Web-based accounting systems take hold

It's time to start looking at accounting packages in a new light. By harnessing the power offered by the Internet, accounting can become a company's backbone of information.

In this article:
At a glance: Internet Travel Network
The pros and cons of using Web-enabled accounting tools
Rainforest Cafés
Lessons learned
Accountants aren't known as glamorous types. What they do have a reputation for is confidentiality. They keep their numbers under the tightest of wraps. So the latest trend in accounting software--building in Web functionality--may seem a bit incongruous. Why would financial managers want to open up their fortresses of figures? As it turns out, there are some good reasons why CFOs, treasurers, comptrollers, and other keepers of the cash demand Web-enabled accounting packages.

Internet Travel Network

The company:
Located in Palo Alto, ITN is a three-and-a-half year-old Web-based travel booking company with 105 employees.

The problem:
Providing more immediate account access to customers and ITN employees.

The solution:
ACCPAC for Windows, a Web-enabled accounting system from ACCPAC of Santa Clara.

The finance IT infrastructure:
ITN runs its operation on a rack-mounted 266 MHz Pentium-based computer with 256K of RAM and a 3GB hard drive. It uses Microsoft Windows NT 4.0 configured for five clients.

Take the Internet Travel Network (ITN), a three-and-a-half year-old online travel booking company based in Palo Alto. Although ITN is Web-based, it has a traditional accounts receivable system. Business is generated on the Web, but the information collected is used to generate paper invoices, which are then snail-mailed to customers. "We continue to send invoices out, but now the beauty is that users can access their account information in great detail over the Web," explains Matt Ackerman, ITN's vice president for finance. "They can look at all the detail behind every invoice we send them and check their account status according to our records."

If that sounds pedestrian, all you have to do is look at the cost of processing invoices and answering status queries to realize why penny-pinchers like the Web. According to Adam Thier, vice president for marketing at Minneapolis-based Lawson Software, the Web lets businesses slash the tab for clearing an invoice by as much as 80%. Thier claims that the classic invoice costs from $9 to $14 to process. An accounting system with Web functionality can cut that cost to between $1 and $2. The process also includes the 70% to 75% of the average company's accounts payable staff who is dedicated to answering vendor questions.

This potential cut in costs is one of the reasons so many top accounting software makers have added or are planning to add Web functionality to their products. Of the top 22 accounting packages cited by Accounting Today magazine, nearly half include or are planning to include Web capabilities. "Internet capability is emerging as one of the major new operating features in accounting software," the magazine notes at its Web site:
The Electronic Accountant,

Increased efficiency for everyone

But invoicing and customer self-service aren't the only attractions of the Web. Salespeople at ITN, which employs about 105 people, also find the company's Web-enabled accounting system, made by ACCPAC of Santa Clara, useful. "In the old days, our field people would have to call in and ask, 'Can you tell me this about that account or can you send me a statement?'" Ackerman notes. "Now they can access that information directly through the Web."

The pros and cons of using Web-enabled accounting tools

The pros

  • Enhance customer support
  • Reduce manual input of information and redundant data entry
  • Less expensive to create and maintain than private network
  • Easy for users to learn and use
  • Costs associated with processing of paper documents can be reduced

    The cons:

  • Less secure than private network
  • Ackerman says that the Web functionality built into the accounting system has had a tremendous impact on workers in the company's back office. "We can raise the level of efficiency and productivity of those people because they no longer have to work on manual tasks and can work on our value-added propositions, the actual reconciliation of the account," he explains. "They can focus just on the issue the customer has raised, as opposed to collecting the information, communicating the information, then waiting for feedback." Ackerman estimates that an average worker may spend 10% of his or her time on the telephone sending account and status information to customers. Now most of that time can be eliminated.

    While Ackerman concedes that not all ITN customers may be interested in Web functionality, the company is trying to persuade its largest volume customers--it has 15 of the 100 U.S. companies with the largest travel budgets--to work with the system. "The intent is not to force a tool on our customer set because we feel it's going to be more efficient from our standpoint," he says. "Our belief is that it's more efficient all the way around because you no longer have to rely on someone answering the phone at our end."

    Self-sufficiency reaches new heights

    Web-enabled accounting functions simplify other internal accounting department operations as well. Minneapolis-based Rainforest Cafés uses the Web as its wide area network (WAN), which provides two big benefits, according to Mark Robinow, Rainforest's CFO: It saves the company the cost of maintaining a private network, and it makes purchasing equipment easier to. "Because the Web is so widely used right now, the equipment we buy to use with it can be plug-and-play and off-the-shelf," he notes. Rainforest uses a financial package made by Lawson. The software runs under AIX on an IBM RS/6000 server. The units have Pentium-based PCs running Windows 95. The enterprise, which did $108 million in sales in 1997, consists of 20 restaurant and retail store units.

    Right now, Rainforest, which has 6,000 employees, limits access to its accounting system to its accounting, administration, and operations people, but it plans to extend access to its suppliers in the future. "It's not an immediate priority, but maybe in a year we'll have something that will work for our suppliers," Robinow says. "We want to do that, but we're a young, growing, company and we need to get everything set up internally first."

    Rainforest Cafés says that the cost of running its network over the Internet is less than $1,000 per month per unit, compared to the $2,000 to $3,000 per-month per-unit cost had the company installed a private network.

    Robinow says that interfacing the accounting system with the Web has made the restaurant chain's units more self-sufficient. "It's certainly enhanced our units' ability to do real-time financial reporting," he adds.

    Although there was an incremental cost to move the accounting functions from the company's old dial-up system to the Web, Robinow says that savings washed out those costs during the first year of the new system's operation. Some surprise costs were also connected to taking the company's accounting functions to the Web. Robinow explains that more consulting hours were used in setting up the system than the company anticipated, but that surprise could have been avoided if Rainforest had been less ambitious in its setup projections. Estimates about the time it would take to set up the system also were slightly off. "We thought we could set it up in four weeks, and it took us about eight," says Robinow.

    Asked about the downside to using the Web, Robinow raises the familiar issue of security. "We realize we have more security risk with the Web than we would have with a private network," he admits. "But our calculations said a private network would have been three times more expensive to set up." Rainforest says that the cost of running its network over the Internet is less than $1,000 per month per unit, compared to the $2,000 to $3,000 per month per unit cost had the company installed a private network.

    An island no more

    Rainforest Cafés

    The company:
    With 20 restaurant and retail store units and 6,000 employees, Minneapolis-based Rainforest Cafés did $108 million in sales in 1997.

    The problem:
    Reducing the cost of maintaining a private network and simplify equipment purchase.

    The solution:
    The LAWSON INSIGHT Business Management System financial package from Lawson Software.

    The IT infrastructure:
    The Lawson package runs under AIX on an IBM RS/6000 server. The units have Pentium-based PCs running Windows95.

    As the Web continues to open doors for companies and their customers, more and more of them are demanding that their accounting systems be removed from their island status and become the backbone of information for the entire company, asserts Bill Copeland, vice president of marketing for ACCPAC. A division of Computer Associates International, ACCPAC has been making accounting software for mid-sized companies with sales of up to $500 million for 20 years.

    No one needs Web-enabled accounting systems more than senior managers do, contends Lawson's Thier. "Historically, these people have never interacted with an accounting system." With Web functions incorporated into the accounting system, these managers can pull up a Web page populated with key business metrics from the accounting system the day a company's books are closed. That's a far cry from what's done without Web capabilities. "A couple of weeks after the books close, [managers] get handed a bunch of Excel spreadsheets that told a partial story, so they'd have to call financial analysts to dig up more numbers for them," Thier explains. "That process can be totally replaced with a personal Web page full of financial metrics and the ability to drill around them to find out exactly what they mean."

    By opening up access to their accounting systems through the Web, some enterprises believe they can advance their business objectives in a number of ways. "When employees, customers, and key business partners can interact with the accounting system in real time, the end result is more productivity for employees, better overall customer service, and ultimately more sales," says Dave Dalton, ACCPAC's assistant vice president for product marketing.

    With a Web-enabled system, the customer almost becomes another employee--one a company doesn't have to pay. "A customer can call up my Web site and, almost as if he was a clerk at my organization, he can punch in an order, check the availability of the inventory, and have the order go directly into my accounting system," says Sheldon Needle, president of CTS Inc. (http://www.ctsguides.com/), a Rockville, Md., publisher of software evaluation guides. "We wouldn't have to handle any paperwork, and the customer would have all the information he needs."

    Those aren't the only benefits. By building on the existing accounting system, companies can eliminate the costs of creating redundant systems to accomplish the same tasks. "If you have an order entry system, for instance, that's not tied to the accounting system, then you're incurring costs associated with redundant data entry," Dalton explains. In one sense, the Web-enabled accounting package is acting like a low-cost Enterprise Resource Planning (ERP) system. It's supplying straight-through processing from order entry to accounting and inventory system updates. However, it differs from an ERP system because it isn't designed to standardize all the data traveling through the enterprise.

    Lessons learned
  • Installation of a system with Web functionality may require more consulting hours than originally planned.

  • Installation may take longer than estimated.

  • Installation costs can be rapidly recouped through the resulting savings.

  • The Internet can be a viable substitute for a WAN and can be used at a fraction of the cost.

  • A Web-based system allows a company to use off-the-shelf and plug-and-play components, reducing the cost of implementation.

  • The self-service aspect of an accounting system with Web functionality allows existing employees to spend more time on value-added services.

  • Self-service can be more efficient for customers because it eliminates the snags connected to interpersonal communication such as "phone tag."

  • Tying a company's accounting information to a Web enhances the organization's ability to provide real-time financial reports to its managers.
  • "With an ERP system, you have exactly the same data moving the same way through the entire organization," explains Emery Kobor, a research analyst with World Research Advisory, a Reston, Va., business think tank. "Departments may have completely different computer systems, different operating systems, systems not designed to talk to each other. An ERP system homogenizes all that." Asked whether Web-based accounting systems are a cheap way to get to ERP, Kobor says, "No. Accounting systems are just one piece of the whole ERP framework."

    For organizations sold on the benefits of broadening access to their accounting systems, the Web provides a simple way to do it. That's important because a business doesn't want to burn resources breaking in new employees with access on the intricacies of its accounting system. "A Web applet can act as a thin client, something easy to use," Dalton explains.

    Using the Web pipeline

    When it comes to electronic commerce on the Web, consumer transactions have received the greatest public visibility. But for the most part, the Web features being built into accounting packages are aimed at internal and business-to-business commerce. "All the projections we've seen say that all the real growth in Internet business is going to be in business-to-business transactions," says ACCPAC's Copeland.

    Of course, it costs more to add Web capabilities to an accounting system, but those costs can be relatively low. In the case of ACCPAC's package, existing users need to add ACCPAC's e.Advantage server software, which costs $5,000; its applets for order entry, accounts receivable, and payroll at $500 each; plus $4,000 to $6,000 for some service implementation.

    Not everyone sees financial managers clamoring for Web capabilities. "It's not at the top of their list of priorities," says Philip Grannan, vice president for marketing at Bottomline Technolgies in Portsmouth, N.H., a maker of payment software used by more than 2,500 financial institutions and Fortune 1000 companies such as American Express and Fidelity Investments. "It's a great idea and they see it, but there are some other things on their minds right now, like Y2K," he asserts.

    Although Grannan sees the Web taking a backseat to other concerns now, he predicts that the Web ultimately will be an important technology for financial departments. "The Web as a transport mechanism will be used more and more by businesses," he says. "From a billing and payments point of view, more and more companies will be using the Web pipeline." Adds World Research Advisory's Kobor: "The Internet is going to become a very important conduit for business-to-business transactions. You're going to have straight-through processing untouched by human hands. Two-thirds of corporate treasury departments are made up of folks who are described as transaction processors. Those people are going to be without a job."

    Your company's accounting department is begging for an accounting system with Web functionality. What's your answer?
    Let us know by e-mailing us at letters@datamation.cahners.com.
    What will that mean for the old standard of electronic business-to-business commerce, electronic data interchange (EDI)? "We see the Web and EDI as complementary technologies," says ACCPAC's Dalton. That's already happening at companies such as Wal-Mart, according to Kobor. He says that Wal-Mart has a Web-based piece that fits on the supplier end of its EDI scheme. "Those suppliers don't need to know EDI formats or anything else that's always held back EDI," he says. "Now everything can be done from Wal-Mart's Web site."

    "EDI will grow as a result of the Internet," adds Lawson's Thier. "It will explode with the expansion of Internet commerce." //

    John Mello is a frequent contributor to financial and technology magazines. He can be reached at jpmello@ultranet.com.

    Accounting software with Web functionality

    ACCPAC for Windows
    ACCPAC International Division of Computer Associates
    Santa Clara, Calif., 800-773-5445

    DacEasy Accounting & Payroll
    Sage U.S.
    Dallas, Texas, 972-818-3900
    target="_new" http://www.daceasy.com/

    Great Plains Software
    Fargo, N.D., 800-456-0025

    LAWSON INSIGHT Business Management System
    Lawson Software
    Minneapolis, Minn., 800-477-1357

    Accounting software with future Web functionality

    Navision Financials
    Navision USA
    Norcross, Ga., 770-798-8363
    In the future: Adding MAPI compliance for Web commerce

    One-Write Plus for Windows and Peachtree Complete
    Peachtree Software
    Norcross, Ga., 800-228-0068
    In the future: Adding software to enable users to design Web sites, advertise, and take orders online

    Open Systems Accounting
    Open Systems
    Eden Prairie, Minn., 612-829-0011
    In the future: Adding Internet interface

    Progression Series
    Marion, Ohio, 800-468-0834
    In the future: Adding Internet tools

    Pro Series 5.0i
    SBT Accounting Systems
    San Rafael, Calif., 800-944-1000
    In the future: Adding Web-enabling tools

    Solomon IV for Windows
    Solomon Software
    Findlay, Ohio, 419-424-0422
    In the future: Adding Internet integration

    Visual AccountMate
    Mill Valley, Calif., 800-877-8896
    In the future: To be Internet-enabled

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