This is a guest article written by Charles Chewning.

Have you outgrown your Accounting Software System?

As your firm grows or your competitive environment changes you will probably need to replace your accounting software system at some point.  The key objective is launching this critical project at the right time.  If you wait too long, the pressure may be so high that you rush the purchase decision and that can lead to a disastrous outcome.  At the same time if you do nothing, you may miss an opportunity to compete more effectively in your market or run your business more efficiently.  What should you do and when should you start the process?

The decision to replace your current accounting software system isn’t a black or white question.  It’s based more on an accumulation of issues that at some point tip the balance.  The key concepts found in this approach are the notions of “issues” and “opportunities”.  Your current system could begin to fail from a technical perspective or it could fail to fully support your efforts to compete effectively.  These negatively oriented issues need to be identified and improved in a timely manner.  Rather than reacting to issues, you could constantly (proactively) search for opportunities to improve your competitive position in your market.  Obviously it’s better to anticipate the need to change rather than being forced to change.  Perhaps you should answer some of the following questions on a regular basis.

Ask Yourself the Right Questions

Don’t let a failing accounting software system force you to make a change.  This usually leads to a rush to judgment and a purchase decision that proves to be unwise.  Instead adopt a system of continuous evaluation and improvement whereby you examine where you are today and where you want or need to be tomorrow.  If you base the decision to replace your current accounting software system on this future oriented analysis, you will have time to create an effective selection and implementation project plan.

The key to the success of this approach to software and competitive excellence lies in the questions you should ask yourself.  If you ask (and answer) the right questions, you can begin to build an accurate picture of the direction you should take and when you should launch the actual accounting software selection process.

Does your accounting software system adequately support the needs of your customers?

An accounting software system should help you “get the job done” (e.g. enter and complete a sales order).  However, that’s not your primary objective.  Serving the needs of your customers should be your primary objective and if your current accounting software system cannot help your achieve these objectives, then it might be time for a change.

Do you need more information than your current system can produce?

One of the real problems with older systems is that they primarily support the creation of financial statements.  Yes, they do support transactional processes (e.g. creating a customer sales order or recording an AP invoice), but these transactional processes are very simple as are the reports produced by the system (almost exclusively row and column oriented).  In many instances people are spending significant time creating financial, regulatory, operational and business oriented reports simply because your current accounting software system does not support key information requirements.

Is your current accounting software system becoming increasingly more fragile?

This really applies to older systems (legacy possibly?) that have been in use for many years and have really outgrown their functional abilities and stability.  Actually the term “fragile” refers to several scenarios and you need to ask yourself questions that will help you analyze your current system’s state of health.  Are you operating on the most recent version of your accounting software system?  Has your current system been continuously improved and does it run on the most current operating platforms?  Is your reseller completely familiar with today’s operating systems and Internet based options?  Is your vendor going to continuously update your accounting software system for the foreseeable future?  Does your current accounting software system have program bugs that are longstanding?  All of these questions and more should be investigated to make sure your accounting software system will support your business for at least the next five years. 

Has your current accounting software system been excessively modified?

When you first purchased your current accounting software system one of its attractions may have been its ability to support modifications.  Maybe you needed to create industry specific functions or maybe you wanted your accounting software system to reflect the unique way you run your business.  Over time you created so many modifications that it is now extremely difficult, if not impossible to upgrade your core accounting software system.  Now you are stuck!  If this is the case, you might need to replace your current system with one that meets your industry and business management needs out-of-the-box.

Have you outgrown the capabilities of your current accounting software system?

Smaller businesses rely almost exclusively on the knowledge and experience of their key decision makers.  As an example your experience and industry knowledge may help you balance material supply and demand.  While data certainly contributes to the decision making process regarding balancing workloads and stock levels, it’s your knowledge that really matters.

As companies grow, business processes become more complex and the sheer volume of transactions grow to the point where knowledge and experience can no longer cope.  Experience is still a critical resource, but its influence is overwhelmed by data volumes and business demands.

That’s where an ERP system steps in to supplement the decision making process.  Notice that we have used the term “supplement” not “replace”.  Accounting software systems and even more powerful ERP systems cannot make critical decisions.  They can process vast amounts of data and present information and suggested actions to managers, but they cannot make decisions.  That must remain your responsibility, but your system should help you make those decisions.  If your current accounting software system can no longer support your decision making process, then it should be replaced.

Are the demands of your industry making it more difficult to compete effectively?

Basic accounting software systems work fine for many small businesses, but in many cases they do not support functionality that will help you compete more effectively in your industry.  What do your customer need in terms of industry specific service (functionality)?  Does your competition offer services you cannot simply because your current accounting software system does not support these functions and/or reports?  If it’s becoming more difficult to compete in your industry or if you want to expand into a new industry, then it may be time to replace your current accounting software system.

Is your CRM system detached from your accounting software system?

Many small firms maintain at least two databases (sometimes even more).  One contains their accounting software system and the other one their CRM system.  While this may have worked in the past, it may not be effective as you grow.  You should have but one database that contains all of the information and functionality you need to compete effectively as a single entity.  If your CRM system is not fully integrated with your accounting software system, it may be time to switch.

Do employees have to resort to manual tasks to carry out their responsibilities?

Employees of any size business have certain tasks that they must accomplish in order to meet the demands of their job functions.  Some of these tasks can be accomplished via accounting software functionality.  In other cases employees must carry out required tasks manually.  This could include importing data from the accounting system into Excel in order to generate reports.  In other cases these tasks are indirectly associated with the accounting system. 

Collecting overdue invoice is one such example.  The accounting software system may support an Aging Report that lists the payment status of each customer, but the actual process of contacting customers and securing payment is manual and therefore inefficient and ineffective.  Higher end accounting and ERP systems may support such functionality and it therefore may make sense to replace your current accounting systems system in order to utilize software supported business functions available in these more sophisticated systems.  The key concept here is the notion of moving from an inherently inefficient accounting software system to a more efficient business management system.

Do your current accounting software processes support business management excellence?

It goes without saying that your business software system must support the way you choose to run your business.  If you let your business processes deteriorate over time, how can you possibly support competitive excellence?  All accounting and ERP systems support business transactions (e.g. sales order entry).  The real question is whether your current accounting software system can help you complete these tasks efficiently and effectively.  If you want to practice business management excellence, you need to determine what you need to do very well and whether your current accounting software system will support this quest for excellence.

Do you need more effective business decision making support?

Your business software system must help you complete tasks and activities, but of equal importance it must help you make sound business decisions.  A typical small business accounting software system may not give you the reporting flexibility you require.  Maybe the reporting tools are lacking in terms of support for dashboards and performance metrics.  Maybe there are insufficient data fields to extract the information you need to track.  A more robust accounting or ERP system may enable you to input required data, but you may not understand what output information you may require.  In this case the issue isn’t the system, but your failure to take advantage of its reporting capabilities.

If you are going to compete effectively, you must define precisely what information you need and the display format that will enable you to see at a glance where you need to invest your time improving your business.

Does your current reseller understand your business?

This isn’t necessarily a business functionality question, but it is a critical business success question.  You should understand your business and what is required to compete successfully (and therefore profitability).  Your reseller should understand all of the capabilities of your accounting software system and how these capabilities can be deployed to your advantage.  If your reseller does not have the ability to understand your business requirements, it may be time to change resellers and/or accounting software products.

Can you utilize currently technology to your competitive advantage?

Technological improvements are changing the way we can manage our business.  People can now access their business (accounting) systems from any device and at any time.  People can now collaborate on projects and even include customers in the process.  Dashboards, workflow and exception management help firms manage their business affairs.  If you are going to compete more effectively, you have to conduct research regarding possibilities and determine what your need to do to achieve competitive excellence.  Keep in mind one critical thought.  Technology may enable people to utilize advanced functionality, but that doesn’t necessarily mean your firm needs these capabilities.

Quick Review

In many instances firms decide to replace their current accounting software system because they are forced to do so.  This rush to judgment will always lead to less than desirable results.  Rather than waiting for a disaster, perhaps you should be evaluating the following issues and opportunities.

• Our current accounting software system just doesn’t provide the functionality we need to compete in our industry.
• Our current accounting software system doesn’t provide us with the information we need to manage our business effectively.
• Our CRM system is not adequately connected to our accounting software and business management system.
• Our current accounting software system does not adequately support mobile computing and reporting.
• We have to spend too much time generating regulatory and operational reports.
• The product vendor is going to discontinue support for our current accounting software system.
• Our local software reseller no longer supports our accounting software system and/or there is no longer a reseller in our geographic region.
• Our reseller doesn’t really understand what we need to do to compete effectively in our industry.
• Our current accounting software system has been so heavily modified that it is no longer possible to upgrade our core accounting functions.
• The technology of our system (accounting software programs, database, network and everything else) is dated and it does not appear as though the technology is going to be updated.
• We are not convinced that our current system (hardware and software) can effectively protect us against internal fraud, theft or intrusion by outside agents.
• The system (accounting software system, database or network) is becoming progressively more fragile.
• We are now located in several cities and our current technology does not effectively support multiple location business management.
• Our customers want more sales, service, support and reporting options that are not supported by our current accounting software system.
• Our current accounting software system does not give us the information and functionality we need to compete effectively in our industry.
• We moved into a new industry that our current accounting software system does not support adequately.
• We cannot generate reports that give us the information we need to fully understand what’s going on with our business and business operations.
• Our employees are spending too much time performing manual business processes.  We need software supported functions that make it easier for our employees to carry out their job responsibilities.
• It takes too much time to complete business transactions.
• It costs us too much (labor and time) to get our products out the door.
• It is very time consuming to input job related information which makes it that much more difficult to track costs, manage jobs and bill customers.
• The only thing we have to manage AR collections is an Aging Report with the result that it costs too much to collect overdue invoices and our Average Days Late is excessive.

Summary

As firms grow their accounting, business transactional management and business intelligence (reporting) requirements tend to exceed the capabilities of their current accounting software system.  In some cases these deficits are either ignored or supplemented via product modifications.  That may be sufficient in the short term, but at some point these deficiencies will affect a firm’s ability to compete effectively or operate efficiently.  Rather than waiting until something has to be done quickly (which always leads to a poor decision), anticipate the need for change.  Never let your accounting software system deteriorate to the point where you are forced to take immediate steps to correct long standing issues.  Adopt a proactive approach that gives you the time to examine all aspects of your business and therefore combines business strategy, business process improvement, employee excellence and software excellence into a single, more powerful business management system that will carry you forward into a more effective and efficient future.