Choosing the right accounting software package is a daunting process for any business. Gone are the days of manual accounting, shoeboxes full of receipts and tripping off to the accountant with a carrier bag full of the year’s paperwork.
The regulatory environment has contributed to the growth of the accounting software industry, with more and more packages becoming available. But this abundance is a double-edged sword – it gives you improved options but makes the right choice even more difficult.
To make the process simpler, here are the key points to keep in mind when choosing the right accounting software package for your business.
Know your requirements
First of all, decide exactly what you want from the product – not only now, but also in the future.
Make sure you have a detailed understanding of key business processes, business locations and anticipated software licensing requirements.
Then take into account the likely developments in your business over the next five years or so. The more detailed and accurate your requirements, the less likely the need for costly and time-consuming changes to your accounting software.
Knowing the likely changes lets you evaluate package expansion options at the time of your initial purchase. For example, knowing that you may have to add a payroll module when employees are hired.
An important subset of this area is understanding the reporting requirements for the business. Do you just want standard reporting facilities, or are there specific additional reports that you require to run the business?
For cost, time and ease of setting up, the key is to select a package in which most reporting requirements are standard inclusions. For the other reporting requirements, it is imperative you ensure the software provider is able to produce these additional reports and supplies cost estimations for these services.
Not all accounting packages are easily modified, and if changes have to be made they often come at a high cost. Buyers beware.
Ensure compatibility – inside and out
Compatibility is doubly important – both internally, and with your external accountant.
When examining internal compatibility, the accounting software chosen should be compatible with existing software applications that either import data into the accounting package or export data from the package for further manipulation (for example, spreadsheets). This will enhance your business efficiency.
Business efficiency and reduced costs are also why you should liaise with your business’s external accountant.
Depending upon the services provided by the external accountant, it may be beneficial to both parties for the selected package to be compatible with the external accountant’s software. This will enable increased efficiency that may translate to lower accounting fees and improved service on critical business matters. In addition, some accounting practices have purchasing arrangements with accounting software package providers that may be beneficial to the business.
Ensure tax compliance
The selected accounting software package should enable management to easily adhere to all the business’s tax compliance matters, for example GST, Pay As You Go, Fringe Benefits Tax and Income Tax. An easy reference to tax-compliant software is available on the Australian Taxation Office’s website.
It is also advisable to check with the business’s accountant, be they internal or external, to ensure the accounting software package will cover all necessary tax codes and has the reporting facilities to easily provide tax compliance information.
Know your skill level
It’s important to take into account your computer literacy and accounting knowledge, although this is less essential if an internal accountant or bookkeeper is preparing the financial data.
If this is not the case, you should assess the skills of the employees who will be interacting with the accounting software package and aim for a suitable match. Some packages are less user friendly than others and assume a certain level of accounting knowledge. If there is a mismatch, the financial data mess that may arise will be detrimental in terms of money and time. Again, buyers beware.
Consider IT infrastructure
Does your business have the existing IT infrastructure to support the accounting software packages being considered?
Although it would be detrimental to limit choices to packages that could be currently supported, you need to assess the cost of upgrading your existing IT infrastructure against the benefits that may be obtained across the business. But you should not upgrade the company’s IT skills solely to support an accounting package.
Check out their reputation
There is no point investing money in a product if the company that makes it isn't going to be around in a year or the product quickly becomes obsolete.
Make sure you thoroughly investigate the accounting software provider. As part of this investigation, determine the provider’s history, financial status, reputation, service offerings (including installation, support and training, service area, cost) and warranty provisions.
In addition, check the product’s current status to ensure the provider has no plans to supersede it. And also ensure the provider offers regular upgrades to the accounting software package for tax, accounting standards, corporations law and IT infrastructure changes.
Mistakes to avoid
Clayton Oates of QA Business goes further and recommends a key list of things not to do:
- don’t rush into a decision
- don’t overcomplicate the process
- don’t select an accounting software provider who fails to understand your business and the questions you ask
- don’t shortcut the due diligence process of following up on referrals provided by the software provider
- don’t underbudget the total cost of ownership
- don’t have #ff0000 internal and external installation, running and maintenance relationship responsibilities
- don’t consider the process complete once the software is installed, running and a maintenance regime has been activated. Your business will change over time. This translates to new possible opportunities for the accounting software package to be utilised in different ways, affecting business efficiency and improvements.
A good place to start
The annual CFO Business, Finance and Accounting Software Guide is a good first place to look.
The guide contains a summary of some of the accounting software packages available to small and medium enterprises. It also outlines components of the above details and other additional information to help when evaluating such packages.