Woman's hand holding a cupcake.

Consolidation Lessons from the Cupcake Business

June 22, 2016 Evan Webster  
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Keeping up with demand adding automation and workflow in financial consolidations.

It always fascinates me to hear how so many successful companies today started in someone’s basement or garage. Bill Gates, Steve Jobs and the Hewlett-Packard duo are world renowned examples. But even taking a simple cupcake business as an example, eventually its success will drive demand and the need for increased manufacturing efficiencies to meet it.

The finance and accounting world is much the same, notably with respect to spreadsheets. Virtually all of us start off using spreadsheets for financial processes because they’re intuitive, flexible and low-cost. As a company grows though, so too does its network of spreadsheets with the increased demand of their product or service. Like hand-making cupcakes in a basement no longer makes sense at a certain point, there are only so many efficiencies that can be built into the spreadsheet world.

The case for automated, centralized consolidations

What’s surprising is the number of successful companies still trying to manually churn out cupcakes when it comes to their financial consolidations. When the wrong color frosting ends up on the wrong batch, the reaction is often “let’s keep on churning.” There must be a better way.

I can create 100 cupcakes per day by hand but, if I invest in a piece of automation equipment, I can create 500 per day and save 50 worth in waste and resources. Sounds like a no brainer. So why don’t more companies choose to automate and add enterprise-grade scalability to their consolidation spreadsheets? 

Awareness is the main barrier to adoption

For starters, most companies simply don’t realize there is a better way to tackle consolidations without having to abandon their existing spreadsheets in favor of a full-blown ERP or corporate performance management (CPM) solution.

The repetition of this very scenario across many companies has led some software vendors to create solutions that manage, control and validate the monthly spreadsheet cycle. Accountants and controllers practically salivate at the thought of having tedious number crunching and aggregation work automated for them. They would be well served to learn from the cupcake business where this is just the natural progression of operating a growth business.

The cost issue – upfront investments and change management

For those that are aware of solutions, there is always the issue of costs with traditional enterprise solutions. Almost all involve upfront investments, setup costs and process changes; in a nutshell, steep short term costs in the hopes of larger benefits in the long term. But at the same time, what is the cost of continuing to hand make cupcakes in a basement for a company in which demand far surpasses supply?

When put this way, both sides of the cost issue should become quite obvious.

The cost issue – long term, recurring and secondary costs

It may be less obvious in the world of finance and accounting, partly because it’s a cost center while selling cupcakes is a profit center. Furthermore, the real cost of not automating the consolidations process can be seen mostly in secondary, intangible or difficult to quantify costs including:

  • increased working hours;
  • error prone data;
  • inaccurate statements;
  • lack of timely financial analysis;
  • employee morale, and more.

In other words, you end up paying either way with recurring costs that come with going with the status quo. Unfortunately, many companies only realize this – and decide to look for a solution – only when it becomes painfully obvious, and a cost/benefit analysis is no longer even needed. This need not be the case.

The world of technology has come so far and change is almost always positive. See it as a sign of success to have to move out of your basement and embrace the idea of reflecting and possibly doing things in a better way. Now where’s that spatula…

The post Consolidation Lessons from the Cupcake Business appeared first on Blog | Vena Voice | Vena Solutions.

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