• January 2009 FEATURE ARTICLES •
The Healthcare CFO
Squeezing More From IT
By Howard Latham
Cash is king, as the saying goes, so then cash
flow is the lifeblood of the kingdom. When I started in my
position as CFO almost eight years ago, one of my first critical
system assessments was directed at our accounting software.
The claims of my predecessors and others
implied that the accounting system needed immediate replacement
because it was too old, it lacked the analytical tools necessary
to be of much use for much longer, it couldn’t import or export
to spreadsheet programs, and its reporting scope was too
limited.
Just before my arrival, the company had spent
bundles on various Y2K upgrades so, being a non-profit agency,
immediate spending on a completely new accounting system was not
a viable option. Positioning for upgrades has been the key goal.
Squeezing more use out of what we have gives
us a much better idea of what we must add before deciding on new
IT priorities. IT changes must also provide positive impacts on
cash flow.
I started digging and discovered that our
current system could indeed import and export to and from a
variety of file formats, including spreadsheets. We first
replaced the annual 3-week-long exercise of manual budget data
entry with a 5-minute import routine from the budget spreadsheet
master. We did the same thing with the 8- to 12-hour monthly
data entry routines for revenues, costs and accounts receivables
from the billing system.
Our IT director turned out to be a genius
with any of the systems we have but was seldom asked for ways to
get data from one to the other. Just like waving a magic wand,
data now goes from one (really old) billing system via
import/analyze/export routines to the (very old) accounting
system in a fraction of the time but is now also reviewed before
being used. This also helped us to understand other accounting
system tools which resulted in "automating" about 95 percent of
monthly recurring entries.
Disproving Old Assumptions
Improving payroll processing was an easier
challenge. The integrated payroll module had been a bear to
update because of low software supplier quality; therefore, we
went with Automatic Data Processing Inc.’s (ADP) product and now
import our general ledger data from that.
In eight years, we have increased payroll size by 50 percent, increased billing activities, streamlined processes, improved accuracy and increased revenues all with the same number of accounting staff and reduced staff in other areas.
Being in Florida, where hurricanes are a
threat half of the year, this is also an advantage because if we
are experiencing power failures, we can have payroll run anytime
by making a phone call from anywhere. An added bonus in this
move was ADP’s Web-based time sheet functionality. This saves us
reams of paper each 2-week cycle, increases accuracy and saves
immeasurable amounts of staff time. We now process payroll every
two weeks for 240 people in less than half the time it took for
160 people eight years ago.
We also reduced the number of general ledger
expense accounts (and departmental combinations) from more than
700 to approximately 250. This was a factor in the previously
incorrect assumption that the system’s reporting capabilities
were poor. Accounting allocations and direct charge methods had
been implemented that were excessively detailed and created bad
results from bad processes. Correcting and condensing these
methods then allowed us to properly use the system’s reports and
structure.
The reports that had been established in the
system turned out to be more than sufficient, just not clearly
explained and therefore, not well understood by all the
management team. Report outputs are now also going straight to
PDF files.
Better reporting also raised accuracy that
resulted in increased revenues and reduced expenses in grants
management. In our business, "tight" grants management is a
must. Banking is much smoother and easier than it used to be. We
use Web-based banking daily to reconcile accounts and
transactions as we go, instead of waiting to find out what’s
wrong at the end of the month.
About a year ago, we acquired one of those
nifty little gadgets that let you scan and deposit checks right
from your desk to your bank account. We haven’t made many "bank
runs" since and we get an extra 2-hour window for deposits. All
interbank transfers are done via the Web. About 70 percent of
the dollar value of all incoming payments is now made
electronically. Sweep accounts minimize non-interest bearing
assets.
Cash Flow Specialists
Eight years ago, monthly contract invoicing
routines were late and usually inaccurate. We now have invoicing
routines for our monthly contracts that can be generated from on
a laptop (with e-mail, a fax or printer) from anywhere. This was
also done with power interruptions in mind — if we can send an
invoice, we can get paid.
We had specific staff whose sole
responsibility was data entry of service transactions from
handwritten notes. One of our long-term goals is to implement a
full electronic health record (EHR), but to reduce costs quickly
we re-crafted those routines into cost reductions by using a
combination of forms scanning and direct entry by clinical staff
into smaller databases from which we could then export
transactions into our main system for billing. We found other
uses for the scanning software as well, which reduced processing
costs in other areas.
In eight years, we have increased payroll
size by 50 percent, increased billing activities, streamlined
processes, improved accuracy and increased revenues all with the
same number of accounting staff and reduced staff in other
areas. We have not had audit management letter comments for
three years.
Being in Florida, where hurricanes are a threat half of the year, this is also an advantage because if we are experiencing power failures, we can have payroll run anytime by making a phone call from anywhere.
It is now time to look for a better
accounting system, as we feel the software supplier will soon
cease business operations. Our IT investments for these projects
and process improvements have been the ADP monthly fees, (minus
the software fees we previously paid), scanning and the cost of
a check deposit gadget. Our cash flow is visible daily and
managed very closely and any potential blockages in flow are
known immediately, making our accounting staff seem more like a
cardiac specialty team.
Future accounting systems enhancements and
acquisitions will include an integrated Web-based HR system
(with ADP and tied to payroll), a new financial system that can
handle some extra routines and meets International Financial
Report Standards; document management integration and an
automated clearing house for supplier payments.
We are also in the early stages of our EHR
implementation — but that’s another story.
Howard G. Latham is chief financial officer
for Directions for Mental Health Inc. in Clearwater, Fla. Contact
him at howard.latham@directionsmh.org or at
(727) 524 - 4464
ext. 1708.
