CFOs Put Tech Investment to Improve Efficiencies at Top of New Year’s Resolution List

Economic turmoil hasn’t put the brakes on some companies’ plans to upgrade key software platforms and internal control functions in an effort to enhance operations and better-position their organizations to ride out the tough times to come in 2009.

McBride Electric is a key example.  The company will deploy a new platform for Payroll and Human Resources that will integrate a centralized database, enhance the company’s multi-state payroll capabilities and enable significant process improvements for daily timekeeping.

“This will allow us to reduce resource expenditures on data accumulation while significantly enhancing our daily reporting of direct labor and unit productivity against specific project plans,” said McBride CFO Scott Palka.  “This is expected to lead to improvements in our project margins, as we will have real-time data for management action in the field.”

McBride, a specialized electrical and information transport contractor based in San Diego, Calif. with more than 600 employees in 12 cities nationwide,  will also focus on enhancing control and compliance functions, improving benchmarking, competitor analysis and key performance indicators. 

“The word last year was velocity in everything we do.  This year, the word is optimization,” said Palka.  “…Key to 2009 is our resolution to ensure that we are vigilant in managing the current economic environment to keep a strong balance sheet while continuously looking for opportunities to grow the business and invest in staff and infrastructure.”

Deploying systems and upgrading processes to help control costs and optimize resources is one way companies are positioning themselves to deal with the financial and operational challenges the ongoing economic downturn is expected to have in the New Year.

According to the 2008 fourth quarter “CFO Outlook Survey” by Financial Executives International (FEI) and Baruch College's Zicklin School of Business, CFOs anticipate that significant cutbacks will continue to be necessary across the board.  Survey respondents reported that 2008 cutbacks were led by hiring, capital spending, layoffs and marketing/advertising; those same areas are expected to remain at the front of the line for the chopping block in 2009.

In terms of top concerns cited by respondents, nearly 40 percent identified economic growth, a 9 percent decline over second quarter survey results.  Controlling expenses was identified as the top challenge by 34 percent, up from 30 percent in the Q2, and competition was cited by 21 percent, down from 25 percent in Q2.

For many CFOs, addressing these concerns means moving forward with technology investments, in spite of cost-cutting measures in other areas.

“I believe that one of the biggest potential risks in a tough economy is ‘under investment,’ so we want to keep sharply focused on long-term franchise value creation,” said McBride’s Palka.

Brian Zolkos, CFO of RedZone Robotics, Inc., concurs.  He notes that, although the Pittsburgh-based provider of high performance wastewater inspection technology and services has not yet felt the full impact of the economic downturn, it is preparing to weather an anticipated slowdown in the coming year. 

“Our end customers are municipalities and cities.  Their tax coffers will obviously be declining and budgets will be reduced.  We haven’t seen it yet, but we do anticipate a slowdown, so we are planning for that scenario so we can have the right resources and triggers in place,” said Zolkos.

For example, the company will finalize roll-out of an ERP system, the goal of which is to help its financial team be more proactive in identifying opportunities to improve products, engineering and sales.  The new system will also improve the effectiveness of the team’s business analytics.

“In terms of other new initiatives this year, it will be getting the [ERP system] more institutionalized so we are utilizing all of its capabilities and expending it into new product lines, mainly from the inventory, MRP and even work order planning [perspective],” said Zolkos.  “That will be important in 2009, utilizing those new capabilities and making it effective for the new product line we’re launching.”

Not-for-profit organizations are also focused on deploying systems that will streamline processes and allow them to continue providing services as contributions decline due to consumer and corporate belt-tightening.

The YWCA of Greater Pittsburgh, for example, is moving its HR and Payroll systems to a new platform, and looking for ways to improve and become more efficient, specifically as it relates to documentation and internal controls.  This is just one of the actions taken that will also help the organization prepare for the short- and long-term impact the downturn is expected to have on funding. 

“The endowment draw that we use to support general operating expenses will be significantly reduced in 2010 and 2011,” said Valerie Wheatley, CFO.  “Also, being a non-profit, the economic climate is causing more people to closely examine discretionary spending and consequently; they may opt to reduce or eliminate their [regular] contributions.  That is why we need to be more efficient and identify the return-on-investment via our programs and services for those who do contribute.”
 

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