Evaluating Accounting Software Consultants

By Eyal Feiler

In Brief

A Successful Project Requires Wise Choices and Keen Oversight

Implementing accounting software requires a unique mix of skills in a number of fields. An implementation engagement could run the gamut from installing an off-the-shelf product to advising how new software can reshape business processes and objectives.

Since many organizations do not have the staff time or skills available to undertake a software implementation, using a consultant is often necessary. The ideal candidate will have a mastery of the software and implementation process, possess excellent consulting and management skills, and lay out the engagement with maximum clarity and versatility.

Specific decisions need to be made about how the engagement will be scheduled and billed. Careful attention must be paid to what is included in the proposal letter, project scope, project plan, and delivery timetable. Of course, a consultant's skill set is important, but so are a proven track record and the staff that will be involved in the day-to-day implementation. Not to be forgotten is the decision of what kind of consultant to hire--value-added reseller, software firm, boutique company, mid-size accounting firm, or Big Five firm.

How do you tell the difference between a car salesman and a software salesman? The car salesman knows he is lying. So goes a joke told by many software consultants. While humorous, the comment highlights the complexities of a software implementation engagement: Many of the professionals involved do not fully grasp the project's implications, leading to confusion, misunderstandings, or errors.

A unique mix of consulting skills is required to successfully advise organizations on implementing accounting software. While all consulting engagements call for multiple skill sets, accounting software implementations are particularly complex. An implementation engagement could include installing and configuring an accounting application, converting historical data, changing business processes, and properly training users to maximize their new accounting application. To add to the challenge, many companies cannot hire dedicated staff for an engagement. Instead, management must decide how to prioritize executive and staff time to complete a software implementation.

CPAs within an organization or working as outside advisors often have a voice in choosing a consultant and play a key role throughout the engagement. CPAs should be able to evaluate whether a potential consultant has the requisite skills to successfully implement a software application within a specific organizational environment.

The Proposal Letter

Once it is determined that there is a financial reporting issue or need requiring outside assistance, the first step is to invite consultants to define or "scope" the engagement and submit a written proposal. The invitation to propose may be initiated on an informal basis or as a result of a "request for proposal" process in which the company's needs are specified in considerable detail. The proposal document is a good place to start evaluating the consultants' skills, knowledge level, and expertise. A proposal should clearly outline the tasks required to complete the engagement, assign each task to a specific party, and set forth a timetable for completing the engagement. Lengthier or more complex projects are generally completed in phases; a timetable for each phase should be provided.

A proposal should also discuss the deliverables to be presented throughout the project, such as a written project plan, software deficiency logs, and monthly closing checklists, as well as accomplishments, such as converted historical data, configured accounts payable module, or trained project team users.

The scope of the engagement is often the most important part of a proposal. Is report writing included in the project? Are customization services provided? Is data conversion included? Is an interface to a payroll outsourcer provided? These services are frequently not included in an engagement letter. Services that are included should be clear and specific.

Fees. CFOs and controllers often can't resist turning to the page in the proposal where the implementation cost is noted. While fees are certainly a major factor, hourly billing rates or engagement costs must be compared carefully. What service is offered at the billing rate? Is the consultant just installing software on a server and set of workstations and dropping off the user manuals? Or is the consultant familiar with both industry-specific business processes and the selected software? In most cases, a solution is more than just a package. New business processes must be developed or existing processes modified. A quality consultant will help manage the project and coordinate with software resellers and network vendors. A decision maker that understands the differences in services will be able to differentiate between various vendors. Each consultant responding will attempt to distinguish itself, and careful attention should be given to the value and benefits of what is "thrown in."

Quoted fees may include other services, such as project guidance and management services, as well as postimplementation support. Anyone who has experienced, or more precisely, survived, a software implementation will extol the benefits of good project management. The proposing firm may even advise the hiring of an outside consultant to co-manage the project. Spending more money does not guarantee success, but in many cases "you really do get what you pay for."

Fixed Fee or Time and Materials?

A common project decision is whether to engage a consultant on a fixed fee or time and materials basis. With fixed fee jobs, the management team and the consultant agree to the cost of the engagement at the outset. In time and materials projects, on the other hand, the cost is determined by consultant billing hour. Fixed cost implies fixed project scope, an arrangement in which many managers take comfort. However, decision makers fail to consider that fixed scope projects preclude adding value-added services during the engagement.

For example, during a review of a client's business processes, a consultant might identify a need for the system to handle credit card payments for order processing. If the project is fixed fee, the consultant will push business requirements outside the scope of the agreement to the next project phase. A time and materials project affords client management the possibility of adding features to the engagement during the business process review and before the software is actually implemented.

A key factor in making the decision is management's view of the engagement. If the goal is to just implement a system, a fixed fee engagement might be preferable. However, if the implementation is intended to revamp a business and identify additional opportunities to improve operations, a time and materials project should be considered.

The key to successfully managing time and materials engagements is controlling fees. Control can be maintained by dedicating staff and staff time to the engagement and tightly managing the project scope, focusing on the business requirements. Management should be able to make decisions as project issues arise. Finally, the consultant should be asked for periodic actual vs. budgeted reporting to confirm that project goals are on schedule.

Project Methodology and Project Plan

An established implementation methodology helps ensure that a project consists of the detailed steps necessary to complete the engagement as well as the controls to confirm that deliverables measure up to agreed-upon standards. Any methodology should include a project plan, which assists in planning each task required to deliver a ready-to-use software application by the go live date (See Exhibit 1 for definition of terms). The plan can also help the project managers determine a feasible go live date. Finally, a plan identifies and controls scope creep (i.e., when additional tasks or areas are added to the project).

A project methodology is administrative in nature and keeps the project focused. Without a plan, these unseen tasks can lead to project extensions and cost overruns. If too cumbersome, however, a plan can distract the project team and prevent consultants from completing "pure" project tasks.

During the proposal stage, samples of the engagement plan as well as other deliverables should be carefully reviewed. Documents should be useful and easy to understand, free of meaningless jargon. What each project step includes and does not include should be specified. For example, if a project plan lists "Initiate system architecture review" as a major task, its subtasks should specify "Install NT and Office 2000 on workstations" and "Confirm PCs are connected to application server." An understanding of the work that will be performed as well as the scope of the project is crucial.

It is unreasonable to expect a consultant to complete a significant amount of work before an engagement letter is signed. However, once the project begins, the consultant should tailor the approach to the project. Customizing an approach is more than using a word processor's find and replace feature to update the names on documents. Are there multiple sites involved? Do several managers need to receive updates on project progress? Is the consultant reviewing the CFO staff's work or holding its hand throughout the project? The consultant should ask these questions at the beginning of the engagement and modify the project plan if necessary.

A consultant should be able to adapt to the subtle requirements of the engagement and the company's working schedule (within reason). If the staff is on flextime, the consultant shouldn't plan to be on-site Friday afternoons. A consultant should be able to send a written report once a week instead of biweekly, if preferred. Without being dictatorial, the consultant should take ownership of the project and make its unique needs known.

Software and Required Skill Sets

If a software package has already been selected, consultants under consideration should have experience with it. Certain questions should be asked, such as: Has the consultant worked on the application before? Is the consultant proposing to implement a recently released version of the package? How long has the release been available? Has the consultant successfully implemented this release before? Due diligence is required for both the consultant and the software. A consultant should provide references for prior work.

A software vendor should provide the names of other enterprises using the same product with a similar configuration. Some software vendors treat customers like auto manufacturers that use consumers to find all the glitches in a car's first model year. It is better to know up front if technical support will need to be added to the frequently called number list.

Proven Consultant, Proven Software

During the course of an engagement, an experienced consultant often highlights other, deeper, issues that may have been attributed to the inefficiencies of the old accounting software. When an accounting application is installed with multiple modules addressing the needs of several departments, these departments have no choice but to work much more closely with one another. Often, the results are unpleasant. Accounting, finance, inventory control, and human resources departments may have to modify their workflow and change long-standing policies in order to accommodate the new system.

It is not unusual to see existing tensions explode into battles because of changes or perceived changes in the interdepartmental power structure and the resulting sense of fear felt by many users. Instead of finding new creative ways to take advantage of the system, staff become concerned about departmental change and layoffs. A seasoned outside consultant can help alleviate divisive tension by identifying these issues and, more importantly, persuading management to address them. A consultant with a long track record of applying knowledge toward increased productivity and value in an organization may be well worth the added cost.

It is important to establish a rapport with the consultants, especially because they may become involved in issues beyond the software. All the consultants involved should be asked to provide a copy of their bios or resumes and invited to a face-to-face meeting with each team member. Consultants will be working with staff for an extended period of up to several months. They should be effective listeners as well as initiators for most of the project's activities. Are they leaders as well as team players?

Another aspect of a strong consultant is presence and negotiating skill. Can the consultant work with a CFO to change business processes or train others to take advantage of new system capabilities? Can the consultant sell an idea to a room full of senior managers? A consultant must have the standing to challenge management when required and work closely with it to resolve issues and problems as they arise. A consultant that is also a CPA is especially valuable. The CPA consultant will understand the broader financial implications of the project and be able to communicate with financial management.

Implementation Consulting Sources

Accounting implementation consultants can be categorized into several groups: value-added resellers (VAR), software firms, mid-size accounting firms, boutiques, and the Big Five (See Exhibit 2).

VARs are firms that purchase software from the vendor and resell it bundled with implementation services. They usually offer a wide range of services and can perform intricate customizations. VARs typically work with one or two software applications and offer the lowest billing rates. If the company has selected an application and is comfortable that the package will meet its needs, a VAR is a potential solution provider. A VAR will not be useful in choosing the software application. Returning to the automobile analogy, if you ask a Ford dealer to recommend a full-size car, he won't suggest a Toyota Camry.

Decision makers often rely on word of mouth when choosing a consultant. Additional methods for finding a suitable resource include checking the websites of software vendors and looking for the vendor's partners or network of VARs. A VAR may specialize in more than one software application or belong to a network. A vendor may designate top VARs as "gold" or "A+," indicating that the VAR provides superior services or has a successful implementation rate. Then again, the VAR may just have a superior sales force. References must be checked in order to validate the consultant's assertions.

While experience and cost play a large role in selecting consultants, a decision maker must feel comfortable with the consultants that will have ultimate responsibility for the engagement. A commitment to postimplementation support and the ability to respond quickly to issues that arise will differentiate potential consultants. Again, verifying references will separate good candidates from bad.

Like VARs, mid-size accounting firms offer a typical set of consulting services and focus on a handful of applications. They sometimes sell software directly and also may offer project management services. An enterprise working with a mid-size firm or VAR will likely interact with the principals of the consulting practice in addition to the on-site consultants. Smaller accounting firms may not have in-house expertise but may have experience with firms that offer implementation and systems consulting services.

Boutiques have deep expertise in one industry or business process. For instance, a boutique might specialize exclusively in financial software implementations in specific industries or benefits tracking software. A boutique is helpful for organizations in industries with unique requirements, such as telecommunications or health care.

Big Five firms usually do not sell the software but have strategic partnerships with software vendors and VARs in different markets and industries. Besides traditional Fortune 1,000 clients, they focus on the higher end of the middle market but offer services to many rapidly growing organizations, including many dot-coms. Big Five firms have methodologies for complex multiyear multicontinent engagements. The large firms typically have dedicated practices that tailor to middle-market clients. Companies working with a Big Five firm may have contact with the firm's partners but will work more closely with its managers and experienced consultants. Larger consulting firms often have several consulting service lines that can offer integrated services. They may have dedicated technical professionals that have worked closely with application consultants on prior engagements. A larger consulting organization is more likely to serve as a single point of contact for all implementation services.

Understand Your Needs

Which skills are most important in a consultant? A strong software technician who knows the intricacies of an application with a firm technical background working with networking and databases? Or an individual with deep application expertise, project management skills, and experience at providing guidance on redesigning business processes? It depends upon the scope of the engagement. Smaller engagements may only require someone to install and configure a standard package and train the existing support technician. Large-scale engagements will require a consultant experienced in project management and business process design, as well as application specialization.

Regardless of size, most companies initially underestimate the complexity and resources required to complete an application implementation. Dollars, manpower, senior management commitment, and willingness to change are just a few of the requirements. Selecting the right advisor is the first step in ensuring a successful and cost-effective engagement. *

Eyal Feiler, CPA, is a consultant with PricewaterhouseCoopers LLP specializing in helping middle-market enterprises select and implement accounting and information systems. He is a member of the NYSSCPA's Emerging Technologies Committee and can be contacted at eyal.feiler@us.pwcglobal.com.

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