|In this article:|
|At a glance: Internet Travel Network
|The pros and cons of using Web-enabled accounting tools|
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.
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.”
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
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.
“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.”
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 email@example.com.
Accounting software with Web functionality
ACCPAC for Windows
ACCPAC International Division of Computer Associates
Santa Clara, Calif., 800-773-5445
DacEasy Accounting & Payroll
Dallas, Texas, 972-818-3900
Great Plains Software
Fargo, N.D., 800-456-0025
LAWSON INSIGHT Business Management System
Minneapolis, Minn., 800-477-1357
Accounting software with future Web functionality
Norcross, Ga., 770-798-8363
In the future: Adding MAPI compliance for Web commerce
One-Write Plus for Windows and Peachtree Complete
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
Eden Prairie, Minn., 612-829-0011
In the future: Adding Internet interface
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
Findlay, Ohio, 419-424-0422
In the future: Adding Internet integration
Mill Valley, Calif., 800-877-8896
In the future: To be Internet-enabled
Purchasing magazine / June 18, 1998
“Buyers make Net part of sourcing toolkit,” By Tim Minahan
Purchasing magazine / April 23, 1998
“Office supplies buy goes online,” By Susan Avery
Purchasing magazine / July 11, 1996
“Buyers’ guide to software,” By Susan Avery