Accounting automatons

Written on 01 June, 2006 by Netregistry
Categories Accounting & FinanceTags accountingtax

Remember how the rise of the PC was going to free us from mundane tasks, opening up great swathes of time for more interesting activities? Accounting software is one area where that promise came true. Helen Bradley considers the options.

It’s not a glamour application but accounting software is, nevertheless, a key business tool. It plays a number of roles, the simplest of which is recording transactions and keeping track of money owed and received, and money you pay out and owe to others. Beyond this, accounting software helps your business comply with the legal requirements of lodging tax returns, paying taxes, and accounting for GST.

The most important role it plays, though, is helping you manage your business better. Good accounting software provides reports and calculations to inform you about core areas of the business and how they’re performing. It provides information so you and your management team can make changes and fine-tune strategies.

For every business the first step in choosing accounting software is determining needs. If yours is a small business upgrading from a manual system, you’ll look for accounting software that can take you to the next step in financial management. For larger organisations, the choice is whether to upgrade to another program from the same developer or move to a new vendor.

The starting point is to understand how your business functions and what you require the software to do. This needs to be evaluated in two areas: day-to-day transaction processing, and the management reporting required to support decision-making. Grant Cowie, managing director of Cognito Software, developer of the MoneyWorks solutions, cautions: “The most important thing when choosing any software package is to identify your individual and unique needs, as it is these that the package must address. It’s this aspect that so often leads businesses astray; they tend to rely on the advice of accountants and bookkeepers and too often this is narrowly focused on tax compliance, not on business requirements.”

From your analysis of business needs, develop a list of tasks the software should perform and categorise these as either mission critical or ‘nice to have’. You’re now ready to go shopping.

True Cost

Never purchase a program on ticket price alone; it’s not an accurate representation of what you’ll spend. The true cost of software includes the cost of installation, as well as the time it takes to learn and use, convert from another system, and keep it updated and maintained. “Chances are that any accounting solution is ultimately going to have to work with other systems, such as CRM, e-commerce, or manufacturing,” Cowie says. “Businesses need to look at how the software inter-operates with other key business applications. It is, for example, totally pointless (and expensive) to be manually re-keying information from one system into another. So, looking at the total cost of ownership is vital, as opposed to just considering the purchase price.”

Avoid making a decision on the basis that someone outside your organisation thinks one program is ‘great’. Accounting software must fit your business and give you the tools you need to function effectively, and no one without inside knowledge of your business can make that determination.

Factors to consider when purchasing software include its ability to be upgraded. Many software vendors like MYOB, Quicken and MoneyWorks have a range of products from entry level to enterprise solutions, and you can upgrade from one program to the next in the range. Other vendors, like Attache and Sybiz, provide modular solutions allowing you to start with, say, a general ledger module and add other modules such as payroll and inventory management, later. This way you’re not paying for features you won’t use.

Security is vital if the person doing the accounts is not the business owner. It is important that the program has an audit trail so you can track what has been entered and changed. Entry-level programs typically allow changes to be made and don’t record them, making it difficult to recognise or prove fraudulent activity.

Another thing to consider is room to grow. John Kingsley-Jones, PR manager, Quicken Australia, says there are questions to ask when choosing your accounting software. "As my business grows in size, because it has hired more employees or because it has a greater range of products, can my software cope with this growth? If not, then you need another accounting software solution."

Broad Range

The choice of accounting software runs the full range from simple cashbook systems to enterprise solutions. Entry level solutions like QuickBooks EasyStart, Cashflow Manager, MoneyWorks Cashbook and MYOB Business Basics, are inexpensive, easy to use and free of accounting jargon, with little or no security tools to track fraudulent alteration. They’re best suited to a small or home business where the owner maintains strict control over the finances. Some entry-level programs can also produce invoices, statements and receipts.

The next step up is typically to a program based on the double entry system of recording transactions. These programs are more complex and are designed to be used by a person with some accounting experience. They include an audit trail and will not allow a transaction to be deleted. Many of these programs include additional features such as the ability to track manufacture of products from raw materials, and integrated payroll and inventory management. There are some solutions suitable for service organisations such as QuickBooks Pro, MYOB Accounting Plus and MoneyWorks Gold, that include time recording tools and these can bill on a time basis.

Most middle range and enterprise accounting programs include a contact management module that allows you to maintain records of your suppliers, customers and employees, to record communication with these people and to maintain a to-do or reminder list. Alan Osrin, managing director of Sage Software Australia cites integrated CRM as one of the significant trends in accounting software. "Probably the largest area of growth is in integrating CRM with accounting software. This doesn’t necessarily mean CRM developers will be developing accounting software add-ons but may involve integration of two separate existing products so they work together," he says.

In some instances, accounting software developers provide a software development kit that enables professional programmers to add features to the basic software, access the underlying database to create specialist reports, or to export filtered data to other applications such as Microsoft Excel. This lets you use the data stored in the program in other applications without having to re-key it.

Programs for SMEs are typically multi-user, so more than one person can use the program at a time. You can also enable some employees to have different levels of access and security. Most enterprise programs include the ability to work with multiple currencies and multiple companies

For businesses that operate in a Mac environment, there are many mainstream options that operate on OSX, including MoneyWorks, MYOB FirstEdge and MYOB AccountEdge. If your business runs Linux, the choices are fewer and there are no ‘big name’ vendors with products in this space.

Custom Solutions

Many vendors are developing tailored solutions for vertical and specialist markets. MYOB Just Invoices does just that, and prepares invoices, tracks sales and calculates GST received. MYOB also offers custom solutions for law firms, childcare, and building and construction, as well as tools for managing loyalty programs and job management. Sage Pastel Evolution includes modules for lot tracking, annuity billing, serial tracking, manufacturing, multi-warehousing and fixed assets. Sybiz has custom solutions for consulting, clothing and footwear, car rental and aged care.

In terms of delivery, most accounting software is developed to be installed on a company's own computers. Osrin doesn’t see Australian businesses flocking to the software as a service model for accounting software and suggests they’re preferring to host their own solutions. However, he says, it’s important for applications to be web-enabled. "Integrated mobile solutions that allow for data entry in the field with automated uploading to the central system are important features in mainstream programs."