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.
In Summary
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!
Hilarious Spoof
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.
Two weeks ago, I wrote about all the stunning, very cool software available for small businesses.
Amazingly, these software programs can be used for small businesses up to $100 million in sales volume.
However, some people have concerns going fully into the cloud. In this week’s blog I will address those concerns.
Firstly, My In-House Servers are Safer Than the Cloud
Really? How so? Are they physically safer? Can they be compromised by theft, hardware failure, heat, cold, dust? Are they sitting in a locked, air-conditioned room?
Are you fully satisfied that your backups are restorable?
I once thought I had a perfect backup system for data on our servers. I even tested our backups regularly to ensure they worked.
Then one day, I needed to restore some lost data. Oops. Gone. I have no idea to this day, why I could not restore the lost data. But it was gone. That was a wee bit of a shock.
Managing servers in-house can result in:
Lost data
Hardware failure
Software failure
Outside attacks to steal your data
What Do I Get When I Use a Cloud- Based Software?
Peace of mind is the main thing you get. We started our online accounting business in 1999. We used the latest servers (Dell) and the latest Windows Server software.
We placed our servers in a walk-in vault in our board room in downtown Victoria. We installed air conditioning units in the ceiling.
Still, the headaches and stress was great! Often Windows server software updates changed the way everything worked together.
I had many sleepless nights hacking the registry of Windows so all our clients and Team members could keep logged in.
We then moved to a data facility, and still, many sleepless nights when something broke, or there was a power outage at the server facility.
Moving 100% of our clients to the cloud a few years ago was a huge relief.
Everything was now managed by massive teams of experts for both hardware and software.
You could float on a cloud of peace.
So, is it secure?
Super secure.
As an example, check this out for details (how Xero manages your data):
If It Is So Secure in The Cloud, How Does Data Get Breached?
It is true, your data can be breached.
But first, know that your data is encrypted when it leaves your computer. Second, it is encrypted on the journey back to your computer.
At Xero, unless you let one of Xero’s support Team in by inviting them, they cannot access your data. When you need support, you have to invite them in. They have no way to access any other way!
So, how do breaches occur?
By:
Accessing your user email and password
Phishing attempts
How to Protect Against Data Breaches?
There are 5 things you can do to ensure your data is never breached:
Use secure passwords. Avoid your pet’s name with your date of birth, as an example;
Use multi-factor authentication. Usually this is a unique code generated by another piece of software on your phone. That, combined with a good password, is virtually impossible to hack;
You can check logs of when you last logged in. Look at these logs once in a while to ensure no one has gone in except you and your Team;
Have up-to-date reputable anti-virus software installed. (**NOTE** Windows 10 has been great having built-in anti-virus checks);
Beware of hacking or phishing emails. Do not get hoodwinked into thinking they come from your software provider just because they look official.
Finally, there are ways to dump your data from the cloud to your desktop computers. I will write more about that in another blog.
With Xero Expenses you start by adding your employee as a user in Xero. You assign them “expenses”.
In the set-up you only need to give them “coding” access to the accounts they will use most of the time.
I will explain.
For instance, a salesperson will have expenses in just a few areas. Things like meals, mileage, auto repairs, office supplies, and maybe advertising.
You can “assign” just those 5 accounts to this employee. They do not need to go hunting through your entire Chart of Accounts to figure out where to code the receipts.
Now, here is where it gets cool.
Your employee just has to download the Xero Expenses app from Google Play or Apple Store.
From there they snap a pic of a receipt.
The software will extract the details for them – date, amount, vendor, and GST.
The employee checks for accuracy. They then code it to one of those 5 assigned accounts.
They hit submit.
Boom. Done. That was easy.
Reason #2 – It is Super Easy for You the Manager/Owner
Your employees have submitted the expenses.
You are an “approver”.
All you need to do is look at the expenses. Keep in mind all the receipts get attached for ease of review.
You hit the “approve” button on each receipt.
The items go to “bills to pay”.
Reason #3 – Plooto Makes it Easy to Pay
So far what has happened is that your employee has snapped pics of receipts on their smartphone. They have coded them.
You have reviewed and approved.
Now, your bill-payer software, Plooto takes over.
Plooto takes a look automatically inside Xero to check for bills to be paid.
It pulls over all the “approved” receipts for that employee.
In Plooto you look and pay those amounts. You can even take a last-minute peak at the receipts attached to each expense. All inside Plooto (it pulls the receipt with the amount to be paid).
