Get specific and cover multiple bases
Tell the vendor exactly what you want them to demonstrate. If, for example, you're evaluating an FP&A system, then ask the demo to showcase how to build a variance report or run an ad-hoc query to understand what's behind a particular number. You can also have the vendor show how to leverage workforce planning to create a budget or forecast. The more you connect the demo to relevant data and work your company does, the more meaningful the exercise, and the better your selection will be. Provide the dummy data and demo requirements to each vendor and give them two to three weeks to put together a 90-minute demo.
Enlist multiple functions in the final review process
Make sure there are participants from each stakeholder group attending each demo session. Create a demo evaluation form for each attendee from your company to fill out after each demo. Have them rate various attributes and functions on a scale of one to ten, with ten being the best. Then you can take an average score and compare each vendor when the demos are complete.
Leveraging a financial system RFP and cross-functional evaluation process like this will ensure that you select the best technology for your company.
Preparing for the implementation in parallel with the RFP
While you're going through the financial system selection process, you should be preparing for the implementation. Doing so will simplify complexities and help ensure successful adoption across all users.
Avoid complications by getting your data ready
A major reason systems fail is that the underlying data is not clean or consistent. As the old saying goes, "garbage in, garbage out." In other words, if your system provides unusable information, it's not a reflection on the system, but the underlying data. Leaders should ensure the organization's data is ready before starting a financial system implementation. By contrast, if your team waits until implementation has begun before initiating a data clean-up, many steps may need to be repeated, which will often cause costly delays and additional installation expenses.
Consider the right configurations
In order for your new system to be effective, you'll need to define your dimensions, hierarchies, and ensure the data is configured to this structure. The mantra of data dimensions is mutually exclusive and collectively exhaustive. That means that each level of your hierarchy must be independent and not overlap with others and each dimension must add up to 100% of the company. For example, you can't put total compensation expense and salaries and wages on the same level, because salaries and wages is a sub-component of total compensation expense. Also, if you pull the total revenue for legal entities, GL accounts, departments, locations, products, customers, etc., you should get the exact same number. If your dimensions and hierarchies do not perform this way, you have a data integrity problem, and that will need to be fixed before implementation.
Equip and enable your team
Finally, don't forget about training. Often, companies focus so much on the implementation and data that they forget to include training sessions in the contract with the installer. Make sure all end users (not just finance professionals) have adequate hands-on training, as well as online self-training materials. Also, it's helpful to record the training sessions so that new employees can view the videos and walk through the exercises.
Simplifying financial system success
Selecting and implementing a new financial system might seem challenging, but a structured and thoughtful approach can pave the way for success. By carefully evaluating potential systems, involving key stakeholders, and meticulously preparing your data and team for the transition, you can transform what could be a source of frustration into a powerful tool that drives your organization forward. The ultimate goal is to empower your finance function with a system that not only meets current needs but also supports future growth and strategic objectives of the broader organization.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
