New Back Office Tech Is Revolutionizing Corporate Finance

If there are numbers involved, the associated tasks in producing them can be automated. The crucial question is whether there are skilled people to interpret and effectively apply the received wisdom. JL

Vipal Monga reports in the Wall Street Journal:

New software systems for accounting, inventory tracking and supply-chain management are helping companies combine operations faster by automating some of the grunt work that previously was done manually. The number of full-time employees in corporate finance departments fell 1.6% last year and is expected to drop another 2.7% this year.
It took Horizon Pharma HZNP -0.41 % PLC just six weeks to integrate the financial information of newly acquired Crealta Holdings LLC into its software systems.
After its roughly $510 million deal for the specialty drugmaker closed in January, Horizon had to get the software to capture sales, inventory and other data from Crealta’s business so it could be added automatically to Horizon’s financial reports.
In the past, that process would have taken a year, said Paul Hoelscher, finance chief of Horizon, a Dublin-based biopharmaceutical company.
But that was before Horizon embraced new back-office technology, which also is helping it find ways to integrate the two companies’ production, logistics and sales information using cloud computing, which allows employees to access data and software over the internet.
Horizon is among a growing number of companies upgrading their technology to get a leg up as acquirers. As companies become more dependent on complex software systems to manage their businesses, smoothly combining different platforms is becoming a bigger factor in a merger’s success.
New software systems for accounting, inventory tracking and supply-chain management are helping companies combine operations faster by automating some of the grunt work that previously was done manually.
“If you can integrate faster, it becomes an advantage,” said John Hoffecker, a global vice chairman at consulting firm AlixPartners LLP.
Companies that integrate acquisitions more efficiently will be able to reap better returns from takeovers, which can in turn leave them more leeway to do future deals, Mr. Hoffecker said. “You can pay a higher price,” he said.
Rev Group Inc., which manufactures emergency vehicles including ambulances and fire engines, has 30 different back-office operating systems strewn across 16 plants in the U.S., said Chief Executive Officer Tim Sullivan.
Before embarking on an acquisition push this year, the closely held company, which is based in Milwaukee, decided to streamline its business, which generates $2 billion a year in revenue, by bringing those plants onto the same system for accounting, inventory control and supply-chain management.
A team of employees and outside consultants finished shifting the first plant to the new system, designed by business-software maker SAP SE. SAP -0.60 % Mr. Sullivan expects them to get the entire business on the same platform by 2017.
Although the work will cost as much as $25 million, the company expects to save $15 million a year after the project is completed, Mr. Sullivan said. The new software also will allow Rev Group to bring acquisitions on board much faster, and squeeze similar savings from those operations, which would accelerate the payoff from deals, he added.
The company announced in April that it would buy Kovatch Mobile Equipment Corp., which makes gear for emergency vehicles, fuel trucks and the military. Rev Group didn’t disclose terms of the deal.
Corporate finance functions such as bookkeeping increasingly are automated. As the software becomes more sophisticated, it allows companies to reduce head count by performing routine tasks electronically, said Tom Willman, an associate principal at consulting firm Hackett Group.
The number of full-time employees in corporate finance departments fell 1.6% last year and is expected to drop another 2.7% this year, according to a Hackett study of nearly 200 companies.
Last week, Wal-Mart Stores Inc. WMT -0.22 % said it planned to cut about 7,000 accounting and invoicing jobs at its U.S. stores, because centralizing or automating those jobs was more efficient.
The burden of processing and tracking $3.5 billion a year in sales, with each sale averaging just $2,000, was keeping technology distributor ScanSource Inc. SCSC -1.68 % from pursuing larger deals because of fears that adding more would tax aging software, said Charlie Mathis, the company’s finance chief. Last year the Greenville, S.C., company began upgrading to a single platform to manage invoices and track inventory and expenses, among other functions.
Although 80% complete, the switch already has helped the company close larger acquisitions because the new software system can track more transactions than the older systems, Mr. Mathis said. ScanSource bought KBZ Communications Inc. last September for $61.5 million in cash.
“We weren’t sure we could take transactions over the bridge before, because it might have collapsed,” said Mr. Mathis. “Our M&A strategy goes hand-in-hand with the technology.”