Tech & Work

Demystifying accounting software

Your accounting department is screaming for a new software application, but you don't know if the new software is compatible with your network architecture. Accounting expert Jack Fox explains how to balance accounting needs with network requirements.


For large corporations, the job of software selection is relatively easy. Such enterprises often can afford to retain a large consulting firm, such as Andersen Consulting, PriceWaterhouseCoopers, or Ernst & Young, to examine their business processes and advise them on the software they need.

That level of expertise, however, is out of the price range of many smaller firms. They must rely on software publishers or on resellers, often called AccountingVARs. (The VAR stands for value-added resellers, who represent the software publishers on a local level.) These resellers often know a great deal about the software they represent, but they may not know much about integrating any given product into a particular business. CIOs have to be smart shoppers who focus on filling specific business needs.
Do you spend half your time making a budget, only to readjust again a month later? Can you make sense out of the spreadsheets that your accounting department is constantly sending you? What’s the best way to calculate ROI or TCO? If you have an accounting conundrum that you’d like answered or explained, send your question to Ask Jack. Every month, Jack Fox will answer questions from savvy CIOs who just don’t have time to become experts in bean counting.
What’s in the box
The siren call of the software industry has long been that companies need to have the latest, fastest software available. Balanced against this type of hype are the CIOs who must be skeptical, weighing their existing computer investments against the time and cost that would be necessary to upgrade hardware, software, and the network—not to mention training employees to work with the newest accounting software package.

CIOs who work for smaller companies should not take their eyes off their business needs. Your focus shouldn't be on having the latest and greatest but on having core software programs that meet business needs. What difference does it make whether you upgrade or not? The key part is the information you're looking for.

The first step in deciding what accounting software to buy is to determine which applications are crucial to your business. These "mission critical" applications are generally financial and business management programs such as accounting, sales automation, budgeting, and business planning software. These types of software also happen to be among the most complicated kinds to buy and implement, especially for rapidly growing companies. Smaller enterprises present a significant problem for the CIO because in some situations they're beyond the capability of single software packages, and the high-end software at the other end of the spectrum is very expensive.



Accounting for cost
The CIO must know the types of accounting software the firm requires and is faced with making the decision of choosing among what's available. Here you are confronted with the factors of price and function and not breaking their budget. There is more to software than just the price and features. Savvy CIOs realize that the purchase price of software makes up only 20 percent of the total cost of owning a software package. CIOs should concentrate on the total cost of ownership such as hardware and software upgrades, maintenance, and employee training. The more critical the application is, the more important such issues become.

The CIO should not underestimate the time and expense it will take to get an important accounting software package up and running. Depending on the software involved, companies can take anywhere from two months to a year to implement an accounting software package properly and can spend a dollar on hardware for every dollar they spend on software.

Qualify your sources
As a CIO, choosing the right accounting software package can present a complicated task. While we hate to admit it, not everyone is an expert. One good way to find out what to buy is to ask peers—companies of a similar size or in the same industry. Some industries, perhaps yours, have unique business needs, and certain programs may become standard among companies. Your industry, trade organizations, and local chamber of commerce are often good resources to utilize.

Several accounting software publishers are listed with individual Web sites for further information. Consultants, accountants, or accounting software resellers represent almost all of these software producers. As a CIO, exercise extreme caution, since it's important to find a reseller who understands the specific needs of your business and industry, not just how the software works. Many resellers have a background in programming, not accounting. When the time comes to choose your accounting package, get as much information as possible about what's available, then bring in vendors to demonstrate their wares.

You should find out how many companies are using the program, and get the names of people who are using it. Be confident that the software developer is going to be around to support the package. You are not just buying the software; you're buying a small piece of that company. Making an important software purchase is similar to hiring a new employee. You want to make sure that A) they're going to be there, and B) they're going to continue to be there in the future.

Many CIOs draw up a written business plan for software purchases that outlines their company's needs, the type of software they're looking for, and whether it fits in their software budget. By sticking to the plan, the CIO has a measuring stick to guide the decisions they make.



Accounting software resources
ACCPAC International

CYMA Systems Inc.

Great Plains

Macola Software

Micro Vision Software

Navision Software

Red Wing Business Systems

Sage Software

Solomon Software

Jack Fox is Executive Director of The Accounting Guild in Las Vegas, NV. Fox has been assisting thousands of accountants and IT consultants in building their own successful businesses. He also coaches for effective leadership in IT functions of small to medium-size enterprises since 1984. He is the author of five books, including the third edition of Starting and Building Your Own Accounting Business , published by John Wiley & Sons.

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