White Paper: How to choose an accounting system

Sponsored by Sage

The challenges to successfully choosing, installing, and implementing new accounting software are many. But so are the opportunities—to gain greater control of your organization’s financial affairs, to make better decisions, and to improve cash flow, among others.

The remainder of this guide describes the six steps to successfully selecting accounting software:

  • Involve the right people.
  • Define the challenge.
  • Choose a consultant.
  • Evaluate application performance.
  • Choose a software vendor.
  • Implement the system.

Involve The Right People
Your accounting software generates information used throughout most of your organization. That’s why choosing
new software shouldn’t be delegated to a single department or manager. Participation across functional groups will help you select, implement, and use the best possible financial software solution.

There are, in general, five groups of people who should be involved in the selection process:

System Users
These are the people who will use the software daily. They need the software to be user-friendly, logical, and efficient.

System Managers
Managers supervise the system users. These system managers must understand the financial information and reporting needs required by upper management, and then direct system users about how to effectively use the system.

System Customers
Financial information customers can be found throughout the organization, in every department and at any level. These people rely on the reports, summaries, and other
data generated by the accounting system to make decisions and otherwise manage their particular group or department. System customers may not necessarily understand
accounting fundamentals, but they do require the information supplied by the software.

System Sign-offs
These are the people who must give final approval to acquire the system. Typically this group includes representatives from Information Systems (IS), accounting, and the executive management team. The company president or CEO may play a prominent role in selecting the system, or may delegate this task downward.

IS Staff
Representatives from the organization’s IS staff should be closely involved in the accounting software selection process and typically play key roles in the software’s installation and ongoing upkeep.

Make a list of the challenges you are currently experiencing. Then create a second list of what you’d like to do but are unable to do now. This information should become your core list of requirements when evaluating new accounting software.

Prioritizing Your Automation
Most organizations automate their business in the following order:
1. Word processing
2. Billing, accounts receivable
3. Accounts payable
4. Inventory control
5. General ledger
6. Sales order entry
7. Payroll
8. Purchase orders
9. Desktop publishing
10. Spreadsheets, forecasting
11. Custom-management reports

Five years after automating, companies were asked to rank applications from most to least beneficial. Here’s what they reported:

1. Information for management decision-making (spreadsheets, custom reports)
2. Information for cash flow planning / forecasting (sales orders, purchase orders)
3. Billing and accounts receivable
4. Inventory control
5. General ledger
6. Payroll
7. Word processing

Notice that what most people consider basic accounting (general ledger) is way down the list of desired benefits.
Information management, on the other hand, is at the top of the benefits list.

Other questions to ask:
What data do I need to make strategic decisions?
This could include results from budgeting and modeling your business. It might include current gross profit by
product, customer, or salesperson. You probably want to predict which customers and products are growing and
which are declining. You may want to use financial ratios to measure your company’s performance against competitors. Your general ledger can show key profit and cost center performance against budget to help you evaluate each group’s effectiveness.

What do I need to forecast and control my cash flow?
Because cash is the lifeblood of a business, forecasting cash flow should be a key element of your accounting
system. Sales order and purchase order tracking will also be invaluable, since they provide advance information
about future cash inflow and outflow. Other elements that affect cash, which must be accurately monitored, include
manufacturing workflow, shipping, receiving workloads, and the movement of materials.

What information do I need to manage my assets?
Accounts receivable and inventory are often the principal financial assets of a business. Most of your company’s cash is tied up in these assets, so small swings in the amount of either of these two can have a huge impact on your cash flow. Your payback from exerting more control over your assets is easily visible and immediately apparent.

What should I automate to grow?
Many businesses automate for the wrong reasons, or computerize functions that offer little payback. First, apply your resources to the areas with the most benefit to your bottom line. You can determine these areas through careful study and analysis of your accounting system.

How flexible can we be?
It makes sense to consider accounting software that has been created specifically for the general size of your business. Even following that general guideline, however, realize that few organizations use accounting software “as is.” Most businesses customize one or more aspects of their accounting software. Those organizations that are most adaptable and attempt to integrate the most customization and flexibility will receive the most out of their accounting software solution.

You shouldn’t have to change the way you do business to suit your accounting package. Make sure the accounting solution you choose is flexible enough to adjust to your business requirements.

Choose a Consultant
It’s possible that your organization has the internal staff to successfully implement your new accounting
system. It’s more likely, however, that you don’t have the people or time resources—or expertise—to devote to analyzing, purchasing, installing, and maintaining a system.

A software consultant can help considerably. Consultants have special expertise—they’ve been through the purchasing and implementing process many times. And while they charge fees, they can help your organization in three significant ways:

1. Evaluate and select the best accounting system for your organization.

2. Save time and money during system installing and subsequent training.

3. Get the most out of your new system based on the system’s capabilities and your organization’s requirements.

Some of the best consultants are accounting software resellers. Most accounting software products are purchased through resellers. Therefore, they can focus their complete attention on helping you automate business systems. Software resellers have a valid stake in your
organization’s success, as they want to continue servicing your company in the future.

Finding a Consultant
There are many ways to find qualified accounting software consultants. Here are a few proven ideas.

  • Ask your IS department for recommendations.
  • Ask colleagues for suggestions.
  • Attend an accounting industry
    tradeshow or seminar.
  • Review accounting publications.
  • Talk to your business associates, particularly in your industry.

The Ideal Consultant
The ideal consultant to work with is someone who has reviewed and installed accounting systems at businesses similar in size and scope to yours. To learn what types of organizations a consultant has previously assisted, simply ask.

Here are some questions to ask a prospective consultant or reseller.

Can the reseller provide references?
Ask for contact names and phone numbers, then call to learn as much as possible about the customers’ working relationship with the reseller.

Can the consultant provide a complete service package Critical elements of any software implementation are product training, technical support, and future maintenance and upgrading. Look for a reseller who wants to assist you not only with the immediate sale and installation, but also with long-term training and service.

Does the reseller listen effectively?
This question separates the true consultant from the person peddling a product. To make the best recommendations for your organization, a reseller must first learn about your organization—including its current capabilities and those missing (but required) items or functions. Has the reseller attempted to learn as much as possible about your organization? Has the reseller spoken to more than one person within your company?

Does the reseller communicate clearly?
Be wary of resellers who spend all their time discussing features—what a program does. Your focus during
discussions with a reseller should instead be directed toward what benefits the accounting software can bring to your organization.

Do you think you can work with the reseller?
While purchasing accounting software is a business transaction, you’ll be working closely with the reseller over a period of days, weeks, maybe even months. Hence, it’s important to find a consultant who you enjoy working with, who is a good fit with your company’s philosophy and culture, and who you feel will provide the necessary expertise and consultation in a professional way.

Evaluate Application Performance
Once you have selected a reseller or consultant to work with, take time to review specific software applications.
Here’s a secret most accounting software companies won’t tell you: the vast majority of accounting programs perform basically the same functions. Naturally, how they do specific tasks varies greatly. Does this mean you can’t go wrong when it comes to choosing accounting software? Not really. There are substantial differences among programs, what kinds of information they deliver, and the companies that create accounting software.

Speed of Installation
Installing new accounting software is a major undertaking. A key issue to understand is how quickly and efficiently the new software can be installed. In general, the longer it takes to install the software, the more costly the installation process becomes—and the more possibility for errors or other interruptions to your core business.

Does the reseller listen effectively?
This question separates the true consultant from the person peddling a product. To make the best recommendations for your organization, a reseller must first learn about your organization—including its current capabilities and those missing (but required) items or functions. Has the reseller attempted to learn as much as possible about your organization? Has the reseller spoken to more than one person within your company?

Does the reseller communicate clearly?
Be wary of resellers who spend all their time discussing features—what a program does. Your focus during
discussions with a reseller should instead be directed toward what benefits the accounting software can bring to your organization.

Do you think you can work with the reseller?
While purchasing accounting software is a business transaction, you’ll be working closely with the reseller over a period of days, weeks, maybe even months. Hence, it’s important to find a consultant who you enjoy working with, who is a good fit with your company’s philosophy and culture, and who you feel will provide the necessary expertise and consultation in a professional way.

Evaluate Application Performance
Once you have selected a reseller or consultant to work with, take time to review specific software applications.
Here’s a secret most accounting software companies won’t tell you: the vast majority of accounting programs perform basically the same functions. Naturally, how they do specific tasks varies greatly.

Does this mean you can’t go wrong when it comes to choosing accounting software? Not really. There are substantial differences among programs, what kinds of information they deliver, and the companies that create
accounting software.

Here are several of the key elements to consider when reviewing various accounting software solutions.

The Company
Are you familiar with the company that makes the software? Is it a respected name in the accounting software industry? How long has it been in business? What is its vision for the future, in terms of its own products and the accounting software industry as a whole?

These are just a few of the many questions you should attempt to answer regarding the manufacturer of each
accounting program under consideration. Obviously, you don’t want a “here today, gone tomorrow” organization.

Scalability as a Product
Scalability is a fancy word for a simple concept: can your software expand as your business grows? There are two elements to a product’s scalability. The first is scaling up—does the software manufacturer have a family of products that your organization can upgrade to over time in a logical, easy, and cost-effective manner?

When considering future upgrades, ask these questions:

  • How easily and quickly will existing data convert to the new version?
  • Will the interface of the different software products remain the same? (The same interface significantly reduces the amount of training needed.)
  • What price incentives, if any, are offered to current customers who want to upgrade?
  • Will customized reports and other customized features run when the new software is installed, or will these be lost? The other element to consider is whether the family of software allows for scalability out—can you add elements to enhance the existing software? The best software solutions allow scaling out by offering:
  • Numerous optional modules in addition to core modules.
  • Third-party products.
  • Availability to customize functions, reports, etc.
  • Web store and/or e-business capabilities and integration.

Globalization
With the emergence of the Web, almost all companies will become global companies, in that they will buy and / or
sell products in countries around the world. Here are key questions to consider regarding how global the accounting company and software are:

  • Are multicurrency options supported?
  • Does the company sell and support products in the countries in which you do business?
  • Is the software available in languages other than English?
  • Can the software deal with the various taxation and reporting requirements of these countries?

Other Factors
Other key elements to consider when reviewing accounting software solutions include the following:

Capacity
This refers to the software’s limiting characteristics. What is the maximum number of customers, vendors, or inventory items it can handle? How many line items can be included in a single invoice, sales order, or purchase order?

Reporting Capabilities
Does the software already have the capability to produce the reports that your organization requires? If not, can
customized reports be created with a minimum of time and added effort?

Ease of Input
You want a system in which information can be entered quickly and efficiently: full-screen editing, embedded help
systems, clear prompts, etc. You also want a system that does not require excessive mouse use, slowing down entry of information by continually forcing the user to switch between keyboard and mouse.

Data Validation
How good is the software at preventing mistakes from being entered into the system? The program should test for
errors (such as duplicate customers and vendors, incorrect item numbers, and unreasonable amounts or dates). A good system also notifies the operator of unusually high quantities or unit prices for certain types of items and offers valid choices along with the notification message.

Error Handling
Find out how well each program prevents unbalanced transactions, and how users are stopped from deleting or
otherwise losing important data previously in the system. Some systems provide detailed audit trails for errors to track who is making each change.

Security
The degree to which sensitive functions and reports can be protected through passwords will affect how the program rates in security. Ideally, you should be able to specify which operations each user can perform at any given time. For example, a system with strong security would allow you to specify that your accounts payable clerk could only print checks on Thursday afternoons beginning June 1 and ending August 30. Some systems will even provide a report to verify when the check run was performed and by whom.

Choose a Software Vendor
Now that you’ve reviewed the various accounting software possibilities, it’s time to make a choice. It’s important to realize that you’re not only selecting an accounting system— you’re choosing a company as well.

Previously we touched on what to look for in a software company. Here is a more in-depth look at the factors to
consider when choosing a software vendor to use.

No Technology Lock-In
Most major vendors who used to offer only accounting software now also provide comprehensive applications,
suites, and systems created for key vertical industries. The underlying technology market is also changing. For example, Linux is challenging Microsoft Windows for operating system market supremacy. In fact, Linux now accounts for more than 13 percent of the total share of the server operating system market and its unit shipments are growing at more than 50 percent per year.*

While you are exploring software applications, you should make sure that your selection does not leave you tied to
a particular solution or vendor. Doing so can be risky and uncertain and you may be spending a great deal of money on bells and whistles that you honestly don’t need and will never use. Worse yet, you may end up with obsolete technology that will cost you when it comes time to replace it.

Choosing a vendor that offers you the freedom to choose among multiple products like Linux and Windows, multiple databases, and multiple operating systems is the key to avoiding technology lock-in.

A Large Installed Base
How many organizations throughout North America are currently using the company’s software? How many
organizations around the world are using its software? How many resellers does it have? If the company you’re considering has a large installed base of current users, it’s an obvious sign that it is probably doing something right. People and organizations vote with their checkbooks; a popular product is a good sign that a company is stable and customer-friendly. A large installed base also has a second benefit: third-party software manufacturers will be more likely to offer add-on software, worthwhile utilities, product training, and other
benefits that you can utilize once you install the software.

Frequent Updates
Good software suppliers update their software frequently. They also make bug fixes available quickly and easily to
resellers and customers. Before you make a purchase, find out if the software publisher has a maintenance program in place that gives you access to updates as they become available.

An Upgrade Path
This is similar to scalability mentioned earlier. A good software company invests heavily in engineering and
develops new product features and enhancements regularly. It stays abreast of new technologies and makes sure that its customers do too, particularly those customers with a quickly growing business.

A software upgrade—where you move to a similar but more powerful product—can give your company flexibility as it grows. Software upgrades also are desirable as they often cost far less than the retail price of the full program. Imagine purchasing a new car a year ago, and then seeing this year’s model and wanting some of the new features. You can’t have those new features unless you purchase the new model! A good software manufacturer, however, will provide product upgrades at reasonable prices or as part of a yearly service agreement.

A Good Technical Support Team
Your consultant will be a good resource regarding technical questions or other issues that arise. But you will still, almost certainly, rely on the vendor’s technical support team as well.

Questions to ask regarding the vendor’s support team include the following:

  • How many people are in technical support?
  • How quickly do they take calls from customers?
  • What are their hours of operation?
  • What options are available for after-hours questions or concerns?
  • What charges or service plans are involved?

Implement the System
Once you have chosen the vendor and product, and purchased the software, it’s time to install the solution. If
you’ve done your homework, this is an exciting part of the process. Please note, however, it can also be a frustrating time as well! It will take time to adequately and safely install the new software without damaging or otherwise invalidating your existing system. Inevitably, there will also be a few kinks to work out. What is the best way to make the implementation process a smooth and successful one? Follow these guidelines:

Postpone Modifications
One of the most common mistakes companies make is requesting extensive changes to packaged programs before installing and using them. Instead of trying to make a new system work the old way, wait until you understand how the new system works before attempting to change or customize it.

Provide Good Training
Even the best software can be a nightmare to the organization if people are not properly trained to use it. People are the key to the success of any accounting software program. Good staff training is essential and provides the information, practice, and involvement needed to get the most out of the software. Please note that different people within your organization will have different skills and levels of experience with computers; one training class will probably not be right for every system user. Ask your consultant or software vendor for a training plan that will get everyone up to speed (at his or her own level) quickly.

Keep People Informed
Frequent review meetings during the implementation phase will also help people become familiar with the new system. Don’t surprise users—let them know when changes will occur. As well, keep your management team involved during the implementation process through meetings, attending the training, etc.

Don’t Go Too Fast
Rushing the implementation can cause mistakes and unnecessary tension. Time your installation and implementation of the new software as close as possible to your organization’s slow time of year. When you are ready to convert to the new system, attempt to do so during a weekend, to minimize business interruptions. You may
even consider converting to the new system on a module-by-module basis or running in parallel with your existing system for verification purposes.

Alter job titles to reflect increased responsibilities
The implementation process will almost certainly present one or more employees with a chance to perform exceptionally or exceed what their role has been in the past. Extra work—evenings, weekends—may also be required. Reward these efforts with a spot bonus and / or a promotion.

Plan for Ongoing Review and Evaluation
Plan to frequently review and evaluate the system based on desired criteria, such as one month following implementation, three months, six months, etc. Immediately inform your consultant and vendor of any challenges or questions. Document all changes and customizations made.

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