Information Liquidity
Financial executives have long understood the meaning and importance of liquidity. The current emphasis on “free cash flow” is the latest testimony to this.
And anyone responsible for finance and accounting operations today is keenly aware of the prominent role information plays in managing, moving and measuring money.
(For practical corporate examples of this, see the links in the blog post on this site titled: “Newton’s New Laws.” )
Although financial managers are very familiar with the independent roles that “liquidity” and “information” play, the combined idea of information liquidity may actually seem quite foreign.
The concept of information liquidity is very simple: Use information systems and technology to move money faster within and between companies.
Viewed another way, it’s the idea of leveraging information flow within a company to accelerate cash flow for the Company … a matter of converting bits and bytes into more dollars and cents.
The benefit is clear-cut: better cash flow and improved financial productivity.
The execution, however, has been trickier because it requires the timely and efficient integration of the various sources and systems that supply the financial and accounting organization with the information it needs. And it requires building electronic bridges between the islands of information that exist between the various operational functions in a business that produce and share this information.
For example, the “typical” portfolio of systems found in accounting and finance today might include:
· An ERP-based system that hosts a set of core financial modules (e.g., General Ledger, Invoicing, A/P)
· EDI and EFT systems
· Budgeting systems
· Financial modeling and decision support systems
· Metrics (dashboards, scorecards and cockpits and any other assorted pet names for digital instrumentation)
· External systems (banking, IRS, vendor, customers, payroll, etc.)
· A plethora of subsystems and spreadsheets that seem to multiply like kudzu vines on a Southern highway
Within each of these groups of systems there is usually some degree of integration, but there are still miles to go before this is optimized. Users still complain about "rigid" applications that don't give them the flexibility they need to access or manipulate data in new or ad hoc ways to meet their special needs. The approach to overcoming this deficiency is either manual-intensive effort or some of kind of makeshift spreadsheet.
The problem is significantly compounded, though, when we consider the level of integration between these various systems. Users who rely on the efficient flow of data and information that flows across these numerous and disparate systems are forced to cut-and-paste their way to what they need. If put on a flow chart, these improvised work-around routines would look like a Rube Goldberg contraption. (For proof, have someone in your organization chart all the systems modules and interfaces used by the financial and accounting teams. Be careful: you may find yourself trying to put tomato sauce on what looks like an IT version of a plate of spaghetti.)
The patchwork of applications, and the lack of integration that results, lessens productivity and means lost opportunity. The delays in the flow of work, information and money, are the equivalent of stopping and paying a toll every time we go from one system, function and user to another. It stymies speed and the organization's demand for rapid information. It impedes efficient reporting and analysis. It chokes the ability to get things done.
The lack of financial systems integration is well understood by the users themselves. But the inefficiency tends to go unnoticed at the managerial and executive level because they are not directly involved with it, they can't see it for themselves. And with good reason: there are much more important priorities to worry about than something so mundane. But the compounded effect of this lack of information liquidity has a huge productivity-killing effect that is significant to a company's overall performance and productivity.
The bottom line is this: Tremendous strides have been made implementing standalone systems that automate accounting and financial transactions. But when it comes to integrating that information flow within and between these systems, there is a basic disconnect. The result is a non-integrated and under performing portfolio of financial systems and capabilities. Such performance would create a red flag for any financial manager if it involved assets and dollars. But because of its "techie" nature, financial systems integration flies under the radar fairly undetected.
Fixing the financial integration problem way sound like it is daunting and expensive. After all, we are talking about a highly diverse set of systems, functions, processes and users that are involved.
Actually, the solution is simpler and cheaper than one might think. For example, Ratchet-X software from RatchetSoft is a premier example of such a solution. By using the power and flexibility of XML coupled with proprietary software and know-how, Ratchet-X offers financial executives a productivity tool that will provide better integration within and between systems, as well as closer collaboration between departments. And the real value is that Ratchet-X is budget-friendly and can be implemented without changing the source code of your core systems.
For financial executives looking to improve the productivity of their systems assets and employees, Ratchet-X may is well worth a look. It is an innovative tool that can help unlock the "information liquidity" in a company. The asset, systems and productivity optimization that can be realized by using it are something no productivity-minded executive will want to overlook.
