What Problems Does Your Solution Create?

Feb 24, 2014

Have you ever heard this phrase before? Theoretically, it must be true. Every time we address a problem and believe we have come to a resolution, it often creates another “problem” or “challenge”. It must work this way, or we would be dealing with perfection.

I heard this from a client a few weeks ago, and it was really thought provoking. We spend endless hours every day solving problems, but are the solutions really the best and most efficient? Several weeks ago I had an opportunity to speak with a newly promoted CFO. She had been at the business for many years (10+) and her mentor, the former CFO, had recently retired and she was more than excited to take his place, but realized after just a few short weeks that maybe some of the way “things were being done” was not the most efficient and maybe not even correct.

For starters, her background was strictly financial and she felt she had very little capacity for managing product costing and pricing, as well as, management accounting aspects overall. As we began to talk, she asked how William Vaughan Company could help her understand this feature of her job and overall what services we could offer to her. I explained that I needed to gain a better understanding of what the business was doing now as far as operations, and spend some time doing a thorough review of the current cost model.

Unfortunately, as the conversation ensued, I discovered this business was like so many others. Over the years, as the system broke down, many aspects of the cost model had been hung together using extracted information from an underutilized system and manipulated into an overwhelming Excel spreadsheet that was not understood and most likely incorrect.

The problem? Initially someone did not understand the software, did not recognize the capabilities of the software, or just decided to start an excel spreadsheet.

The solution? Going around the system to create a tool that used to manage profitability of the Company. However, now it created a new problem. We have identified that the system is not capable of performing tasks and we made the decision to continue to work “outside” of the system.

The solution? Continued use of spreadsheets, under-utilization of the system, and increasing risk for errors and lack of data integrity.

I could go on, but it is a pattern I see more often than not. This blog is interesting, because it blames the problem on the business, not the individuals who first made the decision.

While I am certainly not advocating these tools, Mr. Sommer does a good job of describing “spreadsheet addicts”– almost worth reading just for a laugh.

You are likely in the majority, and over utilizing spreadsheets and underutilizing your system whether for traditional accounting transactions or product costing. Speaking from experience, if you step out of your comfort zone and make the change, you will see that the effort will bring with it great results.

Categories: Cost Accounting

Categories: Cost Accounting