Outgrowing your accounting system?

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Outgrowing your accounting system?

Why every business should plan for that possibility, and how to tell if it's time to consider an alternative.

As a business grows in size or complexity, what was once the right accounting software may no longer fit the bill.

“You don't know how big and how complex a business will become,” said ESV Accounting and Business Advisors partner Tim Valtwies, so owners tend to select accounting software that meets their needs for core functions such as invoicing, sales, debtors, expenses and in many cases payroll.

They typically look for at least some scalability, and depending on the type of business may also require inventory or provision for billing for services.

This usually results in the selection of one of the well-known small business products such as MYOB, QuickBooks or Xero. However, that may turn out to be an interim solution that the business outgrows, said Valtwies, so the potential need to change to another system should be kept in the business's plans.

How to tell if it’s time for a change

There are various symptoms of a business outgrowing its accounting software. These include:

  • An inability to extract the information needed for management decisions, leading to the need to use an add-on report writer or manipulating the data in spreadsheets
  • Poor or no provision for operating from multiple locations, or in multiple currencies
  • Poor integration with the way you interact with customers
  • Poor or no integration with contact relationship management (CRM) or other business software.

Poor integration can include relying on add-ons to the accounting software that provide some of the required functionality without working as one true enterprise-wide system. 

“We even see that in our own business,” said Valtwies, because a client database isn't the same thing as a real CRM.

How to plan for the change

He gave the example of one client in the education market that changed its business model and consequently had to migrate quickly – and at significant expense – to a much larger system. One of the requirements was integration with the Salesforce.com CRM that the business had been using for some time. 

“It was a big jump up in terms of cost and the training required,” Valtwies noted, observing that there is a considerable gap between systems like MYOB, QuickBooks and Xero on one hand, and on the other those designed for midrange to larger businesses.

For a company facing such an upgrade, “it's a significant investment... they need a structured approach,” he said.

The important thing is to identify the critical functions and make sure they are provided by the selected software without requiring customisation. 

“Customised systems are costly [in the first instance] and costly to maintain,” he warned. 

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