How to implement an information system in your company? Part 1

I hate to scare you from the start, but if you have this task ahead of you, don't underestimate your mental preparation. You may at least be lucky to be introducing it for a brand new business. But if this has happened to you in a company where people have been accustomed to their practices for years, albeit inefficient, and you have to convince them of the benefits of "doing things differently," prepare for purgatory. The worst-case scenario is when you start as a new employee in a company that remained in the 1980s and where colleagues love their papers and working outside of the system. In this case, try to find some key allies who do not consider the concept of digitization to be an indecent word and are aving. You may be able to do it yourself, but in the evening you reach for a bottle of wine or a chocolate bar. You will logically have support from the company's management, but complaints will come to them very soon, so always have good arguments at hand to prevent conflicts at this level. In order not to end up in a hospital after a few weeks or months, it is necessary to think carefully. It should always have in mind that the information system is intended to serve the company and must be tailor-made for the it. If, as users, they feel it's the other way around, you have a problem, and you might be surprised how even a decent bill-invoicing lady can explode and what words she can use. Some decisions are not important, and you can change them, improvise later, but in certain areas you need to be clear at the beginning, for example, within the management of the warehouse management.

At the beginning, we map the default situation. As part of this blog, we will try to introduce an information system for the needs of a hypothetical small industrial company with a turnover of up to 50 million CZK and up to 40 employees.

Selection of information system (hereinafter IS)

This topic could be published as a separate blog, however, the most important questions are how many people will enter the system, whether individual users will have restricted access, or whether this access should be allowed through the remote desktop, etc. Software companies offer their programs in different versions, precisely for this reason. The type of business of the company itself is secondary, after all, accounting is only one and is universal. For our company, we will choose IS, which will be networked (in which case we will need a server), it will also allow the setting of access rights to individual modules (e.g. the person in charge of buying of material will not be able to access the payroll module, although he would like to see how much his colleague is earning per month, especially when his colleage is so lazy). If our company is not overflowing with money, we will not choose f.ex. SAP, which is precise and reliable, but quite expensive and rather suitable for large companies.

What accounting output do we need for efficient company management?

When setting up IS, the program itself will make your job easier in many ways. If you check "we are VAT payers," it will automatically set your agendas in a certain way. But it won't ask you about most of the important questions. Will we only be satisfied with so-called financial accounting, where we monitor costs and revenues without any further distinction, or do we want to know whether the product or service or the client has ended up profitable for us? The revenue is easily found at the order level according to the customer invoice issued, but in case of costs it is more complicated. Will we assign direct costs, e.g. material invoices, to individual centres or even to orders? If this information is important to us, one solution would be to adapt the order system (purchase order module) accordingly. We do not have to order the material by e-mail, but we create an order directly in the program with the breakdown into individual orders. Indirect material (rent, wages, etc.) can be divided into individual orders later, according to a certain key. The solution for the key may be the hours worked by our employees on a individual order multiplied by the rate of indirect costs per hour. Some firms use different standards and coefficients for the indirect cost rate, others sum up indirect costs and divide them by the total number of hours worked. If they are employees who work in IS, they can register their time on individual orders on an ongoing day. For others, the poor accountant must continuously post these data on the basis of the work statement of individual employees. Furthermore, it is possible to use modern technologies and use barcodes for individual orders or other activities to let employees scan the order number in the workshop before the start of the operation and when it is finished, f.ex. via mobile devices. In that case, it is a good idea to consult with the IS manufacturer whether the program allows such a thing. You can also do it with off-balance accounts and internal documents. However, by taking advantage of the conveniences of the digital age, the company can save a lot and further improve its reporting.

Tracking orders is important not only in terms of reporting, but also for calculating work in progress.

Linking orders to inquiries and invoices

This area is absolutely crucial for the burden on accountants. If you set up the order system smartly, the users will enter into system exactly the data you need to create sales or purchase invoice based on received orders (from the client) or purchase orders (to suppliers, f.ex. to buy material).

Set up of warehouses

Does the company have a stock clerk, does it use expensive materials whose flow needs to be monitored, is material offen lost, etc.? If so, then method A is appropriate, and the storekeeper should be your key ally. In this case, you must create stock cards in the IS, and the storekeeper must register each receipt or spending of relevant material in the system. If the company uses the "Just in time" method, where the material can be easily assigned to orders and saves on the warehousekeeper or can easily do without him/her, you need to consider method B. You will basically skip the warehouse module and can still function through the order module, if it is set up correctly.

List of G/L accounts

We will think well about analytical accounts from the beginning, based on how closely we need to monitor the company's costs and revenues, e.g. we will divide the "other services" G/L account into rent, leasing, etc. This G/L account generates a huge amount of items and after division, the subsequent analysis is not needed. We always add an analytical account for non-tax costs that cannot be applied under income tax to each group of accounts, we will thank ourselves for this at the end of the year. Then we will go to the settings in the program of already entered precontinctions to correspond with the selected analytical accounts, and we would rather delete those that we do not need or are misleading to other users.

Set up of cash registers and banks

We set up cash registers and bank G/L analytical accounts based on currencies and individual bank accounts. Later, try to minimize cash expenses, which are often a problem (refilling banknotes and coins in the cash register and an unpleasant deficits), e.g. by having the company's drivers have their bank cards to a separate bank account. Only accountants enter these agendas and they possess knowledge of accounting, so there will be no problems. Setting up internal documents, assets and their depreciation, logbooks, etc. is not complicated in a good IS and is again based on the individual needs of the company.

Set up of invoices

This will also be easy, it is certainly good to divide the groups of invoices through analytical accounts based on currencies, but we do not want to overdo it with different series by client, branch, etc., which would have separate analytical accounts, otherwise we might have a problem with balances (the status of open invoices of the given group does not correspond to the balance of the its analytical account, if another analytical account was used in the payment by mistake, that should not happen as it monitors the program, but it sometimes does, especially with manual modifications).