Tools and organization, part II

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In the first part, we laid down the principles and looked at an example in software development. In this part, we will look at an example in financial management.

Like all parts of your business, finance has its processes, workflows and controls. Unlike other teams, finance interacts with every single other part of the organization. A customer support person may have no interaction with an online marketing / social media associate. But everyone deals with finance, whether for budgets, vendors, expenses or just getting that paycheck.

Every such interaction involves workflows. What is the process to follow to get a vendor approved and eventually paid? Does it matter if it is a subscription at a fixed amount per month vs. a one-time payment? Do the approval levels change if it is above $1,000, $5,000, $100,000, $1MM? Do you send it to a manager for approval before finance reviews, and therefore save the manager the time reviewing non-compliant requests that finance might catch, or does it go to the manager immediately, to catch any non-approvals right away?

The number of workflows is quite large, the number of actors outside of finance relatively large, and the finance department relatively quite small. Any variation in workflow can be magnified and overwhelm the finance department. Not only does this annoy the employees, and possibly put them at risk if any cash flow (e.g. to a mission-critical vendor or to their own pocket if they are carrying large expenses) is crucial, but can also put the firm itself at risk since the finance department is also responsible for managing the day-to-day cash position of the business. For a great example, read the first few chapters of Gordon Bethune's "From Worst to First."

Once again, whether or not the tool(s) - expense management, payroll, budget review and approval - have certain features is far less important than whether or not it can work within the organization and the desired workflows. I believe this is one reason (but probably a secondary one) why the niche cloud finance providers have been so successful in penetrating small-to-midsize firms, and even some larger firms. Their ability to have simple workflows that are easily accessed and managed by everyone in the organization eliminates big overhead and brittleness.

One caveat is important in financial management, and is a more important reason why the cloud providers have succeeded. Unlike many other tools, corporate financial management and enterprise resource planning (ERP) tools are incredibly expensive and complex. Companies have spent literally tens of millions of dollars on large ERP software, followed by an equal or greater amount on consultants to install and manage the tools. Because the burden of many of these tools is so high, it is important to also consider features, in addition to organizational "grease" (getting the gears moving smoothly). Nonetheless, the primary role of these tools is to enable organizational activities. Focus on those.