Cost accountants have a vital role to play in ensuring that new software is successfully implemented in an organisation. From raw materials to finished products, from bid preparation to determining customer credit terms, cost accounting impacts on every aspect of operations. Whether the organisation is implementing a new Enterprise Resource Planning system or requires a standalone cost modelling capability, the challenge is ensuring that sound cost management principles underpin a system which supports insightful business decision-making.
Whilst it is not the intention of SCM to promote the commercial interests of any particular software companies or their affiliates, there is clearly a role for the Society in guiding members in their evaluation processes and providing information which will empower them to make better-informed decisions. SCM has broadly defined 3 categories of costing software:
- Enterprise Resource Planning (ERP) – Many ERP vendors such as SAP, Oracle, JD Edwards, Great Plains, Sage incorporate functionality to support costing objectives. Such functionality will range from responsibility accounting using Cost Centres hierarchies, Bill of Materials and routing tables, Continuous Process manufacturing, transfer costing and Job Costing. Consolidation of the software market for Business Intelligence (BI) software tools (under which cost modelling software is often classified) means that the large ERP vendors also offer solutions for specific costing methodologies.
- Dedicated Software – There are a significant number of both small and large software companies offering dedicated software solutions to support cost management. These different products may support a particular methodology or provide a generic platform to support costing principles.
- Generic Software – Non-specific software such as spreadsheet or database programs can be used to develop cost management systems. The attraction of such software is that it is often already in use in the organisation and there is no incremental cost to purchase. For relatively simple projects or prototype solutions such software may be appropriate. In many instances the data volumes and complexities of cost allocation mean that its use becomes a false economy.
It is worth bearing in mind that careful planning and focused execution are vital components in the successful delivery of a cost management initiative. No software package will be a “silver bullet” eliminating all of the shortcomings of current management information systems. The chances are good that several software packages will be capable of delivering the result you need. Make sure that poor project discipline does not let you down. Many consultancies and software vendors will have specialist costing consultants who can assist with business and technical consulting support.
Define project objectives and scope at the start of the process. Will this be a single, strategic modelling exercise to support a one-off decision? Is this part of an initiative to drive continuous improvement at an operational level. What will be the frequency of updates? Will the scope include the whole organisation or just part of it? Describe the output you need.
Many organisations have defined IT standards and policies which will be applicable to the procurement of software. Ensure that your IT department is sufficiently involved at the start of the process of software selection.
Consider the following functional areas of software when making a decision:
• Data Integration Capabilities
• Reporting Options
• Automation Capabilities
• Ease of Use
• Technology Platform
• Software Maintenance Contracts & Technical Support
• Customer References
• Vendor Company Statistics
Whether external resources are required to assist in deploying a software solution will depend upon the availability and level of expertise of people within your own organisation. Sound project experience from third parties can prove to be the difference between success and failure.
This article first appeared on Society of Cost Management’s blog at www.costmgmt.org