Feasibility Report for SkiZone - Case Study Example

Accounting Information Systems Case Study: Ski Zone Executive Summary SkiZone is a small to medium sized business which deals with ski products, and also lucrative snow ski hire. The company has three stores in Newcastle, Wagga Wagga and Wollongong. Each of the centres is individually managed and the company lacks a clear integration in the stores. Also, there is lack of technology in the company which has led the company to be faced with high process flows and more complex work systems. Based on the company details and the requirements of the company a number of Enterprise Resource Planning systems have been researched to help provide the company with better integrated working and also to meet the needs which include, a) Improved stock taking process, b) Improved customer relationship management, c) Inclusion of Pay Roll software for better calculation of wages and electronic payment to the staff, and d) Inclusion of sales forecast software to help in forecasting the sales easily and effectively. Based on the research two products have been shortlisted which show potential for SkiZone. These include, NetSuite SaaS and QuickBooks Enterprise Solutions 10. 0. A thorough analysis of the features of the two solutions along with relative merits and demerits indicate the effectiveness of using these systems at SkiZone. These solutions are also financially analysed using investment appraisal methods and the cost benefits are identified. It is identified that Quick Books results in higher returns to the company and also increases the value of the company by a significant amount. The cost benefit analysis indicates that the Quick Books Enterprise is the optimum solution for SkiZone covering all the requirements. Contents Executive Summary 0 1.0 Introduction: 4 2.0 Overview of Company: 4 2.1 Stock Taking Process 5 2.2 Sales Process 5 2.3 Hiring Process 6 2.4 Customer Information Management: 6 2.5 Wage Processing 7 2.6 Sales Forecasting: 7 3.0 Objectives of the Report: 7 4.0 Current Issues: 8 4.1 Solution Objectives: 8 4.2 Possible Constraints: 9 4.3 Assumptions: 9 5.0 Pre Feasibility Study: 10 6.0 Development Plans and Potential Solutions: 10 6.1 NetSuite SaaS 10 6.1.1 Overview of Product: 10 6.1.2 Features: 11 6.1.3 Pricing 12 6.2 QuickBooks Enterprise Solutions 10 . 0 13 6.2.1 Overview of Product: 13 6.2.2 Features: 13 6.2.3 Pricing: 15 7.0 Recommendations: 16 Bibliography 19 Appendices 21 Appendix -1: Net Cash Flow: 21 Appendix 2: Net Present Value Calculations: 22 Appendix 3: Return on Investment: 24 1.0 Introduction: Stock management and good book keeping play a very important role in every business. It is essential that businesses keep a clear record of all their finances as well as maintain their stocks effectively (Gelinas & Dull, 2009). Keeping a clear track of all aspects of the business will allow the businesses to have better control on the finances and will also allows the company to benefit from other costs like opportunity costs, stock holding overheads and also any possible risk of wastages (Romney & Steinbart, 2008). This report aims at analysing the current position of Ski Zone and investigating the current deficiencies of the systems used as well as recommending alternative solutions to the company in order to develop better stock management systems. The financial aspects of the alternative option have also been included to gain a better overview of the cost – benefit analysis of the solutions. Detailed financial analysis including the net present value, and the return on investments will be calculated to justify the recommended solutions. Before moving into the recommended solutions, it is essential to gain an overview of the company, the objectives of the report and also the current issues, the solution objectives and assumptions. 2.0 Overview of Company: Ski Zone is a small to medium scaled business operating from Newcastle. The company deals with good quality ski equipments and the business deals with both water as well as snow ski products. The company also has a ‘lucrative snow ski hire’ which can be used and is mostly meant for the students and families alike (Case Study, 2010). The company has been able to achieve a strong clientele and has been able to grow to a great extent over the past five years. The company has also been able to expand into Wagga Wagga and Wollongong as well. At an average the company hires a total of fifteen employees for the three stores and three managers. The company has a number of processes which need to be considered for better overall performance. Te following sections will detail the process flow being adopted presently in the company. 2.1 Stock Taking Process Ski Zone currently does not have a well designed stock taking process. The company currently, keeps the records of the stocks in a hap hazard manner and at no given point is there a clear access to the stock levels within the company without a physical stock take. As explained in the case, in times of high work there are higher chances for the employees to miss out marking the stock sheers during purchases (Case Study, 2010). Also although the company does keep a set of stock sheets these tend not to be as accurate as there are several instances where the sheets are not updated and there are chances for the sheets not to be updated as well. Andrew West tends to take random stock takes at times, however this is time consuming and only done when needed for either forecasting or for further purchasing. 2.2 Sales Process The sales process of the company is also not well developed and planned and lacks a great deal of steps. The company used ‘point of purchase’ tills to record the sales in a simple cash register machine. These machine although do serve the purpose do not take into account the customer details and simple keep track of only the products sold, the staff member handling the sale, quantity sold, prices and totals (Case Study, 2010). 2.3 Hiring Process In terms of the rental that the company provides the processes are again not well developed. Here the department provides ski equipments, boots, skis and ski suits for hire for a few as well as several days at a time. While the customers hire the equipments, the customers are provided with excellent service where they are provided with assistance from one of the staff in the selection of the equipments and the other skiing needs. Once the customer has made the selection, a temporary record of the customer and the details of the equipments are kept and a paper copy of the entire process is kept in alphabetical order (Case Study, 2010). The customer is also provided with a copy of the details. When the customer returns the good, the details need to be pulled out from the paper back up and then the total rental value is accounted for in the EPOS system. 2.4 Customer Information Management: The company does not have any customer information management system in place. All the sales are recoded however no customer information is retained and this leaves the company to have no customer database, despite the strong clientele that the company has. The company keeps temporary paper records of the customers however these are destroyed once the rentals are completed. 2.5 Wage Processing In terms of the wages of the employees, it is clear from the case that the assistant prepares the wages and the details of the staff members are fed into a spreadsheet from which the cheques are written out each month. The overall process of passing the cheques to the staff is also long and it goes from the assistant to Mr. Andrew, who forwards it to the Newcastle store from which a courier is sent to the Wagga Wagga Store and Wollongong store. This process is being followed so that a copy of all the payments is available for easy accessibility. 2.6 Sales Forecasting: In terms of the sales forecasting, it is clear that Mr. Andrew collects all the information from the Newcastle store and he along with his assistant tend to use the spreadsheet to Business Activity statement as well as for sales forecasting (Case Study, 2010). This details all the sales from the two points of sale of cash machines in the stores. 3.0 Objectives of the Report: The main objective of this report is to define the current issues that are being faced by Ski Zone and to develop solutions for the issues. The report aims at analysing the implementation of new systems at Ski Zone to help the company with the following: a) Improved stock taking process b) Improved customer relationship management c) Inclusion of Pay Roll software for better calculation of wages and electronic payment to the staff d) Inclusion of sales forecast software to help in forecasting the sales easily and effectively. 4.0 Current Issues: The company currently has a wide number of issues that need major attention. Although the company has a wide range of excellent products, and services, the lack of technology is the cause of the issues (Stair & Reynolds, 2008). As has been noted in the above discussion, it is essential to note that although the processes that the company currently adopts does the intended job, there is a lot of opportunities for the company to improvise on them to be able to get most of each of the processes. 4.1 Solution Objectives: The main objective of the solution is to follow the rule of, ‘Use existing facilities wherever possible and Implement changes where absolutely necessary’ (Rainer & Turban, 2008). The aim here is to develop a system which is user friendly and flexible. Also, the focus is to provide the business with a chance to have systems where all stock levels and store information can be tracked from every store, i.e. having a single interlinked system. The objective is to develop information systems and to build customer database for the company and to provide remote access to the business across all locations. Also to develop a system for effective forecast of the demand of the customers which can help the company develop a strong sales forecast. An electronic inventory management system to be developed which will help the business stay in sync with the business strategy and also have functions which can be used effectively to meet the needs of the customers. 4.2 Possible Constraints: Developing systems to meet all the needs of the company can involve a wide range of infrastructural changes, which will include high levels of investments. Also, this could also include a high number of costs which pertain to training and development of the employees. The only major constraint that is present is the budget for the implementation of the systems. Other minor constraints include the time frame and deadlines, and also the lack of competency of the staff to conduct the regular business on the computerised systems. Lastly, the lack of the required systems is also a constraint for the company. 4.3 Assumptions: The assumptions here include that the changes and the development costs are all borne by the management. Also, the main aim of the management is to receive a system which is user friendly, flexible and allows space to grow in case newer stores are opened in the future. Also, the management is willing to accommodate the changes in the infrastructure. 5.0 Pre Feasibility Study: Based on the requirements of the company, the best option was to use an integrated system which caters to all the aspects, i.e. payroll management, inventory management, sales forecasting and customer relationship management. An initial investigation has been carried out and a number of products dealing with Enterprise Resource Planning were researched and analysed to check for the feasibility with Ski Zone. Of the various products available in the market, two have been shortlisted and these prove to be the most feasible for the company. Details of the two products, i.e. NetSuite SaaS and QuickBooks Enterprise Solutions 10.0 have been discussed in the following sections (NetSuite , 2010, Intuit Enterprise, 2010). 6.0 Development Plans and Potential Solutions: 6.1 NetSuite SaaS 6.1.1 Overview of Product: NetSuite is an integrated business solution Software as a Service (SaaS) which supports all elements of the business including the accounting, customer relationship management, shipping and billing, sales, customer records and also the employee management. The product is an integrated and an “all – in – one” business management software (NetSuite , 2010). This product has a number of features that cater to the needs of Ski Zone as well as a few additional features which can prove to be beneficial in the future. These have been discussed below. 6.1.2 Features: NetSuite SaaS offers a wide range of features which include in – built and customizable dashboards which can be used by the company to plan based on the needs. Also, the product includes an integrated solution for the Accounting aspects and the customer relationship management of the business which make it more flexible as well as simpler to implement (NetSuite , 2010). In terms of the main features of the product and SkiZone’s business requirements, it is essential to note that major requirements like the order management and fulfilment, time and billing, financial statements, budgeting and also sales forecasting can be easily done with the system (NetSuite , 2010). Along with these, the system also caters to the needs in terms of the employee management and productivity and allows the business to keep employee records, and also keep records of all employee payments (NetSuite , 2010). The system also provides “group calendaring and collaboration, expense reporting, purchase Requisitions and Employee Self Service” (NetSuite , 2010) as well. 6.1.2.1 Additional Features In addition to the above features, the product also offers a number of other features which will prove to be beneficial for SkiZone in the future as well. These features include good incentive management, along strong customer support and services (NetSuite , 2010). Also, it includes automation of the sales force and marketing efforts as well as partner relationship management programs. The other features also include, the “multi – currency, revenue recognition, advanced financials, accounts receivable and accounts payable and also general ledger” (NetSuite , 2010). Although a number of the additional features do not sound very useful in the current situation, these can be beneficial over a period of time when the business plans to expand and improvise (NetSuite , 2010). Other features also include the ecommerce facilities like, “Database Driven Web Site/Web Store, Front- and Back-Office Integration, eBay Integration, Credit Card Processing, PayPal, Affiliate Marketing, Customer Acquisition, Customer, Partner Self-Service, and Web Site Analytics” (NetSuite , 2010). 6.1.3 Pricing In terms of the pricing of the product, “NetSuite is $499 /month base fee and $99 /user /month (includes maintenance, support is extra)” (Compare CRM, 2010). Hence in the case of Ski Zone, the price that the company will need to pay per month totals to almost $ 697 ($ 499 + $ 99 + $ 99, for the three stores). 6.1.4 Risk and Possible Issues: In terms of the risks involved, it is essential to note one of the possible risks includes break down of the system or need for servicing. There is no clear specifications that have been provided regarding the same and although the company does provide servicing the turnaround time has not been specified. Also the other obvious issue is the lack of training of the employees however this can be overcome by providing the employees with training or also recruiting of employees with the required knowledge and skills. Other issues include the need for broad band connections to keep the product online and keep the connectivity between the stores. This becomes an addition cost for the business. 6.2 QuickBooks Enterprise Solutions 10 . 0 6.2.1 Overview of Product: QuickBooks Enterprise Solution is an advanced version of the small business financial software. The product is focused on companies with three or more locations and provides a number of facilities like Quick Book Premier Plus and also other advanced functionalities. Here the users have a control over the information and can also control what information can be shared and those are not to be share (Intuit Enterprise, 2010). The product also has a strong and effective reporting tools and a strong inventory management system. The price of the product includes support as well as upgrades within the first year of purchase (Intuit Enterprise, 2010). The product has a number of features which make it feasible for SkiZone as well as a number of additional features which can be used in the future by the company. 6.2.2 Features: The product provides the customers with a chance to customise the reporting to a greater extent and also allow more flexibility in terms of the entries in the spread sheets (Intuit Enterprise, 2010). Along with these it also provides the business with an easy snapshot of the company and provides clear cut view of the key financials of the business instantaneously (Intuit Enterprise, 2010). Also allows creation of the financial statements and a complete track of the business expenses and the fixed assets of the business as well. Considering the inventory management of the company, the product provides a chance to easily add and delete the products and also keep an updated version of the inventories in the company. It also provides simple overviews of the inventory levels of company and provides key vendor information as well (Intuit Enterprise, 2010). It also facilitates simple creation and sending of the purchase orders and back order tracking as well. Other features also include the customer relationship management and easy entry of customer information as well as simple retrieval of the customer information (Intuit Enterprise, 2010). This also allows keeping track of the customer choice which further permits more focused marketing efforts of the company as well (Intuit Enterprise, 2010). In terms of the employee management, the product allows a wide range of services like, “Payroll Processing Including Direct Deposit, Find Key Employee Information Instantly, Track Employee or Contractor Time, Centralized & Secure Employee Information Tracking, Comprehensive Employee Management Reports, Employer Compliance Guidelines, Employment Forms, Letters & Templates” (Intuit Enterprise, 2010). 6.2.2.1 Additional Features: In terms of the additional features, the product provides the company with a chance to easily prepare the tax details of the business along with the deductible expenses as well. It includes the laws of the country and provides automated tax tracking for the company as well. in terms of the additional features regarding the inventory management, the product allows, “Track Hundreds of Thousands of Vendors and Parts or Service Items, Change Assembly Components on the Fly, Define Custom Fields to Track Unique Information, Use Foreign Currencies on Purchasing Transactions, Create Bills of Materials to Track Costs and Components, Unit of Measure Conversion, Available to Promise, Track Manufacturer’s Part Number, Easy & Convenient Shipping, Process Returns & Non-standard Goods, Easier Setup and Improved Integration with TrueCommerce EDI” (Intuit Enterprise, 2010). It also permits to set custom billing and pricing for customers as well as foreign currency sales transactions as well, which can prove to be beneficial in case the company expands and increases the scope of the business. QuickBooks Company also provides its customers with twenty four hours service seven days a week and provides clear and well expressed turn – around time for the servicing. 6.2.3 Pricing: QuickBooks Enterprise Solution has been priced at $ 3,000 for a package of 5 users as an additional payment, following which the company will need to renew the product by paying $ 850/ year. This will allow five users to use the product and proves to be very effective as it is “more cost effective than buying new software every three years” (Intuit Enterprise, 2010). 6.2.4 Risk and Possible Issues: Here again the most obvious issue is the lack of training of the employees. This system also requires continuous connectivity and needs broad band connection to keep the connectivity live between the stores. Again the company will need to focus on the training of the employees here as well and ensure that either the employees are trained or employees are recruited for the system management. In this case the company also provides service warranties and definite turnaround time of 24 – 48 hours for the servicing of the machines. 7.0 Recommendations: In order to financially justify and to identify the best suited software solution for the company, investment appraisal is conducted. The initial and operating expenses of the two solutions are identified. Software Solution NetSuite QuickBooks Enterprise Initial Costs     Software Cost - $ 3,000 Installation Costs $ 2,000 $ 1,500 Training Expenses $ 3,000 $ 1,000 Total Initial Costs $ 5,000 $ 5,500 Recurring Costs per Year     Renewal of License $ 8,364 $ 850 Broadband Costs ($ 500 /month) $ 6,000 $ 6,000 Total Yearly Expenses $ 14,364 $ 6,850 The software solution does not generate any direct revenue. However, the implementation of the solution results in increased productivity, increased customer base, effective and efficient sales process, lesser efforts in inventory and payroll management. As both the solutions effectively meet all the requirements and eliminate all the issues currently faced by the company, it can be assumed that the savings from either solution are equal. In order to quantify the expected savings, the impact of the two solutions on various parts of the business is estimated as follows. Effective Payroll Management $ 3,000 per year Increase in customer base (CRM) $ 10,000 per year Effective Inventory Management $ 10,000 per year Financial Reporting and others $ 2,000 per year These savings (total of $ 25,000 per year) are assumed to be constant for a period of 5 years. The company’s cost of capital is assumed to be 10 %. The net cash flow each year for the two options is computed and presented in Appendix 1. Based on the data, investment appraisal is conducted. The Net Present Value (see Appendix 2) and Return on Investment (see Appendix 3). The NPV which is an indication of the proposal’s value to the company (i.e., the solution increases the value of the company by that amount) is found to be significantly higher for QuickBooks Enterprise ($ 63,303) whereas it is just $ 36,319 for NetSuite. Moreover, the Return on Investment is also significantly higher for QuickBooks. The calculations of ROI indicate that QuickBooks generates a return of 214 % whereas NetSuite generates just 65 %. Hence both NPV and ROI analyses indicate that QuickBooks Enterprise has to be implemented by the company. Based on the above discussion and after a thorough analysis of the two products, it can be concluded that using QuickBooks Enterprise Systems 10.0 will prove to be most effective here in the case of SkiZone. The quality of after sales services as well as the service turn – around time for the company is relatively lower than that of NetSuite SaaS. QuickBooks Enterprise System has been chosen as it not only helps in providing solutions to the current needs, i.e., a) Improved stock taking process, b) Improved customer relationship management, c) Inclusion of Pay Roll software for better calculation of wages and electronic payment to the staff, and d) Inclusion of sales forecast software to help in forecasting the sales easily and effectively, but is also financially more feasible than NetSuite SaaS. Bibliography Case Study. (2010). Accounting Information Systems. Overview – SkiZone . Compare CRM. (2010). Netsuite Pricing . Retrieved September 21, 2010, from http://www.comparecrm.com/crm-vendors/netsuite/netsuite-crm-pricing.php Gelinas, U. J., & Dull, R. B. (2009). Accounting Information Systems . South-Western College Pub. Intuit Enterprise. (2010). QuickBooks Enterprise Solutions 10.0. Retrieved September 21, 2010, from http://enterprisesuite.intuit.com/products/enterprise-solutions/ NetSuite . (2010). NetSuite Features. Retrieved September 21, 2010, from http://www.netsuite.com/portal/pdf/ds-netsuite.pdf Rainer, R. K., & Turban, E. (2008). Introduction to Information Systems: Supporting and Transforming Business . Wiley. Romney, M. B., & Steinbart, P. J. (2008). Accounting Information Systems (11th Edition). Prentice Hall. Stair, R., & Reynolds, G. (2008). Fundamentals of Information Systems. Course Technology. Appendices Appendix -1: Net Cash Flow: NetSuite Cash Flow Year Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Savings - $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 Less Expenses $ 4,000 $ 14,364 $ 14,364 $ 14,364 $ 14,364 $ 14,364 Net Cash Flow $ (4,000) $ 10,636 $ 10,636 $ 10,636 $ 10,636 $ 10,636 QuickBooks Enterprise Cash Flow Year Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Savings - $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 Less Expenses $ 5,500 $ 6,850 $ 6,850 $ 6,850 $ 6,850 $ 6,850 Net Cash Flow $ -5,500 $ 18,150 $ 18,150 $ 18,150 $ 18,150 $ 18,150 Appendix 2: Net Present Value Calculations: The Net Present Value is computed by discounting the cash flows generated by the solution every year. The cost of capital used here is 10 %. The cash flow generated in a particular period is discounted using the discount factor and the present value of the cash flow in that period is computed. The Net Present Value is the summation of all the present value of cash flows generated in a five year period. NPV (NetSuite) Year Cash Flow Discount Factor Present Value 0 $ (4,000) 1.0000 $ (4,000) 1 $ 10,636 0.9091 $ 9,669 2 $ 10,636 0.8264 $ 8,790 3 $ 10,636 0.7513 $ 7,991 4 $ 10,636 0.6830 $ 7,265 5 $ 10,636 0.6209 $ 6,604 Net Present Value $ 36,319 NPV (QuickBooks Enterprise) Year Cash Flow Discount Factor Present Value 0 $ (5,500) 1.0000 $ (5,500) 1 $ 18,150 0.9091 $ 16,500 2 $ 18,150 0.8264 $ 15,000 3 $ 18,150 0.7513 $ 13,636 4 $ 18,150 0.6830 $ 12,397 5 $ 18,150 0.6209 $ 11,270 Net Present Value $ 63,303 Appendix 3: Return on Investment: ROI = (Total Cost Savings – Total Costs Involved) / Total Costs % ROI Calculations Solution NetSuite QuickBooks Enterprise Total Savings $ 125,000 $ 125,000 Total Costs $ 75,820 $ 39,750 ROI 64.86% 214.47% Read More