Choosing an Accounting System.

Deciding which accounting system to use can be a daunting process and there are many factors to consider when choosing one.  Whilst most Start-Ups will initially use an external bookkeeping firm to perform their accounting and statutory filing requirements, the day will come when they want to bring this in-house and have information more readily available. When a business starts to grow a basic system might need to be replaced with something more complex that allows for more automation and detailed management reporting.  You should engage with a consultant to help you with this if you do not have the expertise in-house.

Many businesses will suffer the difficulties of not knowing how they are performing financially, needing to wait until their accountant reports to them, often with much delay. Businesses will be run largely on spreadsheets and paper-based processes, leading to higher risk of inaccuracies.  Compliance issues may occur as a result, and an ineffective system of internal controls may allow fraud to flourish.

The benefits of choosing an accounting system tailored to meet the needs of your business overcomes all of these issues.  Taking control of your accounting and finance processes allows you to have financial information at your fingertips. The accounting system can often be part of an overall package of systems (including a CRM and billing system for instance), or be easily integration to your own bespoke systems.  Processes can be largely automated improving the accuracy of the numbers, and as a result you can be confident that statutory filings are compliant.  Paper-based processes can be eliminated, and the entrepreneur can even monitor real-time performance indicators using mobile devices.

The 5-step process to choosing and implementing a new accounting system.

A simple 5-step process will help you to choose an accounting system that meets of your needs. A wide range of products are available from off-the-shelf basic cloud-based systems for the single-entity business to more complex solutions that deal with multi-currency entities and accounting standards.

It is a good investment in time and money to get support from an independent consultant guide you through this process. Identifying and implementing the right system for you is a critical decision in the development of your business as once implemented you will most likely keep it for the long-term.

To find out more information on how Pensapos can you through this journey, please click here for a free 1-hour consultation.

Step 1 – Needs Analysis.

The first step is to conduct a needs-analysis study, covering the following areas:

Basic Needs analysis.

What do I need in order to perform the most basic of activities? This will often include Customer Billings, Supplier invoice processing, VAT accounting and reporting, bank processing and account reconciliation.

Existing Pain Points.

Another useful activity is to think about the areas that are currently causing some pain. Understanding the cash position of the company may be one.  Compliance with external reporting may be another.  And others may include not having the right financial information available in real-time or inefficient paper-based processes.

Wish List .

Finally, it is useful to consider potential features of a new system that are over and above your needs, or that you may need in the future as your business evolves. If you are planning to enter new markets you might wish to consider a system that can deal with more than one legal entity and/or currency, and consolidate numbers at a group level for instance.

Step 2 – Scoring Alternatives.

The next step is to consider the options available in the market and score them.  Factors to consider include the following:

Product Features.

The most important consideration is to determine whether each potential system meets at least your basic needs. To what extent do the product features help you to address some of your pain points.  And will the system meet not just your existing requirements but also meet your future requirements.

Cloud vs Local Installation.

Accounting in the cloud represents a cost-effective solution for most businesses. Access is 24/7 and provides real-time information.  Backing up your accounting system is usually included within the price of the subscription and scaling up easily facilitated by amending it.

Data security & GDPR are the primarily disadvantages of cloud accounting. Customisation can become more difficult as systems are normally heavily standardised, and of course a secure, fast, and reliable internet connection is required to access it.

Price.

Every organisation wants to make sure it is getting value for money from its investments in Information Systems. Standard off-the-shelf solutions offer good value for money and will deliver against most of the needs of an SME.  For larger business, more expensive customisation should be expected.

It is important to consider the Total Cost of Ownership (TCO). Most systems come with both an upfront implementation fee AND monthly recurring fees.  Hidden costs include internal headcount that might be required to run administration services, and costs relating to future upgrades such as the cost of the software upgrade and any internal process remediation work required.

Ease of Implementation.

Make sure that the developer of the accounting system has a proven track record. Competition in the market is fierce, but with varying degrees of success it is critical to choose a provider that has successfully completed projects similar to your own.

Implementation of a new system can be quite complex even for the most basic of accounting systems. It is therefore recommended to engage with an independent consultant to help you navigate you through this.

Implementing a new accounting system is not for the feint hearted. Once you have elected and implemented your system, it is unlikely you will find the appetite to repeat the process any time soon.  This type of decision is going to have long-term consequences and as such is critical that you future proof your system.

Time Savings.

It is unfairly considered that an investment in an accounting system is just about compliance. Yes, you will gain confidence that your external reporting is accurate and on time, however implementing a new accounting system provides an ideal opportunity to completely redesign your business processes. Heavily automated and paperless processes are where the real wins are.

Pensapos has extensive experience in analysing, redesigning, and implementing financial processes.

Step 3 – Choice of System.

The final step before implementing a new system is of course to decide which one to choose.

Sometimes there will be a stand-out and obvious candidate.  More frequently though there will be a number of options both with their own advantages and disadvantages.  This is where the scoring system in Step 2 and an independent consultant can help.

Step 4 – Implementation.

So now you have chosen your new accounting software.  Great news!  But now the hard work starts.  It is important to ensure that all the benefits you have identified in the options analysis and decision stages become realised in the implementation phase.   This can be achieved using a well-structured and managed implementation plan.

Choose a project manager.

This could be an internal head if you already have the IT and project management expertise, along with available bandwidth.  Often a business will choose to engage with an external contractor with agreed deliverables, costings and timelines.

Budget & Timelines.

Implementation of any system requires a serious commitment to allocating resources. Set a realistic timeline and budget using your project manager.

System Build and Customisations.

Even the most basic of accounting systems require some degree of build and set up. And all will require some customisation.  Doing this right will ensure that all of your expected benefits are realised.

Training & Testing.

The staff that will operate your new system should have the opportunity to test it out, feedback on any errors of design or functionality, and suggest further changes.  A test-environment is created to allow employees to have a play in the system.

Sign off functionality.

Once testing is complete it is highly recommended to formally signoff that all features are behaving as expected, and that all expected benefits have been realised. This is critical before starting loading data migration data in the live system.

Data Migration.

A decision should be made about when the system will go live. Critical dates such as year-end should be avoided to minimise risks.

Data from your existing system (or external firm of accountants) should be migrated into the new system so that historical information can be obtained through it.

Step 5 – Go Live.

Getting past the finish line is a major relief for most people and should be celebrated as a major achievement.

All that is left is to ensure that you business has the required level of support to ensure that business activities can be recorded without issues.

Want to find out more?

Pensapos has extensive experience in all of the 5 steps detailed above.  Do you need support in documenting your business requirements?  Or support in the evaluation and decision making process?  Do you lack the bandwidth and/or expertise in implementing a new accounting system.

Pensapos offers a free 1-hour consultation to help you determine what next steps are best for you.