Can Accounting Systems be TOO Integrated?

Systems like SAP, Oracle Financials and PeopleSoft attempt to integrate all aspects of a business, regardless of the number of countries, industries, product lines they operate in.  They address all areas of the business, from accounting, to manufacturing, to planning, to human resources, to management.  There is no question that large corporations have benefited from this integration, but is it possible that we’ve gone too far?

The larger the computer system, the higher the cost of change.  For example, one of my clients was an international oil company which wanted to experiment with a new subsidiary.  The company found it cost effective to do a whole installation of Microsoft Dynamics (and throw it away when the experiment proved to be a success) than to integrate the new subsidiary into their main system right away.

But, more importantly, large systems become increasingly complex, reducing their ability to adapt to change.  I don’t have an inside track, but I have noticed that my telephone company’s billing system seems to be unable to keep up with changes in cellphone services and fees.  In any competitive industry, even large companies need to be nimble and respond to changes in the marketplace quickly.

Finally, there is the “best of breed” problem.  You may have the biggest, most integrated system, but there are other systems that handle specific functions better.  You then are faced with the choice of the one-vendor-solution versus assembling a system from the best of breeds by several vendors.  So, you get your basic General Ledger, Accounts Payable, Banking and Accounts Receivable from one vendor, your Point-of-Sale system from another and your document imaging from a third.

A good example of this type of thinking was a client who wanted to connect his ordering system to his web site.  Both systems claimed to be able to handle the sales tax, but in testing, the engine in the accounting system proved to be more robust than the web site.  The client decided to process the order in the web site, but have it pass the information to the accounting engine to calculate the taxes and send the result back to the web site.  The result was a better system with no tax discrepancies.

Not JUST an Accounting System

Alice* shared one of her constant frustrations in a meeting about their accounting system.  She is an accounting supervisor in a medium sized company with offices across the country.  Her problem is the staff in other departments saying that the computer system belongs to the Finance department, so they don’t have to take responsibility for the quality of the information.  It’s not their responsibility if the information in the accounting system is wrong or out of date.

Accounting systems used to be confined to recording entries, producing invoices and making payments.  Current accounting systems integrate into other business software, so that the Sales, Purchasing, Manufacturing, Distribution and Human Resources systems are now part of the “Accounting System.”  More and more, other systems, such as Document Imaging and Customer Relationship Management, are integrating with the accounting system.

In a world where computer reporting is expected to be detailed and instantaneous, there is no room for error.  In short, EVERYONE owns the data.

By the same token, information needs to be shared.  There should be no arguments about who “owns” the data.  If it is needed in decision making, it needs to be made available to the decision makers, regardless of their department.

The more that operational data gets married to the financial data, the more focused the reports and the better the decision making.  The more integrated the systems, the easier it is to marry the data.  But can systems be too integrated?  Stay tuned for the next blog!  


* Not her real name.