When it comes to the task of loan origination, the primary focus of the mortgage lending enterprise, most lenders are highly skilled at streamlining their technology platforms. They rely on the software they need to complete the mortgage origination process in the most efficient manner and keep their sales operations functioning at maximum efficiency, day in, day out.
Unfortunately at times, the same cannot be said for the software that lenders use to manage the finances of their businesses. In our experience visiting with CFO’s and Controllers in lending firms large and small, we have found that software tends to accumulate in the accounting department. It enters for good reasons, stays long past its welcome has expired, and too often becomes a trap waiting to snare the lender.
Because the legacy accounting software our industry has relied upon for decades is underpowered and inefficient, helper apps have piled up on laptops and aging computers. At the same time, financial department managers are likely using tools such as Microsoft Excel like duct tape to hold their departments system’s together.
There are many problems with this, but the three in this article should be compelling enough to give any lender reason to consolidate their financial management software into a single, centralized platform.
Without the ability to rely on a single platform for accounting, department managers must seek out tools where they can. These tools don’t generally share information easily, so spreadsheets are used to shuttle information between them. The inefficiencies in this process are staggering, often seeing individuals having to manipulate reports or even hand key data from one system to another.
Disparate applications is a problem, but even worse is having different people within the department with the knowledge to run the various tools. This creates pockets of knowledge across the enterprise and exposes the company to the risk that the person who can run the software becomes ill or leaves the company.
Instead of having employees siloed into castles built around disparate systems where they can create bottlenecks, a centralized system with the power to provide the essential tools, and cross-training employees on different areas of the system is key. The end result being that with multiple employees trained on the system, no single employee becomes irreplaceable for the delivery of mission critical information to the CFO.
When new financial management or analytical tools enter the finance department, they generally come with an intended use and as the result of someone demonstrating a need for the functionality. Over time, these tools remain for a number of reasons. Often, the department does not have the budget to replace them with updated tools but the need persists. In some cases, a better alternative is yet to be found, but the software is aging and has not been updated.
The finance department can call for IT support, but it is more often than not the last department in the company to receive it, falling far behind those that are closer to the borrower and the loan origination process.
As the software ages, it becomes less stable. In some cases, the hardware that the software resides on ages but cannot be replaced without losing the functionality. So, the old hardware remain in the office, subject to accident, mishap, or loss. In a number of organizations we have visited over the years, outdated hardware is stacked around the office because the company still needs access to a program on its hard drive.
Just because the software is old and the tools are outdated does not mean that there are no costs associated with it. First there is the cost to the business of the IT department keeping the tools working. In addition most of the older software are still subject to maintenance contract fees. These contracts most likely have to be renewed in order to keep the tool functioning correctly, or in some cases working at all.
These two costs, multiplied overtime and by each tool, add up, and are unnecessary with today’s modern mortgage enterprise accounting solutions.
The CFO is tasked with keeping his or her team focused on running that department correctly. In most cases, this is a lean operation with a relatively low operating budget and a small staff. From IT’s perspective, this is a department that can often be managed with an “if it’s not broke, don’t fix it” approach.
When this occurs, the CFO generally finds that he’s operating with older software hosted on disparate systems and managed by individual employees operating out of their own little fiefdoms. This is inefficient, overly expensive and fraught with risk. Corporate management is advised to seek alternatives that will reduce the number of technology platforms and software applications in use in the finance department in an attempt to negate these problems.
About the author
Martin Kerr is co-founder and President of Bestborn Business Solutions, creator of the Mortgage Accounting Solution Loan Vision. Kerr has overseen the rapid growth of the organization into the fastest growing accounting software vendor to the independent mortgage industry. He can be reached at martin.kerr@bestborn.com.
