Financial Management

Project purpose

ABC Ltd is faced with the option of conforming to technological advancements in the operation of their business, or risk being pushed out of business by emerging competitors. The organization deals in small tools, fixings like nails, screws, paints and similar DIY materials to individual clients and small home improvement and decorating businesses. Although the IT department has applied a considerable amount of technology in the financial management of the company’s accounts, the technology is soon becoming irrelevant, as other players are entering the market with up-to date technical know-hows. For instance, ABC Ltd has stipulated aten step procedure on how a customer’s credit information is managed. The system is party computerized and partly manual and was invented 10 years ago by the chairman’s son. It lacks the detailed system level controls considered as standard in most modern computerized accounting packages. The system is inferior and is undermining the company’ sales objectives in the face of their competitors who have employed state-of-the-art packages that provides for online transaction of the construction products. Furthermore, some of ABC’s new competitors are offering delivery services further posing a threat to the dwindling customer base of ABC Ltd.

In the wake of the above scenario, ABC’s management has decided to take a proactive approach, and fix the leak before the ship sinks. The management tasked the finance department to carry a research and come up with recommendations on how to rectify the situation. A report from the auditor’s recommended the introduction of an integrated finance and transaction package. Nevertheless, the auditors fell short of ideas because of their limited knowledge in IT, resulting to the management of ABC Ltd contracting my organization to prepare a report that would broaden their view of the information technology constraint. My report would analyze the ABC’s dilemma and put forward recommendations, and go further to offer a justification of the solutions presented. My report would employ Gantt and SWOT analysis frameworks in coming up with relevant recommendations.. the purpose of the project is  to analyze current technology that exists in the market (this is the technology that has been acquired by the various forces competing with ABC Ltd.), and make suitable recommendations that would lead to the adaptation of an improved technology. The port would report would also address the inferior technology of ABC Ltd. That is outdated and poses future threats in the company’s financial spheres.

 

Scope statement

My project was born out of ABC Ltd.’s request to explore the state at their IT department, and come up with relevant solutions. The paper would achieve this objective by first presenting the current state of the company’s IT system, and state what needs to be improved and why. The company’s board expect us to accomplish a study on their system based on four facts: external competition from rivals who have started offering on-line services for the last three months, their stock prices are outdated; thereby resulting to losses for the company, the company lacks up-to-date management accounts and an information management system that was proposed two years ago has not been implemented, and lastly their credit system is faulty leading.

My project would address the issue of outdated technology, and the corresponding negative impact created. If the company decides to adopt my recommendations, they would secure their market share which is gradually dwindling thanks to new entrants in the market who have adopted up-to-date technology in their dealings. My project would focus in digging into the weaknesses of the current credit system, and recommend steps that the company needs to take in order to come up with a relevant credit system, if possible, maybe ABC Ltd should consider acquiring a more superior technology. The credit management system that this paper proposes should be simple, fast and powerful that would integrate and automate all transactions. The present business world is IT managed, and automation is the way to go for all businesses that aspire to maintain relevance in the IT age. (Carlos, 2007)The new credit management software should have an enhanced customer experience that would enable the business respond to changing and specific business needs. The new system should be able to transmute the business processes with a performance enhancing components that encompass accounting, statutory, inventory and reporting processes (Jones, 2011).

 

The Gantt-chart framework

The gantt refers to a horizontal bar chart meant to be a production control tool and mostly employed in project management. It has a graphical representation of a schedule that aids in the planning, coordinating, and track specific changes in a project. The Gantt chart below represents the Gantt chart collection of activities for the activities that would aid the project in attaining its objectives. The research and report writing were carried out in the following months: April, June, July, November and December of the year 2007, 2008, and 2009. It was crucial for the research to extend over the 3 years in order to collect data. A research producing outdated data or data that was momentarily and did not reflect the true situation lead to inefficient solutions.
key: Task F- preliminary research E- draft writing  D- interviews   C- training    B-evaluation    A-final report

 

Work structure

The horizontal axis represent the total time span of my project, represented in years, and a vertical axis showing the tasks that i would undertake in fulfilling the objective of the project. The major activities that were involved in the project include: carrying out preliminary research. I plan to collect data majorly from primary sources like the ABC Ltd.’s IT department, the  IT experts in the rival camps (if I would be granted permission), and the executives in ABC limited. Other information would be sourced from the websites of the relevant organizations, including those of the rival organizations. In the course of conducting the research, I would be orienting myself toward report writing. the Gantt chart provides for a researcher to record simultaneous activities that are crucial for accomplishing the goals of the research. For instance, while i was carrying out preliminary studies, I was orienting myself toward the report writing, provided for in the training level. In the training stage, i also plan to collect past research work conducted in the field and borrow useful tips that would make my report more appealing. During the training, I would also take this opportunity to initiate various interviews in case the initial research does not gather sufficient data. This reveals the importance of primary data gathered from the informants (the IT experts) because what the staff from the IT department say represent the situation in the ground.  As soon as i am through with the preliminary investigation and the training, I would immediately get into the evaluation stage. Here, I plan to carry out a final evaluation of the draft report and any other additional data collected. The evaluation would usher in the writing of the final report that would be submitted to the chairman of ABC Ltd. the magnitude of the bars represents the amount of time for the particular task to be completed. (Maclean, 2003)The overlapping of the bar spans show that some tasks were carried out simultaneously. The vertical line extrapolated in the middle of the Gantt table shoe the time period the report was written.

Data gathered from the informants provided the basis of the research. Members of staffs from ABC Ltd.’s IT department were so cooperative. They offered information on the workings of their information system. Some of them confessed to losing patient with the system that recorded major delays. The staff lamented that the system lowered their potential, and made them involve in a lot of manual work. “the system makes me miss dinner with my family, because I have to burn time as I wait for it to respond” lamented Howard who is the assistant technician at ABC Ltd. At times, the sales system; (for credit transactions) that was invented ten years ago losses some information.

When any financial information is lost, some finances are lost indeed. The company’s auditors’ also made a representation in the research, by forwarding two informants to respond to the closed and open ended questionnaires. It is surprising to mention that the finance department (for the auditors) made an assertive move voluntarily, maybe because they could not tolerate the system anymore. One of the auditors forwarded declared that he would be more than grateful to our organization when we fix the system. It is sad to the company’s executives to note that a silent discord was brewing out of the frustration of some of the members of staff. They were frustrated over taking blame all the time for the system’s failures. According to the information in the case study, the system failed to track records for part—payments; by flagging the half-payments as fully paid. Some of the errors were noted long after so many water has passed under the bridge, leading to bad debts. At one point, the company had recorded so many bad debts, forcing the executives to summon a meeting to address the issue. After much deliberation, it was discovered that it is the system that result to the setbacks. The members present pointed their finger toward adaptation of new technology but the directors seemed reluctant. Their reluctance was because of the astonishing news of an outdated system; a system that had accrued the company millions of dollars. They had to stay off from making major investments to provide a chance for recovery. As expected, the company recovered the funds injected to set up the system that was designed by the chairman’s son. Even though it was a masterpiece, it lacked some critical components. For example, it was short of online connection that could allow online shopping and payment of products. One could only imagine the levels that the company would be soaring if the system resembled/ was superior to the system employed by the new entrants. One of the executives confessed that the company lacked enough resources at that particular period to invest in a higher technology. During the acquisition of the system, the former IT manager confessed to knowing about the entry into the market of their main rival 3 years prior to their launch. However, the executive further stated that they could not think that the new investors would think of such an advanced idea of the online transaction. Failure to work on the threat noted through intelligence, and downplaying their rivals made ABC Ltd. lose some profits.

Online transactions

ABC Ltd.’ S main rivals are wooing customers online, most probably that could explain the reduced customer base of ABC Ltd. The online transaction saves on time and appeals more to the customer. A motivated customer is the one who is made to appreciate new methods of doing things, one is guaranteed that such a customer would come back next time. A customer who is subjected to delays arising out of system failure is a frustrated one, and though he/she might come back, future transactions are not guaranteed. The management of the company were comfortable with the high revenues generated by the company. In fact, the company was amongst the best performing in the industry. However, taking a closer analysis would lead to the conclusion that it is the customer relation principles that are to thank more for the success of the company, and not the credit management system, as one would assume.

The online transaction made the cost of doing business cheaper, as well as saved a lot of time for both the customers and ABC’s members of staff. Thanks to the online shopping system, a customer could vies the products that have been availed on a company’s website, and make necessary orders. After completing online payments for the products purchased, they are delivered to the customer’s doorstep upon the product’s values fulfilling a set threshold. Of course logic should dictate that free deliveries cannot be made if the sales volume by a particular customer is low. The idea has really amazed the consumer class, to the point that some customers subscribed to ABC are threatening to switch their accounts to the rival company. For the 2 years that the report would take to materialize, the company has adopted measures that would help them solve the issue of a reduced customer base. The company intends to invest in advertisement campaigns for their products as a temporary measure, awaiting the recommendations of the report. The strategic action is expected to run for the two years and would be implemented in two phases. The board recommended a campaign that would enhance the psychological tastes of consumers, and through the consistent campaign, the company hopes that their products would dominate the choice of their customers in need of home decorating materials.

Duration of the research

The research needed a period of two years because of three. Firstly, the timing of the situation did not favor the financial arrangements of the organization; secondly, in order for the report to recommend long-term solutions, it had to be realistic by stretching over some time period, lest it capture passing situations. Lastly, some of the key figures in the company’s IT department were sent away on an exploration trip to Japan to inspect some of the greatest information management systems. By the time the organization contracted my organization, the senior employees were in Japan, exploring some of the construction material companies. The CEO had suggested that we should wait for the delegates dispatched to Japan, for they would provide some more preferences that the company could want to see in the new financial system. He further suggested that we should maintain a regular communication with the japan group to get updated with new findings, for it would be crucial in the writing of the final report. The board also explained that the two year period would allow the board to come up with strategies of raising capital for the system. The ongoing financial crisis in Europe discouraged major investments in the economy, as well as acquisition of loans from financial institutions. The rate of interest was high, as well as the risk of not yielding meaningful productivity with loans, for the economy was in recession. The company ruled out acquiring hard loans from banks and other .financial institutions, leave alone investing in a recession.

Time wastage

The management of ABC limited should improve their time management procedures in order for them to feel the effects of the new technology. The case scenario indicates that the management considers trust to be the most important amongst their employee. They do not handle time with the same awe, and this promoted time wastage practices. Since time is money, the money lost through time wastage would work to render the new system unproductive by disposing the gains realized through it.

Product structure

ABC Ltd.’s credit sales system has got a lot of errors, partly because it is an outdated technology, and because of the changing demands in the market. For instance, when a customer places more than one order per day, transposition errors are inevitable, when the dispatch note numbers are entered onto the sales invoice. My paper proposes an adoption of a system that is managed in the department that it serves as opposed to being maintained in another department, a system that complies all the information of a customer, including providing an online method for product shopping and payment. The system could also be designed in such a way that the cash book and the sales ledge from CB information are connected to ease information management (when information is recoded in the cash book, it reflects in the sales ledger). The online payment method would eliminate the problem of half payments, where customers make part payments awaiting the clearance on despatches marred by queries. The system also involves a manual banking of cheques and this is really time consuming. While describing the kind of a system to adopt, ABC Ltd.’ Executives should propose a system that accommodates part-payments. The current system forwards the remaining balance into a global “part paid invoices” when a part-payment transaction has been carried out. This would make the system easier to maintain, consequently ensure that all payments are made.

Project resources

(Jones, 2011)The make-or-buy decision is the process of making a strategic decision between buying an item externally, or producing it internally. The buy option is also called outsourcing. The changing demand of ABC Ltd.’s products in the market should trigger them to consider a buy-or-make decision. The firm has an IT system that results to troubles with the management of the customer’s financial records, and encourages the application of manual techniques, which are subject to natural calamities like fire outbreaks. The ABC Ltd. Executives should assume both an operational level and a strategic one in drafting both short-term and long-term goals respectively. Nevertheless, as per the nature of the case scenario, the strategic approach is highly recommended. Changes in technology are usually extensive plans and procedures that are normally long-term. The variables that the executives of ABC Ltd. Should consider are an analysis of the future, current environmental issues for instance government regulation, the market trends and more importantly competing forces in the market. They should outsource for activities stretching from administrative to logistic services. However, before approaching the administrative consultants, the management of ABC Ltd should tighten the nuts as far as the principle on time management is concerned. The case scenario presents the management as a bit relaxed in pushing the time management agenda to their employees. However, it is because of the personal initiative of the employees that ABC Ltd. Boasts of a wide customer base.

ABC Ltd. should undertake a make-or-buy decision if the costs of acquiring the new technology is within their means. If it is not, the plan should be integrated with other future plans, but should be marked as important, considering the nature of impact in case they failure on their part. The new technology should also incorporate the information system that was proposed two years ago to guarantee continuity. The two critical factors to consider are costs and the availability of a production capacity that is in line with the technology. If the proposed system turns out to be too complicated, another report would be commissioned to rectify the situation. Outsourcing a new system would guarantee the elimination of the constraints associated with the current information system.

Project risk analysis and mitigation

The current system jeopardizes the financial stability of the company because it is limiting customer growth. In fact, the company has already started recording reduction in their customer base. The old method of securing the customer base through superior customer care relations is long gone, and organizations are finding that they have to employ o lot of current techniques in maintaining and growing sales. The current system also poses a threat to the company’s profits which are minimized in some instances. Going with the information in the case study, it seems like the credit management system was not designed to handle many credit transactions, in spite of the company carrying out credit term transactions on many occasions. The management should apply the SWOT (Strengths, Weaknesses, Opportunity, and Threats) in addressing the problem (Lawrence, 2013). They have strength when it comes to the number of clients, however, this could be short lived if they do not mitigate their current situation. The inferior information system is their main weakness point and the growth in their customer base could be the new opportunity to tap if they adopt the recommendations of this report. Many organizations spend so much in diagnosing the weakness in their organization. ABC Ltd. Is lucky to be aware of the main thing to alter if they want to enjoy future success, the report offers a framework for intervention.

 

Reference list

Carlos, C. (2007). Financial management. Cape town: Juta.

Jones, P. (2011). Strategy mapping for learning organizations : building agility into your balanced scorecard. Farnham: Gower Pub.

Lawrence, W. (2013). Physician practice management : essential operational and financial knowledge. Burlington: Jones & Bartlett Learning,.

Maclean, R. (2003). Financial management in health care organizations. Clinton Park: Delmar Learning,.

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Riaño, D., Workshop Knowledge for Management Health Care Processes, K4HelP, & Conference on Artificial Intelligence in Medicine Europe, AIME. (2009). Knowledge management for health care procedures: ECAI 2008 Workshop, K4HelP 2008, Patras, Greece, July 21, 2008 : revised selected papers. Berlin [etc.: SpringerLink.

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