How to Determine if You Need New Accounting Software Part One

How To Determine if You Need New Accounting Software Part One - vcfo

A common concern for many of our clients is in regards to their accounting software, specifically QuickBooks. Deciding when to make the switch from QuickBooks for a more robust accounting or Enterprise Resource Planning (ERP) system is no trivial matter. On the one hand, once a company has outgrown QuickBooks, remaining with it may limit or even cripple growth and operations. A more powerful system can facilitate a company’s success. On the other hand, selecting and implementing a new system is fraught with risk and is usually expensive. When faced with this decision, the default response is often to stick to status quo far too long, because owners are unsure of the best path and/or are concerned about the risk and cost. The following guidance breaks this question into three considerations, enabling you to arrive at a confident decision for your unique situation.

Why Migrate to a New System?
Every business is on a different systems path depending on its circumstances, yet the warning signs of a needed software upgrade are universal:
• The primary reason for a systems change is the current systems lacks needed functionality. There are things QuickBooks, as a general purpose small- to medium-size business solution, was simply not built to do. Typically, functionality needs relate to the company’s specific industry or type of business.
• The other big related issues are speed and scale. Companies that grow beyond the capacity of their software usually experience slowness of the program, either due to a large number of users, large transaction volumes or both. Also, some basic functions in Quickbooks can only be done in single-user mode, meaning you must kick everybody off the system or do some common functions in the middle of the night. Viewed in the extreme, Quickbooks was not built to run a large multinational enterprise.
• Most important information exists outside the system on spreadsheets and paper. Apart from being inefficient, this tends to indicate that your system no longer meets your needs.
• Data being re-entered into multiple systems. This is a sign that you have cobbled together functionality from disparate systems that are not integrated or interfaced. Manually reentering information is often an unnecessary use of time and can lead to a rat hole of information being incorrect or out of date in one system or another.

Getting Further on Quickbooks
A robust ecosystem of companies and software with complementary functionality has grown up around QuickBooks.  ECommerce, time tracking, inventory, paperless A/P and A/R processing and industry specific applications are just a few; all of which can be integrated with QuickBooks. You may be able to go further with Quickbooks than you thought using add-in software. The basic functionality of Quickbooks is quite good, and it is not uncommon to see a company reach tens of millions of dollars in revenue using Quickbooks coupled with add-on software. The good news is you may be able to go quite a long way with add-on software. The bad news is you’re likely to end up with multiple systems, because despite the promises in marketing materials of “seamless integration,” in reality those tie-ins are rarely perfect and often result in duplicate data entry and require tinkering to make the systems work together.

Why Not Migrate to a New System?
The operative words are risk and expense. I advise you to consider your needs and make an honest assessment of “must haves” and “nice to haves.” Assess in terms of cost. What is it costing you to stay where you are in lost opportunities or wasted time spent navigating a limited system? Compare that with what it will cost to complete a systems conversion, including direct expenses as well as indirect such as staff time and temporary disruptions to business operations. Is a new system ahead of what the organization needs today, based upon what you expect the company to become in the future, or is it trailing behind what was truly needed a year ago? Depending on your answers to these questions, you can better determine whether it is possible that QuickBooks with add-ons could be sufficient for some period of time since it is generally better to avoid or forestall a conversion if it’s not an urgent need for your business today. Finally, it is important to know that even the best systems will not fix bad processes. Inefficient or unproductive internal processes are best fixed before a new system is selected.

After the system is selected
Evaluating your business’ readiness for a new system is only one part of the process, what comes next is selecting and then implementing the new system. In addition to selecting the right system for your business, a successful systems conversion also requires a disciplined process and adequate resources. In part two of this post, I will go over systems selection and in part three, systems conversion.