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An Accounting Problem

Essay by   •  December 5, 2010  •  Essay  •  1,241 Words (5 Pages)  •  1,275 Views

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The annuities department was faced with an accounting problem. The current accounting system would be obsolete in a few years and our business customers are currently experiencing resource issues when problems arise and support for this system is required.

Since financial reporting is a complex process, convoluted action was required to resolve this problem. The annuity technology group, along with the annuity business group came up with three possible solutions and conducted a high level requirements analysis and a cost benefit analysis to determine which solution to implement. The solutions analyzed were, do nothing and stay on the existing accounting system, go with a new accounting system designed and built by our Life Insurance partners, or build our own accounting engine.

The requirements and cost benefit analysis took several months to complete and a final decision would not be made until 18 months after the initiation of this project. The end result of the requirements and cost benefit analysis concluded that it was most beneficial to our business partners to build our own accounting engine; however this was not the elected solution.

Our suggestion to do nothing was not feasible; we were already facing resource issues for existing accounting problems. Additionally, through requirements analysis, we discovered that no future enhancements would be made to this old system, as the annuity business unit was the sole user of this system. Early on, we were able to eliminate remaining with our existing accounting system as a reasonable solution.

External pressure from our Life Insurance partners wanted us to commit to using their services. Life Insurance had designed and implemented an accounting system a few years ago that provided wonderful functionality. This system is being used by most of the enterprise although there is no corporate mandate requiring administration areas to use it. While the functionality of this system is quite detailed and impressive, it fails to meet all of the needs of the annuity business customers. Because the annuity business requirements were quite extensive, the life insurance group could not commit to the necessary enhancements that would be required to their system to satisfy annuity users. Because of these business requirements, we then conducted an extensive analysis to determine what Annuities IT could do to satisfy the business requirements. The analysis revealed that we could build our own accounting system for only 25% of the cost of using the life insurance system.

With clearly documented analysis, many on the development team thought that the annuity technology solution was an easy sell. However, this was not the case. Negotiations between life insurance and annuities went on for months to persuade annuities to conform and join most of the enterprise in utilizing this new system. Some of the advantages that this new system could offer included using a centralized repository for accounts, account maintenance would not be needed for administration systems, and accounting would be streamlined and accurate for financial reporting. While the Annuities IT solution would provide the same advantages and meet the same financial reporting requirements, the biggest risk was not utilizing the centralized repository for accounts. After renegotiating the cost, eventually our annuity business partners elected to join the rest of the enterprise and utilize the life insurance solution.

Once the life insurance solution was elected as the alternative to solve the accounting dilemma, an action plan was developed for implementing the solution. The action plan involved the basic steps that are used for implementing technical solutions. The steps were programming, testing, delivery of software to the users, and training the users on the new software.

Six months after the implementation of the life insurance accounting solution, the decision to utilize this system has been deemed a success. Daily MIS reports and weekly status meetings are used to as evaluation tools to monitor the success of the implementation. The daily MIS reports indicate successful transmission and processing of accounting files in addition to accounting errors. The weekly status meetings serve as a communication tool in which action items are assigned for follow up and updates to problems are discussed. While these evaluation tools are indications of a successful implementation, this project was also deemed successful mainly because perceptions were effectively managed throughout the project. McCall and Kaplan (1990) state that there are three types of outcomes that result from decisions: First, decisions form policies and strategies for the organization or the decision

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