I hear this question a lot, but it’s kind of like asking: what’s the best car? The answer: it depends on your needs. So, the first step in evaluating accounting software is to evaluate your needs. In the old days we called this a “Needs Assessment” and even small companies used to hire CPA firms like ours to perform these needs assessments when they were considering implementing new accounting software systems or upgrading their old software systems.
Today, business owners and non-profit organizations often don’t bother to “waste” time assessing their needs. We don’t have time for that, do we? Instead, we prefer to go directly to a solution, not knowing whether that solution has much to do with our needs. Basic software is so cheap now that we don’t care whether it will work well or not.
Businesses have learned to tolerate inefficiencies in the accounting function because they have allocated so few resources to it that they can afford ignore it. But they often don’t consider the actual costs of using/misusing accounting software. These costs are hidden in the extra fees you pay at year-end to have your CPA firm unravel the mess you have created in your accounting software (probably using QuickBooks), and in the sometimes critical mistakes you make managing your business because you are relying on inaccurate and misstated financial information.
These costs are also buried in the extra loan documentation hassles and delays that occur when you try to submit your in-house financial statements to your banker. You might even be paying a higher interest rate than you should because of these financial inaccuracies.
So, back to the accounting software/car analogy: think about the software in terms of what you need it for, just as you would weigh whether to buy a convertible or an SUV. The most critical area to assess is the sales cycle: if your accounting software doesn’t enhance your sales/revenue function, then it almost doesn’t matter what else it can do well. If you sell inventory, then you need a point of sale system that actually works and that integrates with your accounting software. If you provide services but need to use job costing, then you need enhanced billing features that allow you to track income and expenses by job, including employee time and expenses.
The next most critical area to assess is how the software will be used and accessed by different users simultaneously, and how or whether the software’s internal controls allow for separation of duties. If you have an accounting clerk processing purchases and recording invoices, you don’t want that person to have the same access to the entire system that your CFO has. And, please don’t follow the practice of having one logon name and password and handing that out to everyone who will be using the system! This happens more often than you can believe, and defeats one of the most stellar internal control applications that software can offer: determining who did what, and when.
After these two areas have been analyzed, you can move on to other functions, but one decision you will need to make is whether or not to go the “cloud computing” route and purchase an on-line accounting software service. Cloud versions of traditional accounting software systems have, so far, been stripped down versions of the “real” package, so be very careful when choosing. On the other hand, some strictly cloud-based software services have been around for years and are worth investigating. If you do go this route, you’ll be improving your productivity, reducing costs, and making life easier for all the users of the system, including the business owner. But this is where system security, passwords and log on names must be strictly adhered to, since you are also exposing your business to greater risk.
Once you’ve identified the key features you need, you can get a lot of help using the internet and seeing how other businesses rate their experiences with various software systems. Ask your CPA firm how they view your accounting system’s needs. If you do take the time to evaluate your own accounting needs, even if you don’t do a formal needs assessment, you are much more likely to find the best accounting software application(s) for your business or non-profit organization.