By Richard Morochove
Illustration: John Ueland
Before a business wastes its time and money adapting to the wrong software, it should seek out a CA to ensure the two are well-suited
The scent of fresh flowers wafted through the air as the IT consultant entered the Elmwood Flower Shop, where a floral designer was hard at work, arranging cut flowers in an intricate display. However, he was not there to smell the roses, even if he was there to sniff around for problems.
The flower shop had spent the previous 12 months trying to bring its operations into the 21st century from a manual billing system to a computerized system. And, as is the case for many successful businesses, the conversion was not as successful as the shop owner had envisioned, with the result being that a considerable amount of time and money was spent adapting operations to the wrong software.
Elmwood had an extensive corporate business, delivering beautiful arrangements weekly to the boardrooms, executive offices and reception areas of many firms in Toronto. These accounts were supplied with flowers on credit and billed weekly. While keeping track of the customer accounts receivable required a lot of manual paper-shuffling, it was an important financial task.
Elmwood complained about the number of financial reports it had to produce monthly to support its bank loan. A great sore point was the time-consuming preparation of its lengthy aged accounts receivable report. The shop’s bank manager suggested Elmwood automate its manual bookkeeping system so it could quickly and easily print out a computerized accounts receivable aging report at month-end.
No one at Elmwood knew much about computerized accounting systems, so its manager consulted with the CA firm that helped with its annual financial statements.
The accounting firm recommended its consulting group assist the shop. The consultants supplied the computer hardware and software, provided assistance, installed the application and trained the shop staff. And the bank was happy to finance the purchase.
However, 10 months later, the bank was still getting monthly manual accounts receivable reports. Elmwood’s new system had been installed for several months, but the shop manager said it was not working well enough to prepare the reports.
The accounting firm said the flower shop staff required more training to use the system effectively. But the manager did not think more training would improve the situation as the staff had already attended several days of training.
And at that point the IT consultant was called in. After a little nosing around at the shop he spotted the bottleneck in the system. Each week the flower shop received a large delivery of cut flowers. The staff would drop what they were doing to make the arrangements then deliver them to their valuable business accounts.
Ideally, invoices should have been prepared and delivered with the arrangements. However, the newly arrived flowers were not immediately entered into the computerized inventory system. The computerized order entry and billing system required a lengthy procedure, moving through six data entry screens to create each invoice. Furthermore, the computerized application did not permit negative inventory. Computerized invoices could not be prepared until after the newly arrived flowers were entered into the system. So the shop continued to prepare its invoices manually.
The problem was that Elmwood’s needs were not well-matched to the capabilities of the new accounting software. Furthermore, the software wasn’t configured to suit its operations.
After the IT consultant’s report, the accounting firm’s partner in charge of the account acknowledged that indeed more training wouldn’t fix this mismatch between the software’s capabilities and the client’s needs. The firm refunded the shop the money it paid for the software. The computer hardware would be reused for another, more suitable, application.
However by this time, the shop owner had lost confidence in the accounting firm and its advice and switched firms the following year.
Cases of mismatches between what a business requires and what the software delivers are not particularly unique. How can CAs, both in public practice and in industry, avoid suffering from an accounting system that does not fit?
How should a CA in industry select an accounting system?
Too many businesses start by looking at accounting solutions before they examine their needs. Usually they first view software demos, then compare the capabilities of these solutions.
And such an approach most often leads to frustration. If you start by looking at accounting applications and compare them with one another, it is difficult to find the right solution. There are many differences in their capabilities, some irrelevant to the requirements of the business. It is like trying to compare an apple with an orange and a banana. Which fruit is best?
Some businesses think they can reduce the time they invest in the selection process by considering only the bestselling applications, and for small businesses in Canada, those include Simply Accounting from Sage Software and QuickBooks from Intuit. (For more information on these and other solutions please see “Small business accounting applications,” page 36.)
Yet selecting from a list of top-selling accounting applications will not necessarily guarantee a good choice. It’s merely one indication that the software developer is earning sufficient revenues to remain in business and will continue to support its many customers in the future.
A bestselling program that is prominently displayed on the shelf of a big-box retailer may not be best for your business. A more specialized accounting solution that sells just a few hundred copies a year through value-added resellers may be the best fit for your requirements.
In some ways, top-selling accounting applications are like the winners of a high-school popularity contest. The most popular student wouldn’t necessarily make the best spouse. Similarly, you need to do more research before marrying your business to an accounting application.
Moreover, some businesses use popular applications that are inappropriate for accounting as they lack proper controls. In a reader survey developed for online business information site AllBusiness.com (for survey results please see www.allbusiness.com/accounting/accounting-software/3473501-1.html), Microsoft Excel was tied for the most popular application to manage business accounts receivable and accounts payable. While a spreadsheet is flexible, it does not check for balanced transactions, nor does it retain an audit trail of entries.
The respondents using Excel in that survey were also the least satisfied users, compared with those using other popular software applications. Probably not a coincidence.
Understand your business software needs
The ancient Greek aphorism “know yourself” applies when searching for business software. Start by defining your business needs, then consider the accounting capabilities required to meet those needs. Compare the capabilities offered by the accounting solutions with your business needs. This way you’re comparing all solutions to one standard: your business needs. The best accounting software solution for your business is the one that meets most of or all your needs.
How to analyze software
Perform your own software analysis by using a spreadsheet. List the accounting software capabilities your business needs in the first column. Rate the capabilities of each of the accounting solutions you are evaluating in another column.
Depending upon the depth of your analysis, you may want to assign different numerical weights to capabilities. For example, preparation of an aged accounts receivable trial balance may be more important to your business than the capability to prepare e-mail-friendly invoices.
You can determine some software capabilities by researching information at a vendor’s website. Some vendors let you download a time-limited or restricted-capability version of their software for testing. But you may need to contact the vendor or attend a software demonstration for all the details.
Such an analysis is a handy way of organizing your evaluation process so you can concentrate on the capabilities that are important in your business.
If you are fortunate, you will find an accounting solution that will match all or most of your business requirements. But what if you cannot find a good fit?
When accounting packages don’t fit
An off-the-rack type of business, that is one without special accounting needs, can be quite satisfied with the capabilities of popular packaged business management applications. Some are available in several editions; typically, the more expensive versions permit additional users and add specialized capabilities such as time-billing and project-tracking. However, if your business has special requirements, using a packaged application can be like wearing a jacket with sleeves that are uncomfortably short.
Recognizing these limitations, vendors of accounting packages have added some customization capabilities that may help. For example, you can remove unneeded features from program menus and also create custom reports. You can add new fields to displays and reports. One of my clients added a birth date field to his accounting application’s customer database, so he could track birthdays and send a congratulatory card to each buyer.
Some accounting software developers publish their application programming interfaces. These APIs permit third-party developers to create software add-ons that can integrate with the main accounting application. These add-ons are usually designed to satisfy specialized business requirements. One might be just what you are looking for.
If an accounting package comes close, but doesn’t quite fit your needs, contact the developer to see if it encourages software add-ons and can provide you with a catalog of what is available.
But sometimes even that is insufficient. Perhaps you deal with your customers in a unique way or offer more options for your products than does the competition. In that case you have two choices: adapt your business operations to the software available, or adapt software to meet your business requirements.
For some businesses, changing procedures to conform to the software is not a problem. However, if changing your business operations feels like shortening your arms to fit a jacket, how should you handle changing the software?
While you can start programming an accounting application from scratch (or, more likely, hire someone to do so), that is much like re-inventing the wheel. If you require a custom solution, it is usually more cost-effective to start with something that comes close to what you need, then modify the source code to deliver a precise fit.
Look for an accounting application that comes close to what you require and that makes source code available, such as Sage Software’s Sage Pro. Someone familiar with the language used by the source code can modify the code to change the operations of the software.
Bringing in a professional
Modifying the source code for an accounting application re-quires more technical knowledge than installing a packaged ap-plication. You may need support from a contract programmer or experienced consultant. You can often get good leads to qualified professionals from the application developer or a product support bulletin board on the Internet.
Once you have your modified software, test it thoroughly to ensure it works as you expect. I recommend running it in parallel with your existing system for a minimum of three months. Compare the results each month to see if the overall totals agree. If they do not, stay with your original program until you get concurrence for at least two months running. This means extra work, but it is one of the costs that must be factored into your decision to go the custom route.
Examine the capabilities of packaged applications and their customization options carefully before rejecting them. Sometimes a business assumes its needs are unique when, in fact, thousands of other companies have similar requirements and software to deal with them is already available. It just requires an investment of time to find the specialized software.
But if your business operations are truly different, there is nothing better than the fit you can get from accounting software based on customized source code.
How should a CA assist a client in selecting financial software?
A CA’s business knowledge and experience can be a valuable aid to a client looking to improve the way it manages its business finances. Accounting software is one tool that can help a business achieve that goal. A CA with a combination of business knowledge and accounting software expertise can offer valuable assistance to a client.
While all CAs should have some computer expertise, not everyone can keep up with developments in information technology, nor is everyone suited to advise clients. It is important to recognize the limitations of one’s IT knowledge and experience; consider consulting with a CA who specializes in the field before advising a client on IT matters.
The CA•IT designation identifies a CA who specializes in IT. While not all CAs specializing in IT have the CA•IT designation, those who do exhibit a commitment to the field. (For more information see www.cica.ca/index.cfm?ci_id=640&la_id=1.)
Some accounting software developers help accountants learn more about their applications. It’s in their best interest to do so, because CAs are influential advisers to many businesses.
Such vendor-sponsored partner programs provide special access to software and prioritized product support to answer your questions quickly.
Training in the accounting software is usually offered, either online or at an annual partner conference. Passing a certification examination, to confirm in-depth knowledge of the accounting software, leads to more benefits, such as a link on the vendor’s website that lists certified consultants. This listing may lead to inquiries for consulting work from businesses in your area searching for software assistance.
Sage’s partner programs aimed at accountants include the Simply Accounting Premier Advisor Program ($249 annually) and Certified Consultant Program ($449). Intuit offers QuickBooks ProAdvisor ($199) and Certified ProAdvisor ($399).
The partner programs of software vendors offer good value for education and may help a CA gain clients for both consulting and accounting work. However, the objectives of the vendors are not always congruent with the best interests of the CA and of the client.
The vendors want to sell more software and often offer incentives to induce software sales. However, the CA who is tempted by these blandishments risks changing into more of a software salesperson than a business adviser. That role change can destroy a CA’s relationship of trust with a client.
A CA must remain focused on satisfying client needs in order to maintain the valued role of a trusted adviser. A CA who is a certified consultant for a particular brand of accounting software must recognize that this software will not be right for all clients. Another application may be a better fit.
Sometimes the right solution for a client problem does not require new software. Reconfiguring the current software to better match client needs, upgrading computer hardware to improve performance and increase storage capacity or consulting with staff to make better use of the system may deliver more benefits at a lower cost.
SMALL BUSINESS ACCOUNTING APPLICATIONS
Accounting applications for small businesses are more capable than ever. The 2008 versions of two market leaders, Sage’s Simply Accounting and Intuit’s QuickBooks, both feature new, more powerful structured query language databases.
These new databases will operate faster than their predecessors. This is particularly worthwhile for larger small businesses that need to manage many transactions and accounts.
If you are weary of maintaining packaged software, which require you to install updates to remain current, an online accounting application service is one alternative to consider.
A Web-based application hosted as a service, such as NetSuite, is easier for many small businesses to operate. The service takes care of updating the application and backing up accounting data. However, you will pay a premium for this, compared with a package installed on your own computers.
The service will charge a monthly fee for each user accessing it. However, you may save money if it means you no longer have to spend the time or pay for technical assistance to update packaged software.
Here is a list of a few popular small business accounting solutions, along with Web links. Typically these applications will support up to 10 users. Depending on the nature of the business and the number of transactions, most small business applications could handle up to $10 million to $50 million in annual revenues.
Richard Morochove, FCA, CA•IT, is president of Toronto-based consulting firm Morochove & Associates Inc., serving accountants and their clients. He is a founding member of the Alliance for Excellence in Information Technology board and is chair of the certification committee.