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  • CFO.com | US

Financial Software’s Winners and Losers

Controls-monitoring software is overly bothersome, the recession adds value to budgeting and receivables packages, and other observations from Forrester Research.

Just about every organization has an automated accounting system. Almost as popular are technologies that facilitate financial reporting, cash management, and tax planning. But there are lots of other types of financial management applications out there to evaluate. For a small or midsized company that doesn’t have account-reconciliation software, would getting some be a smart investment? How about internal controls monitoring applications or expense-reporting systems?

A new report from Forrester Research analyzes the state of 12 categories of financial applications. It focuses on their relative or potential levels of “success” (defined as adding value to businesses, not in terms of product sales), and on their movement along a technology-maturity spectrum. The study results are mostly qualitative, not quantitative; the methodology involved examining past research, interviewing experts, studying the functional and technical aspects of the solutions, and factoring in intelligence gained by responding to client inquiries.

Three categories were deemed to be in the “survival” phase of maturity (which follows chronologically after the phase of “creation” in labs and early pilot projects, and before the “growth” phase when product adoption starts to take off):

Internal controls monitoring. Technologies in this area so far have demonstrated a low level of success, or business value-add, and are on a trajectory for minimal success over their lifespan, according to Forrester. There is potential payback in error reductions, efficiency, and risk avoidance, but most installations have yet to prove what they will ultimately be worth. And while internal controls monitoring is important because of Sarbanes-Oxley and other compliance directives, “many of the solutions just raise red flags,” Paul Hamerman, vice president of enterprise applications for Forrester, tells CFO.com. “Somebody has to go through these flags to figure out what they mean. If the application doesn’t have the built-in intelligence to do that, it’s value is diminished.”

Accounts payable automation. This still-youthful set of technologies, also known as electronic invoice presentment and processing (EIPP), is on a path toward at least moderate success, in Forrester’s estimation. “In addition to the efficiency benefit of paper elimination, the automated matching of invoices with purchasing authorization and workflow for unmatched items has a big benefit to finance,” the report states. But adoption rates are fairly low so far, given corporate cultural reliance on paper-driven processes and, in some jurisdictions, tax requirements for retaining paper invoices.

XBRL. A variety of products have been hitting the market that enable companies to prepare data-tagged financial reports and let users of the reports perform automated analyses. But business value-add is the lowest among the 12 technologies and is expected to remain low. “Adoption is being driven by compliance mandates rather than by internal needs such as process automation or system integration,” Forrester says.

Five groups of applications were categorized as being in the “growth” phase:

Receivables and collections management. This category has leaped in success because of the recession. As companies fight off the debilitating effects, they’re keeping customers on shorter leashes for balances due. That is unlikely to change after the economy bounces back. In forecasting significant continued success for this technology, the report says, “Clear ROI on the collections cycle has enabled many companies to optimize [Days Sales Outstanding].” Meanwhile, the supply chain is evolving: vendor consolidation has eliminated some competitors, but enterprise resource planning system providers are said to be “giving specialists a better run for their money.”


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