www.netsuite.com
THE
BUYER’S
GUIDE
TO FINANCIAL
MANAGEMENT SOFTWARE
The 10 Essentials of an Effective
Financials Solution
Page 2© NetSuite Inc. 2016
THE BUYER’S GUIDE
TO FINANCIAL
MANAGEMENT SOFTWARE
The 10 Essentials of an Effective Financials Solution
Introduction
Managing your company’s financials is the
backbone of your business and is vital to the
long-term health and viability of your company.
Yet attention to your bottom line often takes
a back seat during times of increasing
revenues and growth. To continue applying
the necessary financial rigor to support rapid
growth, the accounting department needs
the right tools to most efficiently do their job.
Without tools to handle the business and
regulatory requirements of a high-growth
company, accounting staff wastes time on
manual and duplicative work while closing
the books every month and you may end up
hiring extra temporary staff to perform
this work.
When spreadsheets and workarounds
become the norm for your finance department,
you know it’s time to upgrade your financial
management solution. Your financial close
times and audit preparations take too many
weeks to complete and sales that occur on
the last day of the quarter often do not get
entered into the system, thereby not getting
recognized as revenue on time. Critical
financial processes such as handling financial
consolidation, multi-state and country taxation,
and reporting based on multiple currencies
become a huge productivity drag on your
entire department and are plagued with errors.
Add on regulatory requirements such as
revenue recognition and constantly changing
accounting standards across countries
you’re operating in, and the pressures get
compounded. If any of these scenarios
sound familiar, it’s time to take a hard look at
how your existing business systems may be
hurting your bottom line.
This white paper outlines the 10 essentials of
a complete financial management system and
how the right solution can help you keep up
with the rapidly changing business world.
Grab a seat and enjoy.
Read Time: 30 minutes
TABLE OF CONTENTS
4
Streamlined
Order-to-Cash
Process
Page 16
2
Support for
Governance, Risk
and Compliance
(GRC)
Page 11
1
Core Financial
Management
Capabilities
Page 4
3
Multi-Company
and Global
Business
Management
Page 13
5
Integrated
Inventory
Management,
Fulfillment and
Shipping
Page 18
7
Project Accounting
and Contracts
Management
Page 21
6
Complete
Procure-to-Pay
Process
Page 20
8
Actionable
Business
Intelligence
Page 23
9
Adaptability
to Specific
Business Models
Page 24
10
Low Total Cost
of Ownership
and Superior
Ease of Use
Page 27
Conclusion
Page 30
Page 4© NetSuite Inc. 2016
Accounting Functionality
Every financial management system needs
to have basic accounting functions such
as general ledger, accounts receivable,
accounts payable, tax, cash and payment
management with an audit trail built in.
Beyond basic accounting functionality, your
financial management system must be
extensible to accommodate future growth
while simultaneously allowing you to keep an
eye on the operating expenses impacting the
bottom line.
Modern General Ledger
The general ledger is the core of every
accounting system and must be dynamic,
flexible, scalable and unconstrained by rigid
code-block structures. It must empower
real-time financial intelligence and embed
operational efficiencies, such as faster
reconciliations and closing of the books.
The GL should be transformative—not a static,
one-size-fits-all but a dynamic asset that
enables companies to tailor GL processes
to meet their unique business needs and
changing conditions, a dynamic, ‘disruption-
Chapter 1
CORE FINANCIAL
MANAGEMENT CAPABILITIES
ready general ledger’ that gives finance
professionals new flexibility and visibility,
richer reporting functionality, enhanced audit
trails and new support for multi-national
financial management.
The general ledger must also be capable of
handling an unlimited number of accounts
and sub-ledgers to power your company’s
innovation and growth.
It must allow you to define your own
accounting periods and let you close
individual components separately to match
the needs of any new subsidiaries and
international divisions that you may introduce.
The globalization of business continues to be
driven by several factors, including the growing
presence of multi-national corporations, global
capital markets, foreign direct investment
and economic interdependence. At the
same time, investors, bankers, shareholders,
customers and other financial statements
users exist all over the world, specifically
in countries that have their own unique
sets of accounting standards. Whenever
the same business event requires different
Page 5© NetSuite Inc. 2016
accounting treatment because of industry-
specific rules, country-specific rules or both,
different reporting outcomes will occur. To
report financial results within compliance
based on multiple accounting standards
concurrently, accounting departments should
have Multi-Book capability to comply with any
standard. Multi-Book functionality eliminates
data entry replication and reduces the need
for error-prone manual adjustments from
processes due to managing multiple books
per accounting standard.
The ability to build automated processes
with workflows such as approvals, thresholds,
and more checks into the process in order
to balance your growing organization would
be ideal in a financial management system.
As an example, automating the journal entry
approval workflow to verify criteria like
threshold amount and approval limits before
the journal is posted and approvals workflow
functionality streamlining approval and review
process of transactions such as purchase
orders, vendor bills, sales orders, expense
reports, journal entry transactions will reduce
errors, provide better control and insight into
the process. Finally, a modern GL system
must have predefined charts of accounts
for a wide range of industries to help with
quicker deployment.
"NetSuite gave us the agility to adapt to change and the scalability
that we needed. It’s been critical to entering new markets quickly,
efficiently and effectively."
— Avant
Without these essential accounting
capabilities, finance teams could easily
be burdened with tasks that are manual,
error-prone and information that is out of
date and difficult to get. A modern financial
management system can address these
challenges by streamlining and automating
mission-critical processes, reducing
operational costs and delivering unlimited
capacity for growth.
Cash Flow Management
One of the keys to managing your financial
health is your ability to monitor your cash
flow carefully on a regular basis. When your
company is growing rapidly, you may face
unexpected costs for permits, licenses, raw
materials, equipment, extended contract work,
and vendor agreements.
These investments often require large upfront
payments and smart financial planning to
keep cash flow positive. If there isn’t enough
cash on hand to meet any one of these
obligations, it could result in repercussions for
your company, threaten its growth and even
expose it to legal liabilities.
To avoid these potential pitfalls, it is vital that
your cash inflows keep pace with your cash
outflows. Your financial management system
should allow you to perform cash flow analysis
Page 6© NetSuite Inc. 2016
to examine the components of your business
that affect cash flow, such as accounts
receivable, inventory, accounts payable and
credit terms, to name a few. By performing
cash flow analysis on these individual
components, you’ll be able to more easily
identify cash flow problems and opportunities
for improvement.
Real-time visibility is important in making timely
informed decisions. When information can
be accessed instantly from almost anywhere,
without wasting resources on data extraction
and tying data from different sources together,
employees can make more accurate, faster
decisions. By having greater real-time
visibility into your cash flows through detailed
dashboards and key performance indicators
(KPIs), you’ll be alerted to discrepancies and
“red flag” situations a lot more rapidly.
Recurring Revenue and
Revenue Recognition Management
Running a business with a predictable
revenue stream is difficult when you’re in
nascent stages of growth because there
are so many uncertainties related to new
customer acquisition. But once you establish
a stable customer base, you need to focus
efforts on extracting ongoing revenues
from these customers and increasing your
customers’ value to power your next stage of
growth. Close coordination between finance,
sales, and service is necessary to identify
recurring revenue streams, and define the
periods of chargeability for services rendered
and when revenue can be recognized on
your company’s balance sheets. Your financial
management system needs to be able to
handle and report on these varieties of
recurring revenue scenarios.
When identifying potential recurring revenue
streams, it is imperative to know your
company’s “cost to serve”. Your financial
management system should be able to
accurately model different chargeability
scenarios and get a handle on direct and
indirect customer costs—acquisition costs,
service costs and product delivery costs,
as well as which customer segments drive
margin and which do not. The old adage
that 20% of your customers generate 80%
of your profits is particularly important with
recurring revenue, because the remaining
80% of break-even or marginally lossmaking
customers may be costing you year after year
unless you smooth out profitability across your
customer base.
It is also important to have good revenue
recognition processes in place—a revenue
recognition solution that helps you comply
"NetSuite gives us meaningful data rather than what we had before
which was really guesswork. Now we work less hard but make
more money."
— P3 Medical
Page 7© NetSuite Inc. 2016
with accounting standards and report financial
results in a timely manner. Whether your
business conducts sales transactions that
consist of products or services, or both, and,
whether these transactions occur at a single
point in time or across different milestones,
your revenue recognition solution should help
you schedule, calculate and present revenue
on your financial statements accurately. It
should support fair values based on Vendor-
Specific Objective Evidence (VSOE), best
Estimate of Selling Price (ESP), Third Party
Evidence (TPE), and other fair value methods
your company uses.
DocuSign’s newfound flexibility has opened
the floodgates to efficiency. In addition to
slashing its revenue recognition process from
nine days to several hours using NetSuite
Financials, the digital transaction management
company’s finance team has reduced its
monthly financial close from 15 days to 10.
Your financial management system should also
help you comply with FASB, SEC and AICPA
regulations regarding revenue recognition.
Your financial system should feature built-in
support for key revenue recognition rules
such as ASC 606, SOP 81-1, SAB 101, EITF
00-21, EITF 08-01 and EITF 09-03 to enable
you to recognize revenue for multi-element
sales, and to recognize them at different rates.
The new revenue recognition standard,
ASC 606 represents the most sweeping
change to revenue accounting rules in
years. Your financial management system
should be able to handle billing and revenue
recognition that supports compliance with
revenue recognition rules such as revenue
arrangements with multiple elements (ASC
605-25) and percentage-of-completion
accounting (ASC 605-35), while providing a
foundation to prepare for adopting ASC 606
in the future.
These new revenue recognition rules bring
with them a whole set of complicated
calculations that your finance staff must
perform. A financial management system that
incorporates support for flexible revenue
recognition will ensure that your staff reduces
their dependence on multiple spreadsheets
and error-prone manual processes. Such
a system also helps ensure that you gain
clear visibility and continual monitoring for all
aspects of the revenue recognition process,
and that you are positioned to manage and
recognize different types of revenue such as
time-based, percentage of completion and
event-based, among others.
Support for these new revenue recognition
rules is especially important because new
regulations can allow companies to recognize
revenue much sooner. Before the advent of
these new regulations, if you were unable to
determine the fair value of any of the items
that were part of a sale, you had to defer
the revenue for those items until they were
delivered sometime in the future. However,
these new regulations allow you to apply an
Estimated Selling Price (ESP) for items not yet
delivered and recognize their revenue a lot
earlier. These regulations thus have a material
impact on your revenues and consequently
are very important to your bottom line.
Page 8© NetSuite Inc. 2016
Billing Management
Your billing infrastructure needs to be able to
handle multiple pricing schemes for different
customers. You may be managing different
payment terms, whether monthly, quarterly
or annually, and may be billing customers
in advance, in arrears, or prorating them
on partial months. Using spreadsheets can
quickly get out of hand, and different or one-
off billing arrangements can throw things off
and result in billing errors.
You need a financial management system
with a billing solution that equips businesses
to offer transaction, subscription, usage-based
billing, and any hybrid model while managing
that revenue accurately and in accordance
with the latest revenue recognition standards.
An agile and sophisticated solution that offers
unparalleled control and flexibility over billing
and revenue management processes can
be a competitive differentiator by allowing
your customers to change their billing
plans and payment options, thus improving
customer satisfaction. You need an agile and
sophisticated solution that offers unparalleled
control and flexibility over billing and revenue
management processes—a centralized and
future-proof framework that supports the
universe of monetization models and allows
you to be nimble, innovate rapidly and profit in
today’s marketplace.
Financial Planning and Reporting
To accurately plan and forecast future costs for
various initiatives, your financial management
system should give you deep visibility into the
current state of your company’s operations so
that you can identify problem areas.
Financial planning involves pulling together
data from several departments within your
company to gain a comprehensive view of
your operations, and then modeling several
“what-if” scenarios to assess the impact of
different cost structures. Without a financial
management system that allows you to easily
perform these functions, your finance team
will end up wasting time consolidating data
as well as projecting results from all of those
different scenarios on a regular interval
from various systems instead of performing
strategic analysis.
When it comes to financial planning, your
budgeting and forecasting functionalities
rank at the top of the list, especially because
of their focal role in controlling costs. Your
financial management system needs to
enable multi-dimensional data collection
and automate the consolidation of plans so
that you can clearly look into the costs for
personnel, sales, capital equipment and more.
Automation also improves accuracy and
reduces errors by eliminating broken links
and formulas.
A key best practice within financial planning
is to compare actual data with plan data. With
spreadsheet-based planning, integrating
actual data into budgets, forecasts or what-if
scenarios is cumbersome, and subsequent
variance analysis is nearly impossible.
Page 9© NetSuite Inc. 2016
Financial management systems with best-in-
class budgeting and forecasting capabilities
seamlessly integrate year-to-date actuals with
future expectations and allow you to perform
variance analyses to compare actual results
against budgets.
Financial reporting for compliance purposes
is extremely important in today’s highly
regulated environment. Regulations such as
Sarbanes-Oxley, Dodd-Frank and numerous
GAAP standards must be adhered to strictly.
In this kind of environment, it is very important
that your monthly reports, performance
reporting and financial close be built with the
appropriate internal controls into the process
in an automated fashion leading to reliable
and accurate results. This is a major reason
why it takes so long for many companies
to close out every quarter. A financial
management system that can withstand
regulatory scrutiny, accelerate financial close
and produce key financial reports on demand
offers a tremendous competitive advantage.
A robust system should also allow your
finance staff to dynamically drill through from
data entry sheets or budget reports directly
into underlying transactions and the evidence
supporting those transactions, providing deep
and unparalleled insight into your business.
It would also allow your team to monitor
any financial measures according to their
role—whether controller, finance manager or
analyst—through customizable dashboards
and KPIs.
Fixed Asset Management
As your company grows, you may acquire
a variety of fixed assets such as equipment,
land and buildings. You need to be able to
maintain and control the complete asset
lifecycle of all your fixed assets, from creation
to depreciation, revaluation and retirement,
so that you can get a better view of how
this affects your bottom line. Accordingly, a
financial management system must have
detailed asset management functionality and
support multiple depreciation calculation
types. It needs to handle both depreciating
and non-depreciating assets, maintenance
schedules and insurance. It must also tightly
weave your asset acquisition process into
your accounting processes to help ensure
that no equipment slips through the cracks.
There are several methods of depreciation
and each method has a different set of
advantages and disadvantages. Your financial
management system should allow you to use
any of the standard depreciation methods
including straight line, fixed declining, sum of
years’ digits, asset usage and even your own
user-defined depreciation methods.
Strong management of your fixed assets can
help you benefit from tax deductions related
to the depreciation of your assets. These
deductions only serve to help shore up
your cash flows so that you can reinvest the
proceeds into your business and grow further.
Page 10© NetSuite Inc. 2016
TubeMogul
“Our move to NetSuite is really
about scaling the business. We
have much more visibility and
accuracy compared to what we
were doing before with the
real-time accounting capabilities
in NetSuite.”
Page 11© NetSuite Inc. 2016
Today’s business climate is more complex
and more challenging than ever before. Even
small businesses, nonprofits, and government
agencies face issues that historically affected
only the large multi-national corporations.
Contemporary risks and requirements are
numerous, ever changing and fast to impact
any organization. New regulations, business
decisions, changing workforces and evolving
technologies are just a few of the many
examples of increasing changes.
Organizations have traditionally struggled
with effectively managing risk across the
enterprise. Increasing growth and margin
expectations as well as changing regulations
and technology innovations have further
complicated and significantly changed the
risk landscape. The traditional approach
of managing risk in silos across different
functions—internal audit, internal controls,
and compliance—and reacting to risks as
they occur puts many companies at a
competitive disadvantage.
Chapter 2
SUPPORT FOR GOVERNANCE,
RISK AND COMPLIANCE
Today’s environment demands a more
comprehensive, agile, and innovative approach
to Governance, Risk and Compliance (GRC).
Industry-specific compliance, regulations like
the Sarbanes-Oxley Act, and globalization and
outsourcing, have led organizations to expect
more from the GRC capabilities of their ERP/
financial management system.
The key is to understand what your GRC
program is trying to achieve and how a solution
can support you in meeting the program
objectives. A cloud-based GRC solution brings
a number of advantages. One of the many
advantages of utilizing a cloud-based solution
is the reduction of many IT risk mitigation
activities typically required for on-premise
software, such as running regular backups
and establishing data recovery methods, as
an example. A cloud-based solution should
provide its customers with annual reports on
their Statement on Controls, commonly known
as SOC reports (SOC1 under SSAE No. 16 and
ISAE 34021 and SOC2), for the IT General
Controls (ITGC) associated with their customer-
facing systems environments.
Page 12© NetSuite Inc. 2016
In addition to compliance with all key
accounting standards, the financial
management system should have built
internal controls and auditability into the
system. The system should provide tools
for security and controls management with
permissions and management approvals all
built into the core. In addition, the system
must provide flexible workflows that ensures
approval, workflow, and routing processes
are defined and orchestrated centrally while
preserving a complete audit trail of approvals
and changes. When examining technical
criteria for a GRC solution, upgrade paths and
scalability should be a key consideration.
GRC experts point out that typically no single
solution will meet 100% of an organization’s
GRC needs. Many GRC platforms support a
wide range of use cases, and some vendors
are stronger in certain areas than in others.
NetSuite provides a host of options for
customers to develop, maintain, and monitor
their portion of the control framework from
within the NetSuite system. Third party
applications are also available that provide
additional tools for control environment
management. A cloud-based environment
doesn’t remove the responsibility for good
controls, instead it shares the burden to
allow firms to focus on their portion of the
control framework.
Page 13© NetSuite Inc. 2016
At some point in time, your company may
grow across multiple geographies, with
multiple subsidiaries and international
locations. At that stage, you will have to deal
with reporting currency, calculating taxation
and meeting different legal and compliance
requirements for each division. You’ll also
need to consolidate financial and business
information and gain visibility at the regional
and global level.
Handling local taxes poses a challenge for
many companies. Your financial management
system should readily handle local taxes
across subsidiaries through an integrated
tax engine that allows for multiple tax
schedules for everything from GST to VAT, to
consumption tax or general sales tax. The
system should also handle country-specific
accounting standards and deliver multi-
currency management in all financial areas
including accounts receivable, accounts
payable, payroll, billing, invoicing, order
management, forecasting, quota management
and commissions.
Chapter 3
MULTI-COMPANY AND
GLOBAL BUSINESS
MANAGEMENT
With global currency exchange rates
changing on a daily basis, your financial
management system needs to be able to
automatically update exchange rates. It needs
to enable your finance department to maintain
the current local currency conversion rate as
well as the historical rates used at the time an
order was placed or a commission was paid.
While multi-faceted currency conversion
capabilities are an important part of running
a global business, consolidation of financials
and real-time roll-up is critical to achieving
a more rapid financial close, as well as to
gaining timely visibility into operations. Your
financial management system needs to
deliver multi-currency consolidation across
accounts receivable, accounts payable,
payroll, inventory, billing, invoicing and order
fulfillment—from local in-country operations to
the regional office to global headquarters.
The need for intercompany eliminations is
important if you have multiple subsidiaries.
Many companies do not have a clear
Page 14© NetSuite Inc. 2016
intercompany elimination policy and find
themselves struggling with currency,
accounting and tax implications. You need
to properly revalue foreign currency
intercompany assets and liabilities and set
currency conversion rates before performing
the intercompany eliminations. To do this,
your financial management system needs to
have local entity and inter-entity reporting,
automated management of revenue
recognition, tight internal controls, easy-
to-follow audit trails and multi-national
compliance capabilities.
Page 15© NetSuite Inc. 2016
Treknology Bikes 3
“As we grow into new countries,
all the local requirements in
terms of currency, GST and
accounting reports have to be
met. With NetSuite OneWorld,
we actually have instantaneous
access to all of the information at
our subsidiaries in real-time.”
Page 16© NetSuite Inc. 2016
One key to maintaining control over your
bottom line is ensuring that your core
business processes can scale efficiently
as you continue growing. Without doing so,
you can compromise your ability to increase
profits as your revenues grow. As businesses
grow rapidly, the order-to-cash process is one
of the first areas to expose these growing
pains and an inefficient, manual order-to-cash
process can be expensive and cause major
revenue recognition and customer
service issues.
When sales reps convert a lead into a
customer and place an order, that information
typically needs to be transferred to other
databases to process the order management
fulfillment, update the accounting information,
populate customer records and calculate and
pay commissions. Without efficient order-to-
cash systems, you may not be able to capture
this information in your accounting systems
in time for the close of the quarter, resulting
in inaccurate reporting, decreased revenue
results and unhappy sales reps because of
delayed commission pay-outs. Furthermore,
hours of employee time are wasted retyping
Chapter 4
STREAMLINED
ORDER-TO-CASH
PROCESS
data from one system to another, and costs
only rise as more staff and contractors must
be hired and paid overtime to handle order
processing demands.
Once an order has been placed into the order
management system, you need to ensure that
customers provide payment in time and that
your Days Sales Outstanding (DSO) number
doesn’t get to a point where it results in order
cancellations or customer dissatisfaction.
A system that integrates front- and back-
office processes and includes built-in order
management allows your business to reduce
unnecessary paperwork and costs by enabling
personnel to turn closed opportunities into
orders with just a few clicks of the mouse. It
also provides your finance and executive
team with far more accurate and timely insight
in to business performance.
By streamlining and accelerating the order-
to-cash process your business can benefit
by eliminating manual bottlenecks and
errors and establishing a smooth flow from
sales quote to approved order, successful
order to fulfillment, and timely invoicing to
Page 17© NetSuite Inc. 2016
payment, the way TubeMogul did. TubeMogul,
an enterprise software company for digital
branding, used NetSuite to streamline its
billing and order-to-cash cycle, with sales
orders automatically triggering ad campaign
creation and complex revenue accounting
and billing processes have been simplified.
TubeMogul’s multi-currency transactions, 12
in total, move six times faster, and global
financial consolidation time has been cut
in half.
Another company, Outback Toys, sped up its
order-to-cash process significantly while saving
$100,000 annually and growing the business
by 33% with NetSuite. Nucleus Research found
that customers using NetSuite’s automated
quote-to-cash functionality were typically able
to reduce quote-to-cash time by 50%.
It is vital to ensure that your order-to-cash
process is streamlined, efficient and secure
and incorporates the controls necessary to
increase revenue and margins, reduce risk,
and improve working capital.
Page 18© NetSuite Inc. 2016
A major component of cost control is
ensuring that inventories are replenished
at the appropriate times. When you have
more inventories on hand than required, it
increases your cost of goods sold (COGS),
which in turn hits the profit margins of your
company’s various product lines. To manage
each product’s margins with a clear view
into inventory costs, turn rates and inventory
profitability, a good financial management
system will incorporate strong inventory
management controls and provide you with
complete real-time visibility into demand,
supply, costs and fulfillment trends.
Key capabilities of inventory management
include bin and lot management, landed cost,
demand based replenishment, customer and
volume pricing, and multi-location inventory.
Keeping track of performance around these
areas will enable your company to gain
control over inventory replenishment and
ensure that you have enough product on
hand to fill anticipated orders, while keeping
excess stock and related costs to a minimum.
Chapter 5
INTEGRATED INVENTORY
MANAGEMENT, FULFILLMENT
AND SHIPPING
In this manner, you can slash inventory costs
by tightening control of stock levels while
increasing operational efficiencies. Big Agnes,
a manufacturer of tents, sleeping bags and
sleeping pads for backpacking, camping and
outdoor adventure has doubled productivity in
order and inventory management, fulfillment
and accounting; freed up staff resources and
avoided hiring additional people; gained real-
time visibility into the business; and improved
customer support quality. Big Agnes is rolling
out NetSuite ERP globally as it expands into
20 countries.
Strong inventory management capabilities
also enable you to track the specific cost for
each lot as products are bought and sold. As
a result, your company gains pricing flexibility
by being able to assign different prices
to different types of customers and sales
channels, such as wholesale, retail or online
sales. This strategy helps you increase your
customer footprint and extract maximum
value, while at the same time controlling your
costs. Furthermore, integration with your back-
office accounting system allows your finance
Page 19© NetSuite Inc. 2016
staff to calculate demand plans leveraging
historical data and model how expected sales
and purchase orders affect future
inventory levels.
While having detailed inventory management
functionality certainly helps you maintain
stringent controls over your margins, it can
add even more value when integrated with
fulfillment and shipping. With integrated
inventory, order fulfillment management and
shipping, you can eliminate manual re-entry,
order processing errors, and the costs
of reconciling shipping information. In fact,
according to independent analyst firm
Nucleus Research, companies typically save
as much as 35% on annual shipping costs
with a single, integrated back-office system for
inventory and fulfillment. You can also reduce
fulfillment errors by electronically routing
orders to suppliers for drop shipping and
improve your returns process with integration
between order management and return
merchandise authorization.
Page 20© NetSuite Inc. 2016
All businesses need to purchase services
and equipment. Without strict purchasing
and approval processes, you run the risk of
employees engaging in maverick spending
that can hurt your bottom line and potentially
open your wallets to the opportunity for fraud.
A financial management system that handles
the complete procure-to-pay process gives
you visibility into all areas of spending to
quickly identify and rectify any out-of-control
costs and find opportunities for savings. You
need a system that has complete purchasing
workflows, policies, approvals, and audit
trails to provide complete control and
ensure accountability.
Another benefit of a streamlined procure-
to-pay process is time savings and the
elimination of errors through automation
of the entire process through purchasing,
receiving and account payables. When your
finance employees can track the status of
purchase requisitions and orders through
self-service functionality that eliminates paper-
based forms and associated errors, it frees
your staff to focus on activities that help grow
the business while trimming the bottom line.
Chapter 6
COMPLETE
PROCURE-TO-PAY
PROCESS
A further benefit of automation is that new
purchase orders are automatically generated
once re-order points have been reached for
goods or raw material. Instead of having to
pull staff off projects to look up previously-
completed purchase orders and order
quantities, and generate another purchase
order, purchase orders can be automatically
triggered by your financial management system.
Once purchase orders have been generated,
vendors that provide goods or services to
your company need to get paid. Your finance
staff will need to confirm with the receivables
department whether the services or goods
were delivered as promised and only then
authorize accounts payable to release
payment to the vendor. All these activities
consume valuable cycles that your finance
staff could spend on other critical financial
processes and operations. Integrating
receivables with accounts payable ensures
that payment can be promptly delivered
to vendors.
Page 21© NetSuite Inc. 2016
For companies with professional services
organizations and services businesses,
project-based accounting and billing is
one of the most important and complex
areas for finance staff to tackle. Your staff
needs to be in constant contact with the
appropriate business units in your company
to ensure that project deliverables have
indeed been completed and that payment
can be recognized, collected and released
to the contractor. Coordination with accounts
payable for payment processing also needs
to be performed with detailed line items of
the various deliverables the contractor has
provided at each stage. The situation gets
more complicated when multiple contractors
are involved and can take up even more of
your finance staff’s valuable time.
When the project-to-bill process is integrated
with the finance and accounting systems,
stakeholders have complete real-time visibility
into the relevant aspects of the project
and no longer must spend time retrieving
this information from other groups. Best-in-
class financial management systems can
Chapter 7
PROJECT ACCOUNTING
AND CONTRACTS
MANAGEMENT
automatically calculate the appropriate
proportions of payments to be made at each
stage of the project to all parties involved.
This reduces the amount of time your finance
staff needs to work on complex payment
calculations so that they can focus on
activities such as analyzing project costs to
determine areas where money can be saved
for future projects. With its financials, services
business and sales operations all running
on NetSuite, W2O Group, an independent
network of complementary integrated
Marketing, PR, and Communications firms,
employees can drill down to transaction levels
in reports, executives can compare margins
across W2O’s eight subsidiaries, and project
management is more proactive and efficient
than ever. Streamlined project management
processes have freed staff to devote more
time to clients and project execution.
Robust project-based billing capabilities
serve as a threshold for complex contracts
management. Many companies suffer
revenue leakage and customer churn
because they rely on cumbersome, inefficient
Page 22© NetSuite Inc. 2016
and sluggish manual processes to manage
contracts. The many spreadsheets and
organizational handoffs involved introduce
costly errors and project delays, and rob
companies of the opportunity to capitalize
on the full potential of their contract-based
business. In many cases, companies leave
money on the table because they cannot
respond quickly enough to expiring
customer relationships.
One of the many issues around contracts
management is managing the multiple
transactions that typically occur with a
customer over the course of a year. Some of
these may be one-time transactions, while
others are annual contract renewals for
new users, product and module licenses, or
support and maintenance entitlements. A
good financial management system simplifies
this process for both you and your customer
by allowing the co-termination of multiple
transactions into a single contract with a
single renewal. At the same time, multi-
contract support provides for additional
flexibility when it may not be appropriate
to co-terminate all items under a single
contract. This streamlined approach helps
ensure maximum revenue during the renewal
process. This streamlined approach helps
ensure maximum revenue during the
renewal process.
Uplift and discounting are critical aspects
of the contract management process. As
you renew a customer, you may increase
pricing based on a pre-defined price book,
a standard across-the-board increase, or
you might increase pricing for only some of
your customers. Similarly, you may extend
discounts to select customers. It’s important
that you have the flexibility to implement and
customize uplifts and discounts across any
range of customers. However, managing
this process with spreadsheets introduces
the risk of error, lost revenue and customer
dissatisfaction. It’s essential that your financial
management system supply features that
enable uplifts to be managed across the
board or on a customer or contract basis,
while supporting granular discounting down
to the individual transaction level.
Page 23© NetSuite Inc. 2016
Getting an accurate view of your company’s
operations can often be a challenge. Data is
frequently fragmented and scattered across
several systems, and spreadsheets are
often out of date, error-prone and hard to
maintain. Traditional add-on analytics tools are
expensive to implement, and often lack the
key business intelligence components and
easy access required to make them pervasive.
What are the key business intelligence
components that you need for both a holistic
and detailed view of business operations?
For a broad overview of the performance of
your various divisions, you need role-based
dashboards that deliver personalized insights
tailored to each finance user’s need—be it
the controller, financial planning and analysis
managers, analysts or the CFO. These
dashboards need to extract data from a single,
centralized data repository so that the data is
real-time and “multiple versions of the truth”
are eliminated.
To analyze the performance of your company
correctly, you need quantitative metrics
and KPIs to evaluate the success or failure
of various activities within your company
departments. These KPIs enable you to
Chapter 8
ACTIONABLE BUSINESS
INTELLIGENCE
measure performance against benchmarks
and goals specific to lines of business, and
show key variances and period-on-period
trends. Once anomalies have been identified,
you should be able to drill down from this
summary level to greater detail, all the way to
the underlying transaction.
Beyond historical comparisons, the ideal
solution will give your finance staffers a
real-time view into KPIs and performance
metrics that span the full 360 degrees of
your operations—across sales, marketing,
service and fulfillment—to enable analysis
of financial impacts and cross-departmental
dynamics. Real-time data, accessible on
demand over the web, delivers actionable
insights that improve your ability to rapidly
address issues as they arise and capitalize on
opportunities. For instance, after a rapid, two
month implementation of NetSuite OneWorld,
alternative finance leader, Avant, can now
make data-driven decisions with real-time
access to KPIs. Streamlined financial reporting
saved the company an estimated $120,000
per year while the SuiteCloud Development
Platform lets the business tailor its workflows.
Page 24© NetSuite Inc. 2016
Your financial processes need to be robust,
auditable and as automated as possible to
maximize efficiency and provide detailed
visibility into your company operations. In
re-engineering your processes to meet these
goals, you need to be sure that your financial
management system is flexible. When your
company tries to enter new industry verticals
or expand to new sales channels or markets,
your financial management systems need
to be agile enough to adapt to these new
business models.
Your financial management system should
be able to address the needs of your unique
industry and business model. In industries
such as manufacturing, for example, you will
want to integrate your financials with your
suppliers’ manufacturing processes to reduce
lag between your customers’ demands
and your ability to plan your manufacturing
resources. When dealing with wholesale and
distribution companies, one way to improve
your cash flows is to shorten your Days Sales
Outstanding (DSO) with automated billing and
collections management.
Chapter 9
ADAPTABILITY TO
SPECIFIC BUSINESS MODELS
In the software sector, because of the
intangible nature of the assets involved, you
may need detailed amortization schedules
to depreciate these assets appropriately.
Revenue recognition requirements in the
software industry are complex with a need
to be able to easily assess and report on
historical fair market value in order to
establish and monitor based on Vendor
Specific Objective Evidence (VSOE). These
examples are only a sampling of the several
use cases you may encounter with
specific industries.
In addition to industry-specific capabilities, the
system should have built-in configurability,
ease of customization and flexible workflow
management to align with your unique
business processes. The workflow engine
must be able to rapidly edit the actions and
rules that impact a particular financial process
and be able to specify conditions for workflow
transitions to help with back-office automation.
In fact, workflow handling can be a major part
of process improvement—in the case of CB
Engineering, a specialized equipment provider
Page 25© NetSuite Inc. 2016
with complex technology, the time to compile
a 100-line custom-order proposal dropped
from three hours to thirty minutes with NetSuite.
The financial management system should also
contain graphical customization components
so that your staff can more easily and rapidly
create customizations and custom objects by
simply selecting various logic elements.
Page 26© NetSuite Inc. 2016
Glassdoor
“We sell multi-period engagements
and have to manage complicated
revenue recognition schedules.
Our business was growing and
NetSuite was able to render
the scalability needed without
incurring incremental spend for IT
related resources or headcount.”
Page 27© NetSuite Inc. 2016
A typical finance team has to contend
with several applications ranging from
accounting to financial planning, business
intelligence, inventory management and
front-office systems like order management,
CRM and ecommerce. Your IT department
has to spend valuable time to plan, deploy,
manage, integrate and maintain these multiple
applications. Capital-intensive hardware
infrastructure, servers and software licenses,
combined with expensive, time-consuming
upgrades, drive up your operating expenses
—and those costs can get out of control the
faster you grow. Furthermore, your finance
staff may be dispersed in multiple locations,
and may have to deal with a cumbersome
and slow VPN client to access your
financial systems.
Your core business management system
should not only perform essential finance
functions but also minimize overhead and
help manage costs. Selecting a cloud-based
financial management system is a sure-
fire way to reduce the TCO (Total Cost of
Ownership) of your solution.
Chapter 10
LOW TOTAL COST OF
OWNERSHIP AND
SUPERIOR EASE OF USE
It is only through a cloud-based financial
management solution that your staff can easily
access data in real-time without having to
rely on IT. This type of solution is managed
and operated by a provider and all of your
transactional and customer data is housed at
the provider’s data center together with the
hardware and software infrastructure to run it.
This kind of financial management system
is called multi-tenant, which means that the
provider is able to achieve economies of
scale by running the application for thousands
of customers across a shared infrastructure,
with cost efficiencies that are impossible
to achieve for an individual department to
realize on its own. The result is that a cloud-
based multi-tenant financials application
can be more than 50% cheaper to run than
its on-premise alternative. In an Institute
of Management Accountants (IMA) survey,
respondents cited lower TCO as the number
one benefit of moving to the cloud, followed
by anytime, anywhere access. A study by
Hurwitz and Associates seems to back
this assertion—Hurwitz found that the TCO
Page 28© NetSuite Inc. 2016
savings for a cloud versus an on-premise
business application ranges anywhere
from 35-55%.
For example, Roku, the creator of a
popular streaming platform for delivering
entertainment to the TV, reduced its monthly
financial close time by 500%, while not adding
personnel in finance, order management or IT.
An added benefit of a cloud-based financial
management system is that there is a single
version of the application. This means that
your finance department receives automated
upgrades and functionality (such as support
for the latest accounting and regulatory
changes) without requiring they undertake
a time consuming and painful patching
and upgrade process. It also means that
customizations you make to your system carry
over seamlessly during automatic upgrades,
and IT does not have to be burdened with
reimplementing customizations. The result
is a seamless upgrade process taken care
of by your vendor, such that your finance
department will always be running on the
latest software and hardware.
With a cloud-based financial management
system, your employees have anytime,
anywhere access to their systems through a
web browser. This enables your finance staff
to always have access to critical information
"We have tripled our productivity,
enhanced our risk management
and reduced our overall
ecommerce IT expenditures by
more than 20% by switching to
NetSuite."
— Magellan GPS
Figure 1: Benefits of Moving to the Cloud
5%
30 %
28 %
9%
7%
21 %
Speed of Deployment
Lower total cost of ownership
Access data anytime, anywhere
Easy upgrades
Lower cap ex
Streamlines business process
Page 29© NetSuite Inc. 2016
such as cash on hand, cash flows, liabilities,
debts, profit margins and more.
A state of the art, modern cloud based
financial management system should be
built on a robust cloud infrastructure that is
scalable with true multi-tenant architecture
giving you freedom from the legacy
processes of buying and setting up hardware,
installing software, building out security
models, setting up reporting engines and
integrations and defining user access and
authentication systems. The infrastructure
should include all of the above IT processes
as well as fully redundant hardware including
third party security and operations audits
(such as SSAE 16 Type II, SOC1, ISAE 3402
Type II, US-EU Safe Harbor framework, PCI
compliance, NIST 800-30 and ISO 27000
series of standards), housed in multiple
failover datacenters—all in a proven, turnkey,
guaranteed available service that grows and
scales as your business and compute needs
change. These performance, compliance
and audit levels are very expensive for
individual companies to gain and maintain.
They represent both comfort for the boards,
CFOs, CIOs who are looking for assurance,
compliance and reliability.
Page 30© NetSuite Inc. 2016
A financial management system is key to
running your operations profitably. You need to
have real-time insights into numerous financial
metrics such as profitability ratios, inventory
margins, liabilities, fixed assets and taxes. An
integrated financial management system
that brings together your order-to-cash and
procure-to-pay processes provides you with
great business visibility while allowing your
staff to perform their jobs much quicker. An
adaptable financial management system with
rich business planning, comprehensive system
integration and solid reporting capabilities that
operates in the cloud will position you for the
next stage of growth.
CONCLUSION
Page 31© NetSuite Inc. 2016
FMS Checklist
Core Financial Management
General Ledger, Accounts Receivable and Accounts Payable
Expense Management
Tax Management
Compliance Management
Asset Acquisition, Depreciation, Disposal and Revaluation
Depreciation Management
Asset Process Accounting Automation
Cash Flow Management
Revenue Recognition
Support for Key Revenue Recognition Rules
Revenue Recognition Management on Multi-Element Sales
Custom Revenue Recognition Templates
Financial Planning and Reporting
Budgeting and Forecasting
Modeling and Administration
Inventory Management
Inventory Cost Management
Product Margin Management
Inventory Control Capabilities
Monitor Inventory Turnover
Demand and Supply Planning
Purchasing and Vendor Management
Purchasing Audit Trails
Automatic PO Generation
Shipping and Fulfillment
Integration With Shipping Carriers
Self-Service Viewing of Shipping Status
Monitor Inventory Backorder
Allow Selection of Shipping Priority
Logistics Tracking
Support Multi-Step Fulfillment
Quote, Order and Billing Management
Electronic Routing for Drop Shipping
Automatic Quote-to-Order Transformation
Automatic Order-to-Invoice Transformation
Integrated Pricing and Discounting with Quote Management
Integrated Order Management and RMA
Automation of Different Payment Terms
Support For One-Time, Partial, Pro-Rated, or Recurring Billing
Monitor DSO and Aging
Governance, Risk and Compliance
Annual reports on Statement on Controls, SOC reports (SOC1
under SSAE No. 16 and ISAE 34021 , SOC2), for the IT General
Controls (ITGC)
Consolidation of commonly siloed GRC processes
Central storage of GRC data and documents
Role-based configurable dashboards/notifications
Common workflow and rules engine, Regulatory Intelligence
Change Management, Revision Management, Audit Management
Comprehensive Reporting, Closed loop process between GRC
and Legal
Business Intelligence
Real-Time Dashboards
Key Performance Indicators
Self-Service Reporting
Multi-Subsidiary Management
Support for Multiple Currencies and Tax Rates
Local Entity and Inter-Entity Reporting
Real-Time Exchange Rates
Project Accounting and Contracts Management
Resource Management
Contract Renewal Management
Proportional Payments
Project Costing
Custom Uplifts and Discounting
Multiple Transactions Management
[email protected]
877-638-7848
www.netsuite.com
#1 Cloud ERP
THE BUYER’S GUIDE TO FINANCIAL MANAGEMENT SOFTWARE
This white paper outlines the 10 essentials of a complete financial management system and how the right solution can help you keep up with the rapidly changing business world.