10 Steps to Help You Decide If You Need New Accounting Software

By Christopher ONeal, CPA, MBA

If you have been using the same accounting software for some time, you may have begun to come across some limitations in the package. It is not uncommon for businesses to outgrow their finance systems. However, changing finance systems can be costly and time-consuming. So, it would be wise not to be too hasty about replacing your accounting software.

 Companies often change software because they believe that their current package can no longer meet their requirements. Often, though, with a little bit of thought or a simple software upgrade, an accounting package can be given a new lease of life. Here are ten steps that may help you get more out of your current accounting software.

 1. Consider Current and Future Requirements

The first step towards getting the most out of accounting software is to define what you want from the system. Do you want a simple bookkeeping package? Or are you looking for a fully integrated enterprise resource planning (ERP) system? Consider what you need now and what you will need in the future from an accounting package, and specify a timescale to which additional functionality will have to be available. If you do not need the extra functionality right now, a sophisticated ERP system would be overkill. However, should you decide to buy a new system, you will need to consider future requirements when selecting new software.

 2. Review Your Processes

Once you have specified your high-level requirements, you should look at how you process the various types of transactions. Map the flow of information for raising a sales invoice, for example. Look at the route that a vendor invoice takes through your organization, including matching to purchase orders, approval, and payment. Consider how you might better use your current finance software to manage these workflows. Pay special attention to any manual work or duplication of data that might be eliminated by implementing additional features of your existing accounting software.

3. Take a Full Inventory of Your Reports

Create a list of all the finance-related reports that you use. This inventory will include day-to-day reports, such as payment lists and sales reports, as well as month-end reports like the profit and loss account and balance sheet. Ask your finance team what reports they produce on Excel. Could any of those reports be created from the accounting system? If so, you could eliminate unnecessary data entry duplication and the errors that can arise from data rekeying.

 4. Review the Chart of Accounts

A common reason for companies changing their accounting software is that their current software cannot produce the required reports. However, the reason that the desired information cannot be delivered may be that the current chart of accounts is misconfigured. Reconfiguring a chart of accounts and converting historical data will take time. However, creating a new coding structure for your existing finance system will be quicker and less expensive than implementing a new system.

5. Explore Your Current System

Taking the above steps will have helped to uncover the shortfalls in your current system. But it would be unwise to rush headlong into buying a new system. It would be better to ensure that your existing software cannot be reconfigured to meet your needs. Take some time to explore all the functionality that your finance software has to offer. Dust off those old manuals that you have never read. Check the online tutorials, and visit your software vendor's online forums. Not understanding how to make your software do something does not mean that it cannot do it.

 6. Invest in Training

Your accounting software will undoubtedly have been updated since you first began using it. But if you and your finance team have not been trained on a new version of the software, you will likely be unaware of some enhancements made to the package. When new staff members first joined your business, they will probably have been trained by existing team members. Internal training is cheaper than formal training carried out by a software vendor. However, internal training can lead to the perpetuation of inefficient practices, so it is best to invest in training courses provided by your accounting software supplier to keep you up to date. Training might also highlight new ways that you can use the software to meet your needs better.

7. Consider Hiring a Systems Consultant

Depending on your business's size, it might be worth your while investing in some accounting systems consultancy. A software consultant will complete the abovementioned process mapping and develop a requirements specification document. And a consultant will advise you on the best ways to achieve your objectives with your current system or replacement software.

 8. Talk to Your Accountant

Your accountant may be another source of useful information regarding your accounting system. Your accountant may have experience using your current system or have other clients who use the same package. Your accountant may also help you select new software if you decide to invest in a new finance system.

 9. Upgrade Current Software

It would be advisable to ask your existing software supplier about upgrades before buying a new accounting package. You might be able to add the functionality you need by simply upgrading your current package. If your business has grown significantly, your existing supplier might also be able to offer migration from a basic accounting package to an ERP system. Of course, it would be best to compare the price of an upgrade to buying a new system. But an upgrade will usually cost less than buying and implementing an entirely new system.

10. Consider Best of Breed

ERP systems do offer fully integrated enterprise-wide solutions. However, purchasing an ERP system is not always the best way forward for every business. Suppose your accounting system provides all the financial information you need, but you need a fixed assets solution, for example. In that case, it might be more cost-effective to buy a separate fixed asset management system and integrate it with your finance system. Adopting the best of breed approach does mean that you have to deal with several suppliers. However, best of breed applications often offer more functionality.

 Conclusion

The crucial point to take away from the above is not to be too quick to switch accounting systems. If you understand your requirements and get adequate training, you might find ways to make your current system work better for you. So, it would be best to ask your software vendor about upgrades, training, and consultancy before you start your search for a new accounting system.