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Technical debt is a software engineering metaphor that describes the trade-off between taking a quick and messy approach to software development that will make future changes more difficult versus taking more time to develop elegant software that is easy to update.
Cutting corners to get a software product to market quickly is a perfectly defensible decision, but, outside of the software engineering departments, many companies aren’t aware of the long-term negative consequences of cutting corners.
The result is buggy software that is difficult to update and maintain.
These tradeoffs are made by accounting software companies all the time, but businesses using accounting software, whether it is Excel, single-purpose accounting software or integrated ERP suites, are making similar tradeoffs.
Being aware of these compromises will help you understand and manage your business.
Choosing to run your business in Excel is a perfectly defensible decision when you are starting your business.
You probably already have Excel and know how to use it.
Data entry doesn’t take a lot of time because you don’t have a lot of customers so a little inefficiency in data entry is not a big deal.
As you grow, you build out your spreadsheets to solve problems that arrive in an ad hoc fashion and your business processes evolve around these spreadsheets.
Increasingly, the Excel-based way of doing things becomes impractical.
The longer you wait to graduate to accounting software, the more difficult it becomes.
The ad hoc evolution of business processes makes it virtually impossible to find an accounting software that fits the business. Compromises will have to be made and the longer you let the business evolve in this manner, the more difficult it will be to pay off the debt.
The pattern repeats itself when going from accounting software to a full ERP suite and repeats over and over again when extending and customizing the ERP suite to suit your business processes.
Managing technical debt
Whether you are developing software or running your business with software, the pattern is the same.
Short-term, expedient compromises are made that results long-term pain. Failing to manage the problem will eventually result in an unmanageable software product or business that requires a heavy investment to get in to a manageable state.
The first requirement for managing technical debt is to be aware of it.
This is not a simple problem.
Software engineers are keenly aware of the difficulties caused by cutting corners in software because the experience the consequences. Managers do not experience the problems. They need to understand that there is a problem and communicate with the engineers to grasp the scope of the problem and consequences in order to manage it.
Similarly, managers need to understand the problems of running the business on their current accounting solution.
To do this, they need to talk with the people doing the accounting, managing the supply chain, and scheduling the shop floor in order to understand the scope of the problem.
The initiative may have to come from the people who experience the consequences of these compromises rather than the managers. The less they understand of any particular activity, the easier it is to be oblivious to any problems associated with an activity.
Once managers are aware of the problems, managing Technical Debt becomes a lot easier.
There is nothing wrong with allowing it to accrue for a while.
The decision to pay down some technical debt is a business decision that balances the cost of paying it down, the consequences, like operational inefficiencies, of not paying it down, and the compounding future costs of paying it down later.
Well-managed technical debt looks like a zig-zag pattern with it accruing slowly before being paid down in short spurts and then accruing slowly again. Poorly managed, or unmanaged, technical debt keeps growing out of control.
Any improvements to how your business processes integrate with your accounting software, whether the change is in people, processes or technology, is paying off the technical debt created by short-term compromises.
The key to managing this debt is to be aware of it and to maintain that awareness among managers who make the business decision to pay it off.
Odete Passingham is the marketing director at SYSPRO Canada. SYSPRO is an ERP application consisting of finance, distribution and manufacturing controls for mid-size companies. To contact Odete, email: email@example.com or call (604) 451-8889. Learn more about SYSPRO at www.syspro.com
This article is part of the Manufacturing Growth & Innovation Centre, showcasing strategies for manufacturers on the move.