Do Information Technology Investments Show a Return for Small Businesses?

By Bruce E. Lane, CPA

Information technology has made incredible improvements in many areas, but, either due to lack of adoption or plain ignorance, many industries have not improved at the same rate. High levels of adoption appear in the communications sector, including smart phones, e-mail, and social networking. Business solutions—accounting systems, inventory control, manufacturing—have not improved as much, and I would challenge that most businesses that required 15 days to close the month in 1985 still require 15 days to close the month now. Many business have invested heavily in new systems, but what has really changed? Yes, we have new ways of seeing reports, we have a nice new application desktop, we have shortcuts to our favorite Web sites, but has the tech investment made our business better? In most cases, the answer is “no.”

Three causes contribute to a lack of improvement to the cost of the investment:

• Aversion to change is a natural response, and we tend to use new systems as we did the old system.
• To truly take advantage of a new system, we need to change beliefs. Many users and managers, for instance, believe that cross checks have value.
• The benefits of a new system are not reinvested into new processes. We invest in new systems because we see that we can save time in routine areas. Even if this is the case, what do we do with the saved time? In most cases, the time is spent on social networking, music downloads, and so on.

Aversion to change needs to be addressed at the beginning of any IT project. Set the tone that "change will occur." The implementation team must understand, though, that this will not be easy. Current processes must be challenged and justified if we are to maintain them. Change for the sake of change is not the goal, but many processes are in place with no business purpose to support it. A new system is a great opportunity to document processes and their associated business purpose. This allows the implementation team to identify areas for improvement before the new technology is implemented.

Changing beliefs can be the most difficult phase of implementation, especially if upper management’s beliefs are not permitted to be challenged. Too often, accounting managers want to hold on to redundant systems under the misperception that these inefficient practices add value. Once, we replaced a client’s electronic billing system. The system had a parallel manual ledger of the same billing transactions. The client was adamant that the manual ledger must continue. When asked why, we were told that a monthly reconciliation of the two systems is performed. When asked which system typically required an adjustment, the answer was the manual system always required the adjustment and the automated system never did. Once we made our case on the costs of maintaining a system that added no value, the client agreed to eliminate the manual ledger. This may seem like an extreme example, but very often clients will not change, even when presented with overwhelming evidence that change must occur. The reason for this is that clients are emotionally invested in their processes, and change makes them face the fact that they have been inefficient. Presenting these facts appropriately, so management can save face and help put the new processes in place, is critical to the success of the project.

In most cases, staff members are comfortable with their routines. These routines—regardless of how inefficient they may be—serve some purpose to their daily routine and make them feel productive. Keeping this in mind, we must replace these processes or behaviors with something productive. We all know some staff browse the Internet, text, or update their Facebook page during downtime. These behaviors are not always counterproductive, but we certainly do not want to see the time associated with them expand. Many new systems implemented today provide additional reporting that was not easily produced in older systems. For instance, an accounts payable clerk may be able to dedicate more time to updating inventory reorder points, analyzing vendor performance for on-time deliveries, or reducing shipping charges. Use these features, and give employees with time afforded by efficiencies something productive to do.

Technology is not the value, but rather how we change processes and behaviors to bring value. Too often, the emphasis is placed on the technology, and we lose sight of the fact that the true value of the business is in its personnel and its processes.

Bruce E. Lane, CPA, is a director with Vertical Solutions in Export. He can be reached at blane@verticalsol.com.

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