Insurers need to find effective ways to manage change in today's complex marketplace. Shrinking margins, ongoing regulatory changes and competitive global markets require insurers to know exactly what's going on at all times. They need real-time financial visibility to know what's profitable and what's not, which areas offer opportunities for growth and where bottlenecks occur. They need to bring in data from systems across their organization to ensure a holistic view of the financial performance of their business. In short, they need robust financial management capabilities to make better business decisions and effectively navigate through the constantly changing competitive pressures.
Following are five accounting capabilities that every insurer must have to succeed in today's demanding insurance industry:
1. A single ledger providing one view into your finances. Separate ledgers for accounts payable (AP), accounts receivable (AR) and general ledger (GL) are often out of synch, requiring the accounting department to spend time and manpower for reconciliation, and also making it more difficult to know the state of your finances at any given moment. The best approach is to establish a single ledger system that is always in balance. This will give you one accurate version of the truth so you will always know where your company stands at all times. The single-ledger model also speeds up monthly, quarterly and year-end closes, and frees up staff time to focus on more strategic accounting issues.
2. "Multi-everything" capabilities enabling sound financial management in a global environment. In today's global economy, financial visibility needs to extend beyond borders. Multi-national companies need to know the state of their finances organization-wide, regardless of business entity, countries, languages, etc. Ensure that your accounting system can access financial information seamlessly across borders and provide a global view across your organization. Multi-national companies, for example, typically need to manage two sets of books -- one based on Generally Accepted Accounting Principles (GAAP) in the U.S. and the other for International Financial Reporting Standards (IFRS) overseas, and be able to view them in one currency. Similarly, companies need the capability to address multiple tax codes and regulations seamlessly across your organization.
3. Multi-dimensional reporting enabling you to view information according to your needs. To offer the greatest value, reports need to address the needs of each business user. Make sure your financial management system enables multi-dimensional reporting -- the ability to use different accounting coding schemes -- so financial data can be seen and measured in a variety of ways. This gives each business leader the flexibility to analyze and report on profitability and business performance in the most effective way for his or her business area.
4. Easy integration with all types of systems. Silos are out and integration is in. Ensure that your accounting system can easily and seamlessly integrate with your ERP and other key operational systems. This will give you access to the information you need from multiple sources to measure profitability and performance in specific operational areas, determine what is working and where you need to make changes.
5. Built-in flexibility for change. Change is a constant in the insurance industry. Ensure that your accounting system has the agility to quickly adapt as business and industry needs require. It should be able to easily incorporate new applications and adapt to any changes that might arise without requiring your organization to re-write business logic.
Financial insight is critical in today's fast-moving insurance environment. With innovative accounting practices and capabilities, your company will have the access to the information you need, global capabilities and flexibility to accurately assess your business performance and make better business decisions. It's a must-have, winning formula for thriving in today's competitive insurance environment.
Peter Witham is Director and Financial Services lead of UNIT4 Business Software, the North American subsidiary of UNIT4, a $624 million global business software and services company that creates, provides and supports software for Businesses Living IN Change.