How a CFO and an IT chief cooperate to add value at Able Engineering
- 30 March, 2012 02:36
For Gregg Leach, CFO of aircraft overhaul and repair business Able Engineering, the need to involve the IT department on major projects was never questioned. "I've got more background in IT than I do in finance," said the finance chief, whose previous work experience included serving as the CIO of a health care company, and IT positions with finance components.
From that first-hand experience, then, he knew that a close relationship with IT in finance projects with broad company implications "was critical for our decision making."
Ken Hughes, Able's IT manager, couldn't agree more. And as the first case in point he cites how the pair worked together in rolling out cloud-based accounting software last year. A CFO without tech skills, for example, might have purchased software that didn't meet the Phoenix-based company's long-term needs, and assigned IT a limited role, Hughes said.
Companies often thrive when the finance and tech functions work in close harmony these days -- not just in software rollouts, but in an ever-growing number of areas, including data security and adding a tech focus to controling costs. And Able serves as a very good example.
Without the strong bond created between the two men, said Hughes, "I would have had an uphill battle to persuade someone else to go with a cloud solution over what felt comfortable to them, and was really just meeting their requirements." He added, "In my previous experience working with finance, you're filling their spreadsheets, and it's really an arm's-length transaction. Sitting across the table from the bean counters, they don't necessarily understand all the issues. With [Leach] we were able to quickly move through all of them and just get to the point."
That point was the selection of accounting software that would allow for greater data-sharing at the 29-year-old private company, which recorded US$42 million in income last year.
Leach anticipates Able's 2012 income will exceed $50 million. But despite Able's growth, until last April its finance department depended on software traditionally used by a startup, the CFO said. "Basically," he said, "it was a balance sheet and an income statement."
In a joint interview, Leach and Hughes detailed how finance and IT worked in tandem to migrate to a software-as-a-service product Intacct, which develops hosted financial management software.
The previous software, from Mac software developer MYOB, could not consolidate financial results from each of the company's four business units, which maintained separate finance databases. Creating an earnings statement that included the results from the aircraft overhaul division, the department that designs aircraft replacement parts, Able's real estate holdings arm, and the unit that manages an employee management software offering, proved time-consuming.
"If I wanted to do anything, it was export it out to Excel, and that would take hours and hours," said Leach. "And if something changed, or it was wrong, then the decision became, Do I want to fix the Excel spreadsheet or live with the difference? That's not quite right."
And Able is a company whose mainline of business, expensive and logistically challenging aircraft overhauls, depends on data being right and easily accessible.
Able's customers, which include Delta Airlines, American Airlines, Cathay Pacific, and military aircraft and helicopter operators, turn to the company for affordable overhauls. According to Leach, the company holds a 70 percent share in the market for refurbishing the carriages that move the wing flaps on a jumbo Boeing 747, for example. Able looks to make the process more affordable by selling overhauled carriages for $10,000 to $15,000, versus $150,000 to $250,000 for new components.
Data also plays a key role in managing the global shipments that help stock Able's supply chain. For most overhauls Able ships a refurbished or replacement part when the aircraft is about to undergo scheduled maintenance. In some cases, the customer then may ship Able the used part, which is refurbished and sold to another airline.
The timing of the parts' departure and arrival is critical, since component overhauls can take an average of 20 to 30 days. Supply chain wrinkles certainly can impact a customer's bottom line in a significant way. A parked plane is "not earning revenue," noted Leach, so airlines work hard to minimize jet downtime.
After taking over the finance chief position a year-and-a-half ago, Leach determined that "anything would have been better" than Able's accounting software, and began researching replacement applications. Whatever options were presented, Leach wanted to eliminate the barriers preventing employees from accessing and sharing finance data.
Allowing them immediate access offered "a real time savings that just doesn't get captured," Leach said, since employees don't have to ask someone for the data and then wait for them to produce a report.
He also realized that this goal of open data meant a "very intimate" finance and IT relationship, because linking the accounting software to other systems depended on IT's ability to the maintain system. To him, this connection underscored the importance for IT of being actively involved in the project.
Leach wasn't alone in wanting to replace the finance management system. The IT department understood the challenges their finance coworkers faced using technology "we out grew it a long time ago," said IT manager Hughes. "These guys had to do back flips to close the books every month. It was truly painfully."
In fact, accounting's bookkeeping dilemma had spilled over to IT. Staffers there were going beyond their standard duties and developing custom software to help finance generate earnings reports, an area Hughes wanted to exit.
"We shouldn't be in the accounting software development business," said Hughes. "That's definitely not our expertise."
Having IT and finance -- "both big levers in any business" -- operate in tandem on the project "pretty much accelerated our process," said Hughes. That process started in January 2010 when the project was discussed and picked up speed that fall when finalists were named. Intacct was selected in December, and Able began using its new software in April 2011.
Leach and Hughes agreed on several requirements for the new application. Like his CFO, Hughes wanted to give staff greater data access. To him, this meant faster decision making instead of "waiting until the end of the month" to review financial results and then take action.
Equally important was a product that offered an API (application programming interface) that would allow IT to link the software to other systems, like Able's homegrown, Java-based ERP (enterprise resource planning) system. Given Able's specialized work, its IT department receives requests daily to change the system, said Hughes. Producing the paperwork that accompanies a new airframe or foreign military aircraft means that Able needs its ERP system to reflect these situations as quickly as possible. These modifications need to occur immediately, and IT can't wait for a vendor or consultant to make the changes, Hughes explained.
Apple products run most of Able, so the two men wanted a Mac friendly system that did not require "Internet Explorer or that we had a PC server," according to Leach.
When it came to cost, Hughes wasn't keen on purchasing a product that required hiring staff to handle backups and software upgrades. This further lead him to consider a cloud option with a service provider handling the back-end functions. A large price tag didn't scare Leach, who was willing to pay million of dollars more for the right product.
"This kind of money really doesn't mean an awful lot to be honest," he said. "I take that all in context."
This collaboration between IT and finance was hardly limited to the software rollout. And indeed, as Able expands its operations, finance will continue to look to IT to help reduce work costs, for example.
"It is critical for our ongoing operation that the two departments stay very close and work together," Leach said.
Able averages 20% yearly revenue growth, and the accompanying workload means "we don't have room on our production floor," said Leach.
To remedy these "flow problems" next April, Able is moving to a larger facility at Phoenix Gateway Airport, in nearby Mesa. The new space offers direct runway access, and is three time larger than its current building, meaning customers can "bring [their] whole helicopter in, and we'll do it tip-to-tail," said Leach.
For Hughes, the strong inter-department relationship can only help Able better use data to complete its main business of "driving out costs; we're relentlessly trying to improve that."
Such accounting and IT teamwork doesn't require technology leaders reporting to the CFO. In Able's case, Hughes reports to CEO Lee Benson.
And the teamwork between Leach and Hughes seems to work just fine in Benson's view.
When Benson shows the company's business operations to third parties, they comment that Able functions like a billion-dollar company, said Hughes. Some, he added, even tell the CEO: "The way you guys do things, I wish that some of the billion dollar companies in our portfolios would run this way."
Hughes likes to give part of the credit to Leach, saying that although Able would probably fit into the small business category, his CFO has the mindset "that we like to take enterprise solutions."