Financial Control – Bridging the Gap

by Amit Maheshwari on 2010-10-05

Accounting has traditionally been a separate “department” in most companies. But accounting is so integral a part of the logistics business that a constant intermingling of the accounting and operational staff seems to be the norm.

This key difference between logistics companies and others is not addressed by commonly available accounting software. Accounting departments use shrink-wrapped accounting packages that more or less ignore the actual operational specifics of the companies' business.
This problem has been worked upon in many sectors by using plug-ins or other means. But in logistics, more so in India, the relatively recent entry of IT has resulted in the gap between accounting and operations remaining a sad reality, or in some cases widening. Accounts

For example, In most sectors, raising an invoice signals the start of a transaction. In logistics firms, however, it usually signals the end of a transaction. Such a fundamental difference in the way the business processes are structured, and its reflection on the accounting practices, lowers the benefits of using traditional generic accounting software for logistics companies.
A holistic view of how each job is reflecting upon the profitability of the firm, and a corresponding view of how the specific customer to whom the job(s) relate to is affecting the profitability is of critical importance to logistics companies.

Logistics companies investing in IT in the hope of increasing their competitiveness, should focus on operational software, but should also include accounting in the overall scheme of things.

This can be done by staying focused on Financial Control while procuring your IT tools. Financial Control is a key area that helps companies, literally speaking, stay in business. The set of variables that indicate the financials of a company are looked upon as measures of the company's overall health by both those within the company and outside it.
Controlling expenses is a key part of controlling financials. Inability to control expenses, coupled with accounting software having an opaque view of operations, leads to revenue leakages that can stay off the management's radar for a long time.
Finance While controlling expenses, companies often make the mistake of relying upon subjective inputs from various personnel. While this is very much essential, it is equally important to have objective metrics that give you a consistent view of the effectiveness of the company's expenditure. It is very difficult to get this view if your accounting department uses tools that are incapable of keeping tabs of operational expenses.

Using operationally-aware accounting solutions, such as Logi-Sys, is akin to driving a state-of-the art car with a dashboard that has a separate dial giving a direct, real time display of its fuel efficiency. Just like this display would help you decide how your vehicle is performing in various terrain without going through the trouble of doing cumbersome calculations later, Logi-Sys gives a real-time view of how financially efficient (profitable) your firm is in each of the jobs it executes.
Mr. Amit Maheshwari is CEO and Co-Founder of Softlink Logistic Systems Pvt. Ltd., India’s leading IT company focused on creating solutions for logistics industry.  Softlink recently launched ‘Logi-Sys’ , aweb based ERP software for logistics servece providers including freight forwarders & NVOCC. Mr. Maheshwari has over two decades of cumulative logistics industry knowledge, experience and technological expertise. He can be contacted at amit@softlinkglobal.com.

 

See also: