Rose Report: Issue 21

Front-End System Versus Back-End System: Finding the Best of Both Worlds

issue21-pic-story2A management information system is a computer system that provides companies with real-time data about their financial performance. The role of a management system is to track transactions as they are being processed, providing executives with day-by-day—even hour-by-hour—information about revenue, costs, and projected profits.

An accounting system processes those transactions and provides a reconciled set of reports summarizing how a company performed over a set period of time—usually monthly, quarterly, or annually. Typically, a management system is referred to as the “front end” while an accounting system is referred to as the “back end.” When both systems are working effectively, an accounting system should confirm the real-time data generated from the management system.

Ideally most organizations should use both a management and accounting system. If you use neither, you’re flying blind and won’t have a good grasp on where your company stands financially. If you use only an accounting system, your information is dated, making your company subject to surprises at month-end or year-end.

A lot of software companies specialize in building “front end” solutions for different industries. For a retailer, their management system would be a point-of-sale system that processes transactions and allows for seamless interactions with customers. In a professional services company, the management system would track time and expenses for different projects.

These customized management system are great at helping organizations interact efficiently with customers, but generally they are not as efficient on the “back end.” In many of these systems, “Accounting is an afterthought,” says Ted Rose, CEO of Rose Financial Services, who recommends that companies use a well-known accounting system that is specifically designed for accountants: “Otherwise, you are tying your accountant’s hands behind their backs and limiting your own access to qualified professionals to manage your accounting system.”

You don’t want one system to be inferior to the other—the goal is to have a management and accounting system that work well both independently and together. Says Rose: “You want to get the best of both worlds.”