Ep 62 | Interview with Robert Hallberg | A Shot of Business Central and A Beer
Updated: Jul 31
A Microsoft Dynamics 365 Business Central podcast | Episode 62 A Shot of Business Central and A Beer
Welcome to Episode 62 of A Shot of Business Central Podcast! Join hosts Ken Sebahar and Michael Intravartolo as they dive into the latest Business Central news and have an engaging conversation with Robert Hallberg, Managing Director at BMO Commercial Bank. With over 25 years of experience in the commercial banking industry, Robert will provide valuable insights into the role of technology and ERP systems in lending decisions and share how banks view commercial loans for new technology and ERP implementation projects. Plus, they'll be enjoying Schnickelfritz Bavarian-Style Weissbier Ale Beer.
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A Shot of Business Central and A Beer Podcast Show Notes
Beer we're drinking
Shot of Business Central (News)
Business Central 24.1 Update
Platform Hotfixes – 15
Application Hotfixes – 59
Localization Hotfixes - Many
North America – 2
Feature Changes
This enhancement allows AL developers to build more flexible and user-friendly interfaces in Business Central. By setting up specific actions, users can upload multiple files simultaneously, boosting efficiency.
This feature is especially useful for developers creating applications or customizations that need users to upload several files at the same time.
Adding Fields to Business Central Pages
Assumption with Business Central 2024 Release Wave 1: All fields would be available to add through Personalization feature.
Reality: You can add fields but it must be done by modifying roles. Very cumbersome and requires a developer in most cases.
Question: Are the fields added by modifying role read only?
Robert Hallberg Interview
Contact Info:
Robert F. Hallberg
Managing Director
BMO Commercial Bank, U.S.
Office: 630.920.6942
Mobile: 630.841.9383
e-mail: Rob.Hallberg@BMO.com
Visit us online at: https://commercial.bmo.com
Introduction and Background
Q: Can you tell us a bit about your background and your career in commercial banking?
A: I’ve been in Commercial Banking 28 yeas, all focused on serving privately held Middle Market Companies which I generally define as those with Revenues of $20MM or higher. I certainly have a few clients below $20MM but by and large, I focus on the upper end of the range. What I enjoy most is that fact that I get to deal with founders, entrepreneurs and family businesses with multiple generations working in the business.
Q: What motivated you to focus on the small-to-mid market segment, particularly in manufacturing and distribution?
A: As noted above, the fact that I get to deal with passionate owners and their teams, means a great deal to me. I can establish great working relationships and actually have a small role in their success. I love advocating for my customers and providing them the best financial advice, products and services to help their businesses thrive. Nothing comes easy for these business owners and when you do right, they are fiercely loyal!
Experience with ERP Implementations
Q: From a banker’s perspective, what are the key factors you consider when a client asks for funding to implement an ERP system?
A: Generally speaking, the collateral to support ERP Financing is largely intangible in that it can’t be easily liquidated if liquidated at all. In most Financing “asks”, there is collateral in the form of Accounts Receivable, Inventory, equipment or RE that “supports” the ask. As such, we just have to rely on identifying Cash Flow to support the “Ask”. When you are funding an ERP system for a company, you are really only left with Cash Flow….Will the company’s Cash Flow support this ask along with all their other debt obligations. This is precisely why we dive deep into these requests to make sure the plan and process of selecting and implementing the system is solid. Like Ken notes in his book…there is a common 1:1 or 2:1 ratio you need to consider when setting an ERP budget. For every dollar spent on the system, there will be a dollar spent on consulting. 2:1 for a fully integrated system. While we want companies to get a fair deal, going cheap or with the lowest cost almost always leads to cost overruns etc.
In my earlier days, panic often set in right away LOL. All kidding aside, the keys to underwriting a companies financial performance, hinges around properly identify risks, mitigating said risks and supporting the credit ask with reliable financial statements and data.
Q: How does the evaluation process for an ERP implementation compare to that for other major investments, such as building a new facility or warehouse?
A: Cash Flow is key for every major investment. The size of an ERP investment vs buying or building a new facility is likely smaller but the time frame upon which a company will need to “pay off” the ERP debt is far shorter due to the collateral example I outlined below. Buildings and equipment are long lived tangible assets that can be liquidated far easier than technology.
Q: Can you share any stories or examples where an ERP implementation significantly impacted a client’s business, positively?
A: Many examples but one stands out. Very successful family owned business that transitioned to the patriarch’s children. Little was done from a technology standpoint so the company, while in good hands, was not running efficiently or profitably. They laid out a case for what needed to happen and did a ton of research to demonstrate how their investment and a full ERP system, would allow them to “compete” and operate better and more efficiently. They were able to reduce redundancy and get their staff focused more on their core competencies that allowed the company to succeed.
Risk Assessment and Management
Q: What risks do you associate with ERP implementation projects, and how do you mitigate these risks when evaluating loan applications?
A: Main issue is the budget and whether that will hold. We have to have contingency plans in place if there are cost overruns so need to understand where the overruns will be funded. Additionally, data integrity will be interrupted so the receipt of timely and accurate financial data could be impacted. Again, we have to ensure the company has both a solid implementation plan in place and the right people running the process. I’ve yet to see a company perform better in years they are implementing a new ERP so we have to prepare our credit teams for the possibility and avoid surprises. All of these are mitigated or partially mitigated by clear and concise communication at the outset as well as the trust we’ve built with our client. The business owner and their team know better than me “when” they should pull the trigger on an ERP implementation so my job is to make sure I’m asking the right questions to determine if and how I can help from a financing perspective.
Q: How important is it for a company to have a robust technology plan when seeking financing, and what role does their choice of ERP system play in your decision-making process?
A: The plan is key. We rely on that roadmap to validate their financial performance. If they can’t articulate a clear timeline and process, we’re likely less inclined to finance the project. That said, we also understand timelines change and even budgets change. Communication is key and that’s all we can really ask for. In terms of the choice, we are indifferent in many respects. Again, we have to trust that our clients are following a plan to select the right system. The value I bring is to make sure I’m asking questions and speaking up when something doesn’t make sense. I am by no means an expert but have seen enough to know when a plan seems overly optimistic.
Q: How do factors like cyber-security and IT service providers influence your assessment of a client’s technology and overall business risk?
A: These are becoming mission critical topics. We’re fortunate to bank a few clients that are experts in this line of work so can refer our clients as needed. Simply put, financial bank fraud is one of our top concerns so it’s absolutely critical that our clients “invest” in their infrastructure. Thankfully, our clients are pretty darn good about investing in all things IT these days.
Financial Data and Compliance
Q: What types of financial data do you typically request from companies to ensure compliance with loan covenants?
A: Most common are monthly collateral reports (AR and Inventory agings), Accounts Payable agings and monthly financial statements. There are occasions where we may need weekly or bi weekly collateral reporting. The quality and accuracy of these items have to be high although we recognize there is always a risk for modification. That said, reporting has to be timely (within days of month end) and any corrections have to be escalated quickly.
Q: To what extent, if any, does the technological situation of a customer factor into the services you offer them?
A: We’ve had to pass on real nice opportunities simply because we didn’t or couldn’t trust the reporting data. Poor quality or integrity is an absolute deal killer.
Technology and Innovation in Banking
Q: How is AI being used in commercial banking? Do you see it playing a role in assessing or managing loans for ERP implementations?
A: AI is being used in the underwriting process, the financial risk modeling process and likely in many more situations above my pay grade. It’s definitely not going away and something we have to continue to evaluate, understand or seek to understand. I can’t think of an example but have to believe AI is and will continue to be used in managing loans for ERP implementations.
Advice
Q: What advice would you give to companies considering an ERP implementation from a financial perspective?
A: Read Ken’s book, The Executive Guide to Implementing Accounting Software. All kidding aside, ERP’s are a major investment. You have to approach the “Financing Ask” carefully and present both a realistic funding request and demonstrate that you have reserves in place to support the unknowns. It’s not necessarily the banks job to finance these types of requests given the intangible nature. It is however, possible to do so, just as long as you can demonstrate the need.
Q: How important is it for businesses to have a good relationship with their banker when undertaking a project like ERP implementation? Maybe this no longer matters anymore because of banking industries checks and balances?
A: Its absolutely central to any loan request. Relationships drive the day as we know there will be hiccups along the way with any bank relationship. Things go poorly every day and its key that a banker can trust their clients to raise issues in advance without fear of repercussions. ERP implementations, despite terrific planning, can and will go poorly so we have to step up for our clients when it may not be the most opportune time to do so. We do that because of our relationships.
Outro
Well, you’ve reached the end of another episode of A Shot of Business Central and A Beer podcast. Connect with us at www.solsyst.com and on all major social media channels. Also, don’t forget to subscribe to the podcast so you always know when the latest episode is available.
See you next month!
