SMB Accounting Software Buying Guide
- 15 April, 2010 09:52
Choosing new accounting software can be a daunting task for any business, but all the more so for small business. Over the following pages, CFO World’s provides an overview of the Australian small business accounting software market. It aims to help you in the early stages of the buying process, let you know what questions you should be asking and demystify the jargon that sales people will inevitably throw your way.
The function of accounting software
Contemporary SME accounting software packages are designed to simplify and automate complex, manual financial management processes and improve the accessibility, accuracy, and timeliness of mission-critical financial data. In doing so accounting software manages processes and procedures for accurately entering, tracking, and maintaining information related to an organisation’s financial operations. At the very least a CFO would expect accounting software to increase the productivity of finance staff members, while improving financial performance management and strategic company planning.
Leading brands appear to be delivering on this and this guide examines the various issues that a buyer needs to be concerned about.
Software can be purchased as physical packages “off the shelf” or downloadable over the internet. Online accounting is software hosted on a web server that can be accessed by many users at once using a computer’s web browser. A single (or multiple) instance of the software runs on server infrastructure, but serves a number of client users. So rather than paying up front costs for software customers pay a smaller quarterly fee. This is a bit like renting your software while you need it rather than buying it.
Low end to high end
The simplest accounting packages in the Australian market from well known suppliers such as Quicken and MYOB are designed for smaller businesses in start-up phase or those who need to do in-house bookkeeping that feed the necessary information to an external accountant to do “the books” and do compliance returns such as BAS and tax returns as well as company returns to the ASIC. Packages are deigned to be used by non accounting people with no finance skills and only basic computer skills.
A CFO is concerned about the finances of the organisation and whereas larger companies have enterprise systems many small to medium businesses require that other functions (such as inventory control, manufacturing management, and financial reporting) need to integrate with their accounting system. As the enterprise begins to expand across many product ranges geographic locations as well as implementation of strategic planning (not always the highest priority for a start up), the CFO will look to his system providing a capacity to undertake spreadsheet models and templates for cash flow forecasting, business plans, and more.
At the larger sized business, where there are in-house finance professionals, solutions are frequently part of an extensive suite of software often known as Enterprise resource planning or ERP software. Here the use of a single system to integrate all of the data and processes of an organisation – no matter how complex it is.
The switch from software to online accounting
Software which is web-enabled will, for the more popular brands at least, interact with other applications across the company network or over the internet. This means that information can be more easily accessed and entered through different applications, and maintained in real-time. Hosted accounting online software solutions that are maintained by a service provider and then accessed over the web is increasingly becoming the norm in accounting software applications with CFOs choosing Web-based accounting systems over client/server solutions.
As broadband penetration increases and bandwidth increases the capacity to have software provided as a service, that is, anyone with a PC and an Internet connection can use their browser to access applications online and store their data files at a remote location, such as a data centres, making software simpler and cheaper to use. In effect the choice of the right accounting software is getting simpler.
Hosted accounting software
Under the service model, a client will pay to access a system that is hosted on the internet, in a similar way to which they might access online banking. Hosted accounting software – the software as a service we noted earlier and abbreviated to SaaS, provides all the same features and capabilities as on-site accounting software solutions. However, it is not installed and maintained at the company’s site. It is “leased” or “rented” from the service provider who takes on all responsibility for its deployment, storage, and ongoing administration. Here the business pays a monthly fee to utilize the system and its functions, while the service provider handles the rest.
Small business does not want to deal with licensing issues and the manual upgrade of software. In a competitive environment service providers will ensure that multiple annual upgrades and daily backups through their service offering delivers business savings to you as a subscriber.
Outside of operating systems, software technology has reached the mature end of its commercial life cycle and is no better illustrated than online banking and what it has done to “branch banking”. Proponents of the online accounting suggest that this is inevitable too in software accounting. This is no bad thing: just as bank queues are a thing of the past so too should managing the book become far more streamlined, automated and dynamic.
SaaS and cloud computing are favoured by smaller firms
Many finance executives already see SaaS as a way to bridge their organizations’ effectiveness gaps. Long considered an adjunct or complementary means of delivering and using simple business software functionality, SaaS is increasingly becoming part of mainstream IT operations – including core Finance processes and functions. Smaller firms when short of cash often forego IT investment during downturns, because the upfront, “lumped” costs of software and infrastructure can be relegated to non essential spend.
SaaS and cloud computing tip the circumstances more in favour of smaller firms. Smaller businesses can now achieve a high level of SaaS quickly and easily. It is almost possible to run an organisation entirely using online applications as a choice over software.
The advantages are:
- Affordability. Lower capex costs translate to enhanced affordability and an accelerated return on investment. Ongoing costs can be adjusted up or down based on usage and cost creases can be predicted and managed.
- Total ownerships costs reduced
- Rapid deployment. Established service providers have systems in place
- In-house technical support. Most SMBs do not have technical support in-house, hence outsourced solution offer a minimal technical administration
- Improved accessibility and portability
- Ease of use
- Improved integration with online banking services and payment systems
- Decreased administration with smarter Web 2.0 applications now fully integrated into the various offerings.
On the other hand, there are disadvantages including;
- Reduced control over the application and all its associated data
- Potential security risks posed by lower-quality applications and
- Potentially, increased long-term total cost of ownership. Subscription, data transfer and storage fees, maintenance contracts while less than capex may over the long term represent a higher cost than ownership.
A list of requirements when purchasing accounting software;
Software solutions will depend on the type of business you are operating, whether you are a sole-proprietorship, a medium sized business or a large corporate entity. Minimum requirements would be the capacity to:
- Allow multiple users to work with financial data
- Enable and refine forecasting methodologies for improved production efficiency and deliver more effective pricing inputs
- Improve order, inventory, and asset management
- Store customer and supplier data
- Create invoices & statements
- Track sales
- Track of inventory through purchase order
- Create budget report
- Create monthly and annual reports
- Business tax reporting
Integration is critical
Many employees need to have a complete view of customers with real-time information and where the accounting software readily integrates with your existing applications. A financial software package must be capable of importing and retrieving information from other areas of your business.
Accounting software should be like any business software solution and offer industry standards. Whether it’s an ITC solution or a POS software solution or a networking software solution, accounting software too needs to have features which deliver:
- Ease of Use. This would embrace installation, set up, and intuitive ease in use. Highly regarded accounting programs make navigating intuitive, so the user never has to guess where you are or what to do next.
- Reporting Categories: a CFO will need the flexibility of producing reports under any number of categories, making the reporting features an essential one. Customisable reports save you time; thus looking for accounting software that will allow for finance staff to set criteria is a core feature. The question to ask is do standard reports that come with this software? How easy is it is it going to be to prepare ad hoc reports, that you want? After all it is the analysis of financial reports that allows management to analyse what is and isn’t working for your business.
- Scalability. Accounting software should have the ability to grow with the business over time. After all a cheaper but less flexible accounting software option that serves only your needs might lead to a much costlier and disruptive solution in the future.
- Help Desk: while the desired outcome is for a turnkey solution in any software application, the real word fact is that systems invariably need some support. For sure simplicity and ease of use (the #1 feature) is important, invariably issues arise. Look for email and phone support; toll-free phone and live support, online help is a bonus. Online, we look for indexed help topics that can be searched easily. You’ll want quick access for both technical help and accounting help for your software. Accounting software companies should have qualified people (both technicians and accountants) answering these tough questions.
Accounting software risks
Selecting an inadequate accounting system may hamper your ability to detect internal fraud or theft. But there are other risks to consider:
- Loss of data or service
- Being reliant on accounting software, any loss of service due to a power or computer outage could cause a work disruption. Also if information is not properly backed up, a computer outage could result in lost financial data.
- Incorrect Information
- Garbage in- garbage out is an oft-quoted mantra but with software based accounting systems there is still some manual input of data. Financial results could be incorrect unless all input data is reviewed. The onus is on checks and balances being appropriate
- Cost. While cost are often cited as disadvantage, many would alternatively say its an investment. Beyond the initial outlay to purchase the software there is the cost of maintenance, customization, training and computer hardware, although contemporary systems are becoming more intuitive and hence reducing training needs. As one developer of accounting software for a retail application noted “with staff turnovers in retail up to 40% a year we can’t afford NOT to make our POS systems and accounting software ready to turn on and operate.” While time savings may justify the cost, for some businesses it may take years before an accounting software investment pays for itself.
- A computer is vulnerable to viruses, botnets, trojans and other malicious attacks that read, take or corrupt data and applications stored on your computer
- People often store credit card numbers in accounting software files which is a major security issue if all the appropriate best practises aren’t followed (including PCI compliance)
- Online is open to hacking. Most Saas service providers will use the industry protocol of SSL (Secure Socket Layer) just like online banking services to encrypt the information passing between the browser and the server to stop any potential hackers from accessing your data in transit. A potential subscriber of a SaaS powered service would ensure access is username/password protected. Files should also be able to be locked on request. When you compare the risk for example of laptop theft or typical desktop software viruses, there may be significant safety advantages in Saas driven applications than most on-premise software implementations.
- Price (total cost)
- Ease of use
- Reporting capabilities
- Interoperability (integration with other enterprise-wide applications)
- Support and reputation
While MYOB and Reckon dominate the Australian market, there is a plethora of other solutions out there, including Peachtree and even Microsoft’s Money. Reckon’s QuickBooks and Quicken brands have been major brands in the software market and has given US-based software developer Intuit a wonderful license revenue stream.
The important decision points listed above, and apart from functionality, is for the CFO to ask themselves some basic questions, such as what the business needs will be two years out. It is also worth ensuring that the package is one that the company’s CFO is familiar with, while also thinking about the number of people in the business that will need to access the software.
Prices range for a few dollars for the basic MYOB packs; the QuickBooks Enterprise Solution (the platform supporting up to 30 users) costs about $3,000, while at best, midrange accounting software ranges from $25,000 to $30,000.
When it comes to making the buying decision, reputation also helps.
QuickBooks has been around for three decades, and owns about 85% of the small business accounting market. Some users will outgrow QuickBooks—but in recent times QuickBooks now allows up to 30 simultaneous users, so the decision to switch isn’t entirely a size-based one.
QuickBooks Enterprise Solutions accounting and business management software delivers the power and flexibility your growing business needs with QuickBooks’ legendary ease of use. Manage your business finances, inventory, customers, vendors and employees for thousands less than other more complicated accounting software systems.
There are many who recommend using QuickBooks for as long as it’s fitting, but Intuit executives have stated plainly that their products are not intended to ride the wave of expansion from SMB status to larger enterprise. The most important thing, of course, is to assess accounting needs accurately, and then decide what type of accounting and financial software to choose.
As far as reporting capability (noted earlier in guide), some reports that may be of interest include:
- Payments by Vendor
- Overhead as % of Total Income and Expenses
- Sales by State
- Cash Flow Forecast by Quarter
QuickBooks Enterprise Solutions – ( v. 8.0 ) – license and media specifications
- License By Qty user
- License Pricing: OEM
- Platform: Windows
- Distribution Media CD-ROM
Required Microsoft Windows Vista , Microsoft Windows Server 2008 , Microsoft Windows XP , Microsoft Windows Server 2003
- Software Requirements Microsoft .NET Framework 1.1
- Min Processor Type 2.0 GHz
- Peripheral / Interface Devices 4x CD-ROM , SVGA monitor
- System Requirements Details Microsoft Windows – RAM 512.0 MB – HD 1.0 GB
Peachtree Complete Accounting 2009 – complete package
- License Type Complete package
- License Qty 1 user
- Min Supported Color Depth 16-bit (64K colors)
- Distribution Media CD-ROM
- Package Type Retail
OS Required Microsoft Windows Vista, Microsoft Windows XP SP2
- Software Requirements Internet Explorer 6.0, Microsoft .NET Framework 2.0
- Min Processor Type 1 GHz, 1 GHz
- Peripheral / Interface Devices 2x CD-ROM, SVGA monitor, Internet connection
- System Requirements Details Microsoft Windows XP SP2 – Pentium III – RAM 256 MB – HD 1 GB, Microsoft Windows Vista – Pentium III – RAM 512 MB – HD 1 GB
Distribution Media: CD-ROM
- OS Required Apple MacOS 8.6 , Apple MacOS 9.x , Apple MacOS X 10.1
- Min Processor Type PowerPC
- Min RAM Size 32 MB
- Min Hard Drive Space 40 MB
- Peripheral / Interface Devices CD-ROM , SVGA monitor
MYOB EXO Business
MYOB EXO Business is the next step in the MYOB product range (beyond the basic package) and is perfectly suited to organisations that require:
- A large number of users across multiple locations
- Stricter control over the general ledger
- Graphical visibility via management dashboards into how your business is performing
- Advanced stock management across multiple warehouse locations
- Importing of stock from overseas suppliers
- Management of jobs, including, quoting, labour charges, tracking and reporting
- Assembly of goods
- High volume of transactions
Minimum System Requirements
- Microsoft SQL Server 2000 (service pack 4 or above)
- Microsoft SQL Server 2005
- Microsoft SQL Server 2005 Express
Some features require:
- Internet access
- Microsoft Internet Explorer 5.5 or above
- Adobe® Acrobat Reader v4 or higher
- Windows® 2000 (service pack 4), Windows XP (service pack 2), Windows Vista (service pack 1)
- 500Mhz Intel Pentium® III processor (or equivalent) with 256MB RAM (recommended 512Mb)
- 100MB of Hard disk space
- 16-bit colour, 1024×768 screen resolution
- CD-Rom Drive
- Windows-compatible printer
- Windows-compatible mouse or pointing device
- Windows® 2000 Server (service pack 4), Windows Server 2003 (service pack 2)
- Intel Pentium® 4 processor (or equivalent) with 512MB RAM (recommended 1024Mb)
- 200MB of Hard disk space
- 16-bit colour, 1024×768 screen resolution
- CD-Rom Drive
Features and Benefits of MYOB EXO Finance include:
- Importing and exporting – track and manage all your foreign currency transactions using dedicated sub-ledgers.
- Multi-user – hundreds of your staff can access different functional access of MYOB Exo Business at any one time.
- Accounting and Finance – extract real time data for analysis from any area of the business.
- Management Reporting – Improve the visibility of how your business is performing with powerful management dashboards.
- Customer management – Manage complex customer relationships with confidence with MYOB EXO Finance centralised debtors’ master file
- Complex stock management – manage your entire stock process from ordering, inward goods, storage and management to sales picking and delivery.
- Manufacturing Processes -If your business is predominantly occupied with building new items for sale from a set of components and processes, MYOB EXO Finance’s bill of materials (BOM) codes can be used to build product sets
- Warehouse Processes – MYOB EXO Finance’s powerful stock control and distribution features transform your logistics area into a source of customer service excellence
- Multiple locations – set up your business with real time networked integration across multiple locations across the globe.
The final word on accounting software
- While MYOB and Reckon dominate the Australian market, Peachtree appears to have (through various reviews) exceptionally thorough modules, especially inventory.
- Most CFOs will want to know what the business needs will be two years out. That’s a decision driver; as well as identifying the people in the business that will need to access the software.
- When it comes to making the buying decision, as noted earlier in the guide, reputation also helps. That is a plus for MYOB which is a trusted and recognised brand globally and also has an established program of working with software developers that can assist clients who need more than the core applications can provide them.
- The newer version of QuickBooks is ‘web-enabled’, meaning it can interact with other applications across the company network or over the internet. This means that information can be more easily accessed and entered through different applications, and maintained in real-time
- SaaS solutions are in the nascent stage and offer a multitude of open source as well as branded solution providers in accounting software. They tend to have niche applications but the landscape is evolving very quickly.