This article is relevant if you are dealing with a complex IT systems architecture and facing difficulties with information synchronization, poor inter-department coordination and reporting.

Background

The CFO of a fast-growing $100 million USD retailer in the soft goods industry approached us for expert NetSuite support. They were relying on NetSuite to manage their financial accounting, but the CFO was struggling to close the books on time and provide accurate financial reports to the executive management team.

During our initial discussions, we discovered that the company was using a homegrown eCommerce system based on Solidus and had recently started adopting Amazon as an additional sales channel. They had also opened new retail stores and were considering expanding into other channels, such as Nordstrom.

We learned that they were using ShipStation to manage shipping and receiving at their local warehouse but were exploring third-party logistics warehouses to optimize shipping costs across the United States. They are also considering options for shipping internationally.

The Customer Support team felt they had wisely chosen Zendesk to handle customer inquiries. Additionally, they were close to selecting HubSpot to manage lead generation and develop a customer master database as part of their ongoing initiatives.

This highlighted that their business operations were not primarily driven by NetSuite. Once I saw that the CFO had sufficient trust in our NetSuite expertise and accomplishments and that we could satisfy their NetSuite-related accounting concerns, I was able to introduce him and his organization to a different perspective on systems architecture.

Distributed Systems Architecture Orientation

In my subsequent discussions with the CFO, I pointed out that they had a distributed systems architecture. This architecture emerged from the company’s rapid evolution since its startup phase approximately four years ago.  While some IT folks would be proud of what they put together, I am cautious about its implications.

Given that the company’s primary sales channel was eCommerce, they had assembled a technical team of software developers to build out the capabilities of the Solidus eCommerce system. Out of necessity, they believed they were on the right track when they selected the Boomi third-party integration tool, as it offered prebuilt connectors between popular software platforms. To provide management with the operational information needed to drive decisions and evaluate business performance, the technical team also built a data warehouse using Google’s Looker software on top of Amazon’s RedShift database.

Once they were ready to listen to new ideas and contemplate alternatives, we guided them toward a new, highly scalable model. The following section of the article outlines this journey in a general way.

NetSuite’s Follower Role in a Distributed Systems Architecture

With the client’s background situation in mind, I outlined an all-too-familiar systems architecture that we frequently see with clients who approach us after going live on NetSuite.

In this architecture, the Accounting Department is the primary user of the NetSuite system, primarily focused on financial accounting. The department is often in a constant state of “catch-up” as they try to keep pace with the business operations. Here are some common challenges we hear from the Accounting department:

1. Product Margins: It’s difficult to measure product margins because costing information is in the purchasing system, inventory data is in the shipping systems, and revenue is in the NetSuite system.
2. Product Information: There is no central product master. Each sales system uses its own set of product codes, and the accounting team has to harmonize these codes when accounting for revenue.  It is demanding to produce detailed product sales and margin analysis.
3. Customer Segmentation Sales: Breaking down revenue by different channels and geographies is challenging because the data feeds lack the necessary detail to segment the information effectively.
4. Inventory Value: Determining the value of inventory is difficult because the inventory ledger is spread across multiple systems. Count practices are inconsistent, and returns are not well accounted for.
5. Accruals and Matching: Assessing the purchasing cycle is problematic due to a lack of visibility into goods acquired overseas, especially with long lead times for products “on the water.” Capturing all shipment details is challenging, leading to cutover issues that affect income-cost matching and result in margin variations in financial reports.
6. Cash Operations: Reconciling bank accounts is demanding. Payment feeds from different sales channels vary, with some funds arriving net of services and transaction fees while others come in at gross. The accounting team often feels they are always catching up when trying to reconcile shipment details.

It’s no wonder the Accounting team expresses these concerns.  It has something to do with their systems architecture and their business operations.

The Business Operations View in Distributed Architecture

In discussions with the business operations team, they generally express the following concerns:

1. Inventory Management: There’s no central inventory ledger to track the overall inventory on hand, making allocating inventory to specific channels challenging. Spreadsheets are often used to manage this process.
2. Demand/Supply Planning: The team relies on spreadsheets to determine what to purchase from overseas factories. After manufacturing, they then figure out how to distribute the goods to various inventory locations to supply each sales channel.   This situation is much worse for manufacturing organizations because of the need for Materials Requirements Planning (MRP).
3. Order Operations: The business operations team feels a strong dependency on the IT group to keep everything running smoothly. The IT Department frequently discusses the need for an Order Management System (OMS) to better control order flows from sales systems to fulfillment systems.  Naturally, the IT’s approach is to get “yet another” application to solve the concern.
4. Customer Support Inquiries: Customer support staff must access multiple systems to answer questions. Most inquiries involve exchanges for incorrect sizes or styles, making it crucial to optimize systems for easier requests and order change handling. Additionally, preventing fraudulent shipments is a priority.  To provide good customer service, store credit or nominal cash refunds are often issued at their discretion.   These become yet another matter that is difficult for the Accounting Department to reconcile.

These challenges represent a range of issues commonly encountered in this type of distributed systems architecture.

NetSuite in a Hub and Spoke Architecture

In our client discussions, we strongly advocate for a centralized architecture where NetSuite plays a leading role in managing all transactional authority. While NetSuite’s core strength lies in its respectable financial capabilities, its true potential lies in running nearly all major aspects of the business. By how the subscription service offering is sold, NetSuite can be made to activate most of the essential operational elements, though they require proper implementation to realize their full benefits.   Organizations that only activate accounting are indeed paying for more services but not getting the total value.

In this model, we position NetSuite at the center—the hub—of the architecture, with other systems acting as spokes. Each spoke system should be dependent on this central hub. The critical shift here is to align business operations with this model, ensuring that NetSuite is the authoritative source of truth. We emphasize the following key principles:

1. Master Information: Products, pricing, vendors, and customers should be defined within NetSuite, even if they originate in other systems. Once these records are established in NetSuite, they are considered the master data. We focus on eliminating duplicates, ensuring data quality, and then feeding this authoritative information to other systems as needed.
2. Transaction Authority: Information becomes actionable only once it is recorded in NetSuite. Transactions, regardless of their origin—whether from an eCommerce system or elsewhere—must be brought into NetSuite before any further action is taken. Any changes to transactions should occur within NetSuite. Other systems should reference or sync with NetSuite but not allow edits within those systems once the data is captured in the NetSuite central hub.
3. Planning Commitments: With master data and transaction authority centralized in NetSuite, the system becomes the foundation for demand and supply planning. Commitments to any action—such as purchasing from factories—are recorded in NetSuite first. This ensures that all planning and communication with third parties are based on the most accurate and up-to-date information.  We work to avoid taking action unless we record it first in NetSuite.

By adhering to this hub-and-spoke model, businesses can leverage NetSuite’s full potential, ensuring that all critical operations are centralized, controlled, and synchronized across the organization.

Click to see an image of this architecture.

Business Operations Lead, Accounting Influences

When we embrace a centralized architecture enabled by NetSuite, we enter new and more productive conversations with business operations. Here’s how this shift in mindset impacts various aspects of the business:

1. Scalability: The goal is to design operations to allow the business to grow without a proportional increase in resources. I often advocate for exception-based transactional patterns, which we can enable using license-free tools. These patterns allow teams to focus only on transactions that require attention, automating routine tasks and freeing up resources. For more on this approach, please refer to this article: Learn How to Build Scalable NetSuite Sales Order Practices.  Here, we offer a license-free framework that almost every one of our clients adopts when they are committed to true exception-based processing.
2. Centralized Business Rules: We aim to centralize business rules within the NetSuite system, reducing the decision-making burden on other systems. For example, we don’t want the eCommerce system to determine which warehouse should fulfill an order, nor should third-party logistics warehouses decide which orders they can fulfill. NetSuite should handle these decisions centrally, ensuring consistency and efficiency across the organization.
3. Information Reliability: Information reliability is paramount in a well-executed centralized architecture. Any instance of stale data should raise concerns about our record management practices. We must be vigilant in maintaining up-to-date and trustworthy information across departments to avoid missteps that could damage trust with customers or other stakeholders. Poor information upkeep is frowned upon. We are all responsible for good recordkeeping.
4. Accounting Influence: Business operations should be informed by accounting principles, particularly accrual accounting, which ensures that operations align with the actual transfer of property rights. When the Accounting Department collaborates closely with Business Operational leadership, both can ensure accurate and timely financial information. This collaboration prevents Accounting from feeling like it is constantly “chasing” operations and allows it to focus on strategic financial control.  Good accounting controls also are reinforced by strong operational practices.
5. Real-Time Business Reporting: In a centralized architecture, the need for a separate data warehouse is called into question. If the architecture is implemented correctly, all necessary information is already connected and accessible, eliminating the need to consolidate data for decision-making. NetSuite’s reporting tools and built-for-NetSuite add-ons might be sufficient to query the operational database in real time. In this model, a data warehouse serves more for convenience than as a necessity for centralized information.

By adopting this approach, we shift from a reactive, siloed operational model to a proactive, integrated one where NetSuite serves as the backbone, driving scalability, reliability, and strategic alignment between business operations and accounting.

Click to see the image full size of this architecture.

Idealized Centralized NetSuite Architecture

In our experience, clients generally embrace the NetSuite-as-a-Hub model once they understand it. However, the most common complaint we hear is, “We don’t like the user experience in NetSuite.” This is a valid concern, as user experience is subjective and influenced by the market’s ever-evolving standards.

Despite this, the power of the NetSuite platform means we are never truly stuck. We indeed have full control over the situation. Our firm specializes in creating high-performance applications on NetSuite, leveraging the platform’s capabilities to deliver exceptional user experiences—whether it’s speed, mobile access, or customization tailored to user preferences. For example, this article Take Control: Watch How NetSuite can be Amazingly High-Performance!, illustrates how it’s entirely possible to create an outstanding user experience on NetSuite.

In this centralized model, being cautious about not adopting built-in NetSuite functionalities is crucial. The total cost of ownership for a hybrid or distributed architecture can be significant due to the complexity and additional costs it imposes on the organization. With a centralized approach, we require fewer IT skills, reduce the number of vendors to manage, and minimize the risk of data synchronization issues.   Using the built-in capacities reduces the risk of software instability situations.  This streamlined care pattern lowers overall costs while enhancing effectiveness and efficiency.

Achieving this centralized architecture requires a cultural shift within the organization, one that is committed to realizing its benefits. The good news is that this approach fosters better cross-departmental communication and coordination, promoting a shared worldview that enhances customer trust and strengthens harmony among staff.

Please click the image to see a more idealized view of NetSuite’s architectural role.

Centralized Business Operations and Accounting on NetSuite

While the benefits of a centralized NetSuite architecture are compelling, they won’t be realized without dedicated effort. Strong leadership is crucial, as the shape of this system architecture will significantly influence organizational culture. Coordination and a focused commitment (meaning, creating the capacity to act) to the goal are often why many organizations fail to achieve this model—they simply do not invest the necessary resources and time to build it. I discuss this challenge in my early 2012 article, Is Break-Fix Mentality Preventing Advanced Growth?.

Our firm is considered best-in-class for these types of initiatives. Achieving consistent success in implementing this kind of architecture requires a robust methodology that drives business conversations, NetSuite expertise, and project management acumen to deliver the optimal solution. This approach demands an investment mentality focused on the long-term returns resulting from scalability and lower operating costs.

For organizations like our $100M soft goods client, in due course and available for reference, we successfully transitioned them from using NetSuite as a follower system to making it a leader in their operations. The transformation has been so effective that they will never look back—it was an achievement earned through strategic investment and leadership.

If you found this article relevant, feel free to sign up for notifications of new articles as I post them. If you are ready to take on a new NetSuite implementation or prepared to produce greater value from a centralized architecture, let’s have a conversation.

Marty Zigman

Holding all three official certifications, Marty is regarded as the top NetSuite expert and leads a team of senior professionals at Prolecto Resources, Inc. He is a former Deloitte & Touche CPA and has held CTO roles. For over 30 years, Marty has produced leadership in ERP, CRM and eCommerce business systems. Contact Marty to set up a conversation.

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