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Situation
Shelbourne Development Group is a commercial and residential property development company founded by entrepreneur Garrett Kelleher in 1987. Since that time the company has grown substantially and it runs development and regeneration projects throughout Ireland, continental Europe and the US. One of its flagship projects is the Chicago Spire, on course to be completed by 2011. The group structure actually comprises a number of individual development and investment companies. Its approach to real estate development is to bring vertically integrated teams to work on specific projects.
Earlier in the decade, the group comprised 20 such entities and the need for an automated accounts package was apparent. “We were starting to grow and a manual based accounting system wasn’t acceptable so we got a cheap and cheerful system,” says finance director Emmet O’Reilly. “Over the three-year period we were using this system, it became obvious it couldn’t handle the load – we never lost data but there was always a fear that we might. We were growing all the time and felt we couldn’t rely on something so fragile.” The Shelbourne group’s property portfolio at this stage had blossomed to more than x150m and since then it has come to be worth more than a billion euro in asset value terms. “In the last three years we have bought assets worth around x500m in Ireland alone,” says O’Reilly. “With that comes banks, with banks comes reporting and you can’t rely on a system that could fall over,” he adds.
By mid 2006, there were more than 40 companies in the entire group, so the main consideration for Shelbourne was to find a system that could meet its specific needs and provide a reliable overview of the financial situation in each entity. “We don’t have a significant investment property portfolio with lots of tenants and so on. We have a lot of inter-company transactions, which is a lot of work,” explains O’Reilly. Shelbourne Development wanted to implement a robust, functionally rich, flexible and scalable finance solution that would better support the operational and financial control of its operations.
Solution
The group had several aims – it wanted a single software solution across all of its legal entities, allowing for common, consistent and timely reporting. The chosen system also had to streamline and automate the intercompany matching and reconciliation process. Given Shelbourne’s strong history of making acquisitions, another requirement was that additional companies and structures could be added to the system quickly and without fuss.
From looking at the market, Shelbourne identified Microsoft Dynamics NAV as the most suitable application and the application was set up by Microsoft’s implementation partner, Ciall, a specialist in Dynamics NAV and business intelligence. The solution comprises the Financial Management module of Dynamics NAV 4.0 (SP1) and Microsoft Enterprise Reporting. It has been implemented on Windows Server 2003 and on SQL 2005.
The Dynamics NAV Financial Management modules handle a range of tasks including General Ledger, Intercompany Processing, Cash Management including bank reconciliations, as well as accounts payable, accounts receivable and fixed assets. Data is integrated from Dynamics NAV into Microsoft Enterprise Reporting, where full and sub consolidations are available, incorporating the required intercompany eliminations, FX and consolidation adjustments.
The implementation posed a series of challenges for Ciall: careful planning was needed to migrate data from the old system to Dynamics NAV. Automating inter-company postings was complex and required detailed analysis. Automation of VAT postings also posed some interesting challenges during the implementation stage, but Ciall was able to solve all of the potential problems. “It means now we don’t have any manual intervention on VAT reporting. For example, if something is posted slightly the wrong way or at the wrong level, there might be imbalances between the subledgers and the general ledger. Ciall made a subtle change to the accounts system to prevent us from doing that,” O’Reilly explains.
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“We did have problems in the initial phase but Ciall were brilliant. We’d come up with a solution, they would implement it and in a couple of days the problem was fixed.” There have been other modifications made to Dynamics NAV at various times since then. “There are always little changes but nothing fundamental to the structure of the accounting system,” O’Reilly adds.
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Benefits
Supports existing business processes
Dynamics NAV supports Shelbourne’s aggressive growth plans with the ability to quickly setup new legal entities within Dynamics NAV and manage, control and report on these new companies in a consistent manner to the existing companies within the Group. “For property development companies, it’s really about the scalability of the product. Dynamics NAV can scale to any number of legal entities and handle all inter-company processing efficiently,” says Michael Horgan, director of Ciall.
Information available quickly
Using Dynamics NAV, Shelbourne Group has fast access to the right data. This has two benefits – it allows faster decision making for the business, while helping the group to comply with a tighter financial reporting regime. It sold some equity in the business to an external party and as a result it is required to provide management reports on a quarterly basis. “Timely information makes for timely decisions and the appropriate decision,” O’Reilly points out. “I’m confident in the accounting system – in the old system you had to delve in manually. Now things are almost automatic so you can focus your effort on the real numbers,” he says. “You get the numbers in shape better; you’re better placed and have more time to focus on key decisions from an accounting perspective. You get the numbers quickly and that facilitates our new reporting regime which is significantly tighter than heretofore.”
Time saving
Dynamics NAV has streamlined the intercompany process, with entries being posted in one company and the corresponding intercompany entry being automatically posted in the counterpart company. This has significantly reduced the amount of time spent preparing intercompany reconciliations and adjustments.
Integration with Other Applications
Using Microsoft Enterprise Reporting, Shelbourne Development can quickly generate a full or sub consolidation, with all the required reports and supporting schedules. This has created the possibility of generating consolidations on an ad hoc basis, which in turn has delivered better reporting on the overall performance of the Group. “It makes you able to plan your commercial life a bit better,” says O’Reilly. “There is a general feeling of confidence in the numbers and that makes me more confident in making decisions based on the right information.”
Ease of use
Five people in Shelbourne’s accounts department use the software. “The look is very important and that didn’t frighten people away. There was a fairly strong training requirement and that was met,” says O’Reilly. Some additional training was needed at the start of last year, but none has been required for the past six months.
Flexibility
Out of the box, Dynamics NAV could do 80% of what Shelbourne Development required and Ciall was able to develop the rest, Horgan remarks. “We automated the inter-company processing and wrote reports that streamlined the management reporting process. It replaces Excel. It’s easy to modify quickly being one of the strengths of NAV.” According to Horgan, many financial software packages are like cement – once it dries, any alterations are set in stone. NAV, on the other hand, is significantly more adaptable even after initial setup. “There’s flexibility when you’re setting it up and when it is up and running there’s significant flexibility in how the application works. You can change it quite easily afterwards.”
Minimal technical support needed
Shelbourne Development has no dedicated IT staff, which is a deliberate choice, says O’Reilly. “Instead we have an IT support provider. We all have some idea of computers but there’s no expert here. In fairness, there’s never any problem with Ciall. If you’re an accountant and you’re working with the system, it’s very obvious if there’s a problem. The accounting system has never fallen over – there’s no need for any IT person to be involved. If there’s ever a problem, you can get the experts in and they’re quickly able to identify the source of the problem.” Shelbourne is helped by not having a widely distributed group of branches which would require a dedicated IT staffer.
Summary
O’Reilly is satisfied that in NAV, Shelbourne has a product that is fit for purpose and future-proofed. “We’re more of a headline, high level financial reporting company,” O’Reilly relates. “Whereas a retail company needs specific reports, we have simple needs. NAV has more than we need, but who knows where we’ll be in five years’ time? We know it will grow with us. You could get into all sorts of activities beyond property and you need to be able to handle that.” Adds Michael Horgan of Ciall: “From Shelbourne’s perspective, they now have an application that will allow them to do whatever they want going forward. The application won’t restrain their development. They’re quite a large organisation and they could go in any direction quite quickly. NAV has the functional flexibility to cope, allowing Shelbourne to focus on their business.”
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