Understand your current setups positives and negatives
The first thing to do when considering a switch to new software is to look at your current setup. Does it make sense to replace your current way of accounting? Let’s take a look at a few of the different options:
- Continue with an off the shelf bookkeeping program. It is likely that, like most small businesses, you are currently using some sort of small business accounting program that was purchased off-the-shelf or online. You set up the software yourself and trained yourself how to use it. What’s nice about this software is it was very cost effective and handled the basic needs of the business. These relatively easy to use, intuitive systems are good for many companies as they start but are not industry specific and have other performance limitations.
- Manual accounting. Perhaps you are currently doing everything manually. Using a paper chart of accounts or checkbook, handwriting sales orders, and tracking inventory on a notepad or through Excel spreadsheets. When sales volumes and outgoing expenses are low, this can be the easiest and most effective approach. As transactions increase and business picks up, this setup very quickly can become both prone to errors and inefficient.
- Outsourcing accounting to a provider. Outsourcing can be attractive because it allows you to focus on your business and pass the duties to an accounting/bookkeeping firm. What better way to do accounting than have an actual accounting or bookkeeping firm do the accounting for you? Outsourcing the bookkeeping allows you to focus on your customers rather than worry about your books. However, the data you are receiving from the accountant is not real time. Plus, you are not free from all of your responsibilities. You still need to track your inventory, your job costs, your daily sales and provide that data to the accountant. As your business picks up, outsourcing accounting can become increasingly more expensive and prevent you from exercising a stronger measure of control on your company’s financial performance.
9 reasons to improve your small business accounting software
While every business is different, there are a number of common root causes that very often form the reasons to consider a switch to a more capable program.
- Slow processing. Most off-the-shelf programs have closed database systems with a set number of records. General transaction processing such as creating an invoice, entering a customer name, setting up a vendor file, or logging an inventory sku creates a record. Eventually, you’ll run into the record limit. Even before that, as you start to reach the limits of the database file, performance degrades and can increase the amount of time it takes for you to access the information. At a certain point, you will need to actually remove data to accommodate new data without sacrificing performance. This can impinge on your ability to access data you need to make effective business decisions.
- Reporting Limitations. Sales reports, job costing/tracking and departmental reporting are often times more comprehensive reports not found in basic solutions. Additionally, many companies will find they need the ability to customize reports unique to their operations. Most entry-level systems have weak reporting mechanism. Exporting data to spreadsheets for further reporting is an option, but it is a fairly inefficient one that creates issues with data integrity and allowing for easy access to key business info.
Audit Trail. Most entry-level bookkeeping programs make it very easy to change data. It’s often a matter of just accessing the relevant field and updating it. Generally, no record of this change is maintained. This can be convenient, but there is a security cost. More robust software solutions do not allow you to make a change without creating an audit trail. To make adjustments, you need to make a correcting transaction to maintain the audit trail.
Why maintain an audit trail? Simply put, compliance, security and reduction in errors. Maintaining a trail of who made what changes holds users accountable to their bookkeeping activity. Everyone makes mistakes so you can track those mistakes to prevent them from happening again.
Many auditing firms that audit financials for government or nonprofits frown upon off-the-shelf software due to it’s lack of controls and auditability. In certain industries, it may prevent you from winning bid work, if you are not able to demonstrate the ability to create a reliable audit trail.
Multiple Users. One of the biggest reasons for upgrading to the next level of software is the ability to add users. Going from a one user system to a two user system can make the world of difference in how your company operates. Off-the-shelf solutions will often times allow for multiple users, however, there is often a startling lack of user-based access control.
Solutions that provide user-based access controls allow you to restrict access to just the areas users need to be able to access to perform their job duties. This restricted access helps to prevent errors and reduce fraud.
- Industry Specific. Off-the-shelf solutions include basic functionality, which is great for processing money in & money out, but often lack functionality for tracking job costs, scheduling work, managing inventory, or controlling purchasing processes. Additionally, these off-the-shelf solutions do not “talk the talk”, meaning commonly used industry phrases are not common in these basic solutions.
Automation opportunities for increase efficiency. Automation is another big reason for switching to a new software solution. Many smaller firms supplement their bookkeeping software with Excel spreadsheets. While this setup may help, it still requires double entry of data, and is prone to errors. A fully integrated program with added functionality can help you save time in processing transactions in the software.
One of the best exercises for any company considering a more capable program is to quantify the labor savings of reducing administrative labor spent on bookkeeping by, say, 5, 10, 40, or 100 hours a week—depending on your company size. You will be surprised by how little time weekly really needs to be saved even to push annual savings into the tens of thousands of dollars.
Integration issues. The nice thing about building a piecemeal system is the initial investment is often low when the functionality is added. However, in the long run, integrating multiple programs can be more expensive and impractical to maintain.
Buying two programs that integrate now is great, however, when one of those programs needs to be updated, those updates often change the integration with other programs. This requires you to upgrade all programs, create new integration points. Choosing to upgrade all of the programs can be an expense you were not prepared for.
Support. Think about the times you have needed support on the software. Did you call an (800) number that was provided to you and were put into a call center? Have a quick question about how to record a transaction or create a certain report? Off-the-shelf solutions often do not provide the kind of support you need.
Now, you may have never used support or may say, “if I need support, the program is too complicated.” But in reality, even off the shelf solutions require support. More importantly, the support vendor is there to help you setup the software in a way that is conducive for your business. An incorrect setup can cause many problems with the way the software operates and the information you are trying to pull out. Calling support for one of those smaller packages may take hours or days. Buying software from a dedicated reseller provides you a representative that you can reach out to, and often times they can be local as well.
- Scalability. At the top of this article, we mentioned the growing pains you may be experiencing. To address those growing pains, not only do you need to find the right software to meet your current needs but also accommodate future growth. You are already at a point where your current setup isn’t meeting your needs. It is important that you don’t end up in this situation again in a year or two because, once again, the software you chose does not meet your needs.