21st Century Profitability

Selecting a new computer system

When we were first looking for a computer for our business, we were not sure if automating our business meant purchasing one computer for the office, one to replace each of our electronic cash registers (which were current technology at that time), or if we were looking to have a network of computers. There was more variety in the prices for computer systems than there are models of cars. Does buying the most expensive system mean you had bought the best system? And then there was a comment made by several computer gurus that said, "It is the software you buy that is more important than the hardware. Find out what it will do instead of how it will do it."

Why is it simpler today? Because there have been so many dealers who have experienced computers, both hardware and software, in these past decades that with input from them, and articles such as this, you can much more easily decide what you want the computer to do - whether you are purchasing your first or tenth computer.

There continues to be only one reason as to why you should computerize your business; increase profits. Whether that profitability comes from making more intelligent decisions based upon the data you receive, or by eliminating tasks that you have been using an outside source to create (such as financial statements) that allow you to decrease costs.

From the experiences of many current day dealers, you now know that your computer system can and must be more than a glorified electronic cash register. Today's systems can allow you to handle your accounts payable, accounts receivable, payroll, inventory, general ledger, point of sale, communication with vendors, data base management (to allow you to keep track of your customers) as well as allow you access to the Internet. This is where the point of software being most important occurs.

Compare your computer system providing you with the information to your driving a car across town. Most any car will get you there. But only if you know how to get there. The same is with a computer system. Most any hardware will get you there, it is the software that will determine if you get where you want to be.

Hardware components, such as a cash drawer, barcode scanner, or bank card reader, are usually "plug and play" components. This means that as you purchase that piece of equipment and plug it into the computer, the software program recognizes the presence of the new equipment and will function properly.

Looking at the software, there is also the question of accomplishing tasks that will allow you to more quickly utilize all of the features of your computer system. For example, will the inventory control module create the bar code bin labels for your shelves that are in your business, if you are scanning merchandise?

Will the software accept your scanning merchandise as it is received from a wholesaler or manufacturer? And when you are initially entering the inventory, will the system accommodate receiving your purchasing history reports that can be sent electronically from your suppliers? If you have additional avenues of business such as Internet, catalog or mail order, can they be included as a part of one seamless operation?

Many of the software vendors offer many, if not all, of these modules and features. Some of the software vendors also sell the hardware to work with their system. If they do not, their technical department is able to tell you if the hardware you have is compatible with their software. They can also provide you with a list of compatible hardware if you are needing to add components.

One of the questions you want to ask is if the various software modules integrate with each other. The point of sale module should integrate with the inventory module, which along with the accounts receivable, accounts payable, and payroll should integrate with the general ledger. When modules integrate, it means that after you have reviewed and verified the totals of one module, you can move that information to the general ledger module. You will then be able to accurately, and quickly, create financial statements.

While we are not suggesting you eliminate your accountant, this interaction of modules will allow you to have financial statements within a day or two of the end of the month. The concern for systems that do not integrate the various modules is the potential for errors that can occur as you manually recreate the information.

From the experiences of this writer and numerous other dealers, selecting a system becomes a series of trade offs; you begin by looking at all of the features you want that are found on one system. Perhaps you perform the tried and true method of creating a T chart, with the left side having all of the features you want that the system has and the right side being the features you want that the system does not have.

Completing the T chart, as you make your selection, you will most likely find that you are not going to have a system that has absolutely everything you want and need. For those who are looking to upgrade their computer system, there is an additional question of being able to utilize the computer hardware and printers you currently have.

One software provider reports that 70% of the systems they sell today are to dealers who are upgrading from a previous system. Of those upgrades, 40% of the dealers are able to utilize their current hardware. The other 60% need to purchase new hardware to be able to utilize the latest Windows networks software. One of the reasons for the low percentage of reusable hardware is that most dealers are not looking to upgrade until they experience a problem or have a need to upgrade. Printers are also a point of concern within an old system as slow printers can cause a tremendous line of impatient customers at the checkout of a dealer doing a lot of over the counter sales on a busy afternoon.

We stated initially that the only reason to computerize is to increase your profits. For those businesses who have been computerized, you continue to update your system for several reasons. One is software that now gives much more data than previous systems. Software today is also much more dependable. This writer remembers software from years ago whose data became corrupted with every power surge during a thunder storm, resulting in a couple of hours of work to rebuild and recapture lost information.

Another reason is the hardware is much more dependable and faster. Again I remember our computerized registers that cashiers stood and watched as the printer, designed for wide paper, slowly cranked out a receipt whose paper roll got off the track with every other sale. And for those of us who were computerized back then, who can forget those IBM-AT processors with a clock speed of 4 (compared to those we can get today)?

We also stated that selecting a system today would be much easier than times past. One of the main reasons for this is the advent of systems designed exclusively for dealers. Walking the aisles of the a trade show will undoubtedly expose you to numerous vendors.

Most software and hardware dealers offer support service for their products. The fees are often based on the number of hardware components, the aspects of the software that is utilized, and a certain amount of hours per month. Support can be an important consideration for the business that is not computer savvy and does not know what to do when the hardware or software fail to function properly.

Some systems have the ability to work with a hand held device designed to allow you to more accurately maintain your inventory pricing and counts. The unit, called a Portable Data Terminal (PDT), allows you to verify inventory on hand counts and price. With the information in the PDT, it can easily be transferred to your system for comparison of the information. Scheduling the use of this device to inventory your entire business one section at a time throughout the year can provide an additional benefit. It can help to eliminate the need to have a crew of temporary staff people in your business to take a full inventory annually.

How big does your business need to be before you computerize? Several vendors pose the suggestion of computerization to a business that is doing $200,000 or more in sales annually, and to the owner/manager spending more than one hour each week placing orders for inventory.

As we mentioned at the beginning of this article, selecting a computer for your business will have a degree of difficulty. This will be true for both the software and hardware aspects of your decision. The good news, from the perspective of this writer and former dealer, is that while there are many systems to choose from, there are fewer that are wrong.

Years ago, a business could select a system that truly was one that struggled to be adapted from another industry. Today's systems are very specific to the industry. It will be much easier for you, whether you are purchasing an upgrade or initial system, to select one that will work for your business. The challenge is in getting more of the features you want.

The major error that you can, but should not make, is to decide to stay with an outdated system or to do without a system completely. The plus will be in the extra profits you will reap as you work to maximize your business for 21st century profitability.

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This article is copyrighted by Tom Shay and Profits Plus Solutions, who can be reached at: PO Box 128, Dardanelle, AR. 72834. Phone 727-823-7205. It may be printed for an individual to read, but not duplicated or distributed without expressed written consent of the copyright owner.