Many readers of my blog know I am on a bit of a rant about all-in-one software… I promise that today I will only spout an itsy-bitsy rant. (And it will not be until way down near the end)! Manufacturing companies comes in all shapes and sizes.
Type 1 – Full In-House Manufacturers
The first are those ones who control all aspects of their processes internally. They buy raw materials, and they produce finished goods. There is a labour component and a manufacturing overhead component. They need a production scheduling software that manages labour and raw materials. They need a production scheduler and planner. The most complex production and accounting challenges emerge from these companies.
Type 2 – Production is Partially Outsourced
The next grouping are those who outsource part of the production to an outsourced manufacturing supplier/partner. They essentially assemble the finished goods. They are less labour intensive than the first type. They would likely not need a complex production scheduler component as part of their software requirements.
Type 3 – All Production is Outsourced
The 3rd group are those that outsource pretty much all the work to a partner and buy back the finished goods. Think Canadian and USA manufacturers who outsource production to a Chinese company/Partner.
A Few Examples
Imagine a company making organic food from scratch. They process raw materials into finished goods. There is a production team in-house. There is an internal labour component built into the finished product. There are labour variances and material variances. What is a variance? It is the difference between what you expect something will cost to make a finished good and what it actually costs you. You will start with a recipe of exact amounts of each ingredient, plus the labour cost, plus an applied manufacturing overhead cost. When you start a production run of a batch of product you expect to get an exact amount of finished product from a recipe of raw materials and labour. The reality is that it will not always go the way you plan. Your production team was either more efficient or less efficient. If more efficient, you will have a positive variance. This means it cost you less to make the product than you planned for. If you are inefficient it could be for a number of reasons. Raw material costs may have been higher than planned. You may have used more quantities than planned. The same goes for the labour component.
Choosing the Right Software
When you pick software for your business you want to pick one with the right features for you. For simpler manufacturing operations – ones that do not need complex production scheduling – Unleashed Inventory software is a great choice! It allows for many features you need without the extra complexity. You can track batches (critically important for food manufacturers). You can track serial numbers – vital for computer sales, as an example. Unleashed (great name, eh?) will allow for recipe creation (technically called your Bill of Materials) as well. What is does not have is extensive production scheduling for labour and raw materials. For that you will need MRPEasy. It is an amazing software that offers in-depth production scheduling for a full-service, in-house manufacturer. Both these awesome mid-tier cloud-based software programs sync beautifully to Xero or Quickbooks Online.
Now, for my small rant. The people that designed these awesome, extremely focused software programs for manufacturers knew their limits. They did not keep going and add elaborate accounting modules. Why not? Because accounting for them – like for you – is not their area of expertise. They smartly created a link to software that does accounting better than they ever could. Together you get the best of both. If you need help choosing which software is best for you, message me on LinkedIn. Thanks for reading…
I have written – more than once – on the attraction people have for all-in-one software.
It makes no sense. Yet it is pervasive. So, yet again, let me take another stab at this.
Look at your personal life. You have online banking. You do not send emails from your online banking, do you? Do you want to?
You go to Facebook, jump to Twitter, then LinkedIn (oh, whoops that is business). Each has separate log-ins.
Each software has a unique function. You need to do a personal budget. Facebook has a module for that. Just kidding.
Would you trust it if it did? I am not referring to security. Plain excellence. You would likely do a budget in Google sheets or Excel, right?
Three Industry Examples
Here are some business examples from 3 separate industries:
Real Estate Industry – core brokerage software could be Broker Wolf, or, more recently, Loft47. Neither has an accounting package. Broker Wolf has a sync to Quickbooks Desktop. Loft47 syncs seamlessly to Xero.
Home Health Care Industry – two main scheduling software packages are – ClearCare and Alayacare. Neither has an accounting package. They do a fabulous job at scheduling, tracking patients, and billings. They do not even have a payroll module.
Technology Industry – two main software packages dominate about 90% of the global market. Autotask and Connect Wise. Neither offer an accounting package.
When an industry-centric software does offer an accounting module they tend to suck. Really suck. How bad do they suck? Really bad. No bank feeds, horrible reports, not up-to-date with tax reporting to name a few things.
Conversely, when a great accounting package starts to add modules for manufacturing, health care, and so on, it will suck too.
The accounting software has a bigger problem. Think of the sheer, stunning number of industries they would have to add as modules! Why not just let really smart software developers have access to your software through open APIs (techy abbreviation for Application Program Interface)?
Then, boom, you get the best of both worlds!
Here is a hilarious advert for all-in-one business software just to really drive my point home, for the, uh, 3rd time…
I have discovered an addiction people have to a concept…
The concept is all-in-one software.
First, what is all-in-one software?
It is a software suite (usually cloud-based now) that, well, simply, does it all. Basic accounting module, inventory, manufacturing, Customer Relationship Management (CRM), accounts receivable, accounts payable, and more.
Why the heck would you NOT want everything in one place?
We have clients with upwards of 8 separate pieces of software. Each with a separate login.
What? Wait a second…I can hear you say. Are you trying to convince me that 8 separate logins creates more automation than one single sign-on?
I do not believe it, you say.
I will show you how with an example with one area – accounts payable automation.
Follow the Flow
You have a business with 12 locations.
A supplier emails a bill to your document hub software. No human touch.
Software pulls out the amount, the tax, the supplier name, and even the account code.
(**NOTE** here you will likely have an experienced accounting technician checking that everything is coded to the correct account. She will make any coding changes as needed.)
Next, the software publishes it to the accounting software automatically. It attached the bill. No human touch.
Another piece of software looks into your accounting software to route the bill just emailed to the correct department head for approval.
The department head gets an email from the software with bill attached. This person approves the bill with one click.
The software takes that approval and attaches an audit report into the accounting software moving it to “bills to be paid”, along with a copy of the bill and the audit report.
Note that so far this has been one mouse click by a human.
The accounting manager goes into the bill payment software. It sees that the software has auto fetched all the “bills to be paid”, along with the copies of the bills and the approvals (audit reports).
The accounting manager approves the bills for e-signature. (One or two mouse clicks).
The CFO gets notification via email to approve a bill for payment. She clicks “approve” in email.
This audit trail of approvals and e-signatures is recorded in the software.
The software then pays the supplier into their bank account.
Lastly, it records the payment into the accounting software.
Summary of What Just Happened
Okay, what just happened?
The software took care of multiple functions where in the past data entry clerks would have done it. (And done it often very poorly).
The human steps were:
Accounting clerk checked that the document extraction software coded the bill to the correct account
The department head approves the bill for payment (one mouse click)
The Controller and owner each e-signed the payment (two mouse clicks)
The software did this:
Extracted the details on supplier bill
Posted to accounting software
Routed bill via email to department head for approval
Posted approved bill as “ready to pay”
Attached documents including audit report at each stage
Posted the bill payment to the accounting software.
How many logins were there?
The accounting technician logged into the document software
The accounting manager logged into the bill payment software to approve payments
No all-in-one software can do all of the above. Some steps, yes. Not all.
Why Does This Work So Well?
Specialization. When you go to a doctor he will always refer you to a specialist depending on what he discovers, right?
Your doctor will not send you to a nose and throat specialist if you have a sore foot.
Each doctor becomes highly focused on her speciality.
It is the same with software. We use a software called ApprovalMax to route bills to department heads for approval.
The accounting software does not do what ApprovalMax can do. The accounting software acts like a traffic cop receiving requests from the specialized software. It is the hub.
You would not trust a doctor who “does everything”. Nor should you trust a software that claims to do it all.