To stay competitive in this day and age, change is unavoidable. "If you really want to be efficient, automate as much as you can," says Jane Nottenburg, owner of Custom Accounting, an accounting software consultancy in Norwalk, Conn. She says that most of her small business customers spend 50 to 70 percent less time on accounting functions when they automate.
Unfortunately, for many companies, those benefits never materialize. Some find themselves saddled with a system that doesn't meet their needs; others encounter huge problems during implementation. It's no wonder so many are wary of trading in their tried and true -- if somewhat clunky -- accounting systems. However, with a solid groundwork of planning, the transition can be a smooth one.
RECOGNIZE THE SIGNS
Figuring out when to change accounting systems isn't hard. Honor International, a Miami-based computer retailer and wholesaler, used QuickBooks for several years, but the program just couldn't handle the company's heavy duty sales information. The company receives online and offline orders from across the United States and the Caribbean. Workers must calculate shipping charges, compare quotes from private delivery companies, assign and track warranties and serial numbers, track orders, manage inventory, maintain contact information, and more.
"Our inventory control was a nightmare," says Eduardo Gil, general manager of the 13-employee firm. "The system was not efficient and it didn't help us understand our purchasing needs."
Gil knew his company had problems when his staff had to print out past invoices just to determine the last price they quoted a customer. Employees were also having trouble keeping track of customer warranties. In addition, the company's various software systems weren't integrated, employees were re-keying information into several different programs, and they were jotting information down on paper because it was easier than typing it into QuickBooks. It was time to look for a new system.
WHERE TO LOOK>BR>There are many accounting systems available, and choosing among them can be difficult. Start by asking colleagues in similar fields for software recommendations. Also, consider working with a reseller who can give guidance in the selection process. Just make sure you hire a good one. Virginia Seidel, an accounting information system consultant at Atlanta-based CBIZ AH Business Services Inc., says that far too many companies overlook this critical step. Get credentials and references, then ask current and former clients about the reseller's strengths and weaknesses during implementation. Many resellers are good on the sales side but weak on the technical aspects of the program.
Once you're satisfied with the reseller's technical knowledge and track record, ask for a scripted demo of the program using actual data. This will give you a good idea of how the program will handle regular functions.
GET WHAT YOU NEED
Many small business owners assume they should start the process by comparing features on various accounting systems. Seidel says this approach won't work.
"You can't shop for accounting software by features," she says. "When it comes to technology, look at what your business really needs." To figure out those needs, interview employees. Analyzing each employee's job functions can help. The office manager, for example, may need to budget for office supplies. And don't forget about small capabilities, like voiding a transaction.
At the same time, don't be afraid to change processes if you can improve them. Honor International, for instance, used to receive orders via e-mail, then key them in manually. Gil researched several software packages before purchasing Accware from ICODE Inc. He later upgraded to Accware Online, which gave him e-commerce capabilities and links directly to his sales and accounting information.
"Sometimes when you start the business you don't know what you really need," says Stephen Milner, CPA and owner of Squar, Milner, Reehl, & Williamson, LLP, a certified public accounting firm and business consultancy in Newport Beach, Calif. "Identify those needs at the inception, then take things gradually."
PULL IT TOGETHER
The best way to get back good data is to input the right kind of information at the beginning of the process. Gather all those check stubs, balance sheets, and that last reconciled bank statement before you set up the program. The information will help you understand what categories and reports you need.
"Automation is an obvious way to go because it makes things so much quicker and neater, and information is more readily available," says Judith Lievesley, accountant at Cable Consultants Corp., a manufacturer's representative in Larchmont, N.Y. "Then at the end of the year you have concise records to use in putting together tax information." Nottenburg recommends examining invoices to ensure that they can run on the system as is. Test the system by entering just one week's or one month's worth of information. It will be easier to make adjustments at this stage than when there's an entire year's worth of data to contend with.
Moving to a new accounting system presents many potential pitfalls: Losing the company's data or missing a tax-filing deadline because the program won't print the correct report. To avoid mishaps, run the old and new system simultaneously for a few weeks, advises Lievesley. After spending about two months inputting her data into QuickBooks, Lievesley ran the manual books alongside the computer program for an additional two months. That way, she had a way to check herself, and a backup in case she ran into technical problems. She says that backing herself up, as well as the entire automation process, has been well worth the effort.
FIND A HELPING HAND (OR TWO)
Most small business owners try to save money wherever possible. Implementing a new accounting system is one area in which you shouldn't skimp.
"I think it's worth spending that little extra to have a person at the end of the phone," says Lievesley. She hired Custom Accounting's Nottenburg to help the company convert its manual accounting system to QuickBooks.
Implementing a new software package may seem like a relatively simple task at the outset. But people are creatures of habit, and employees will likely have some attachment to the accounting method they use now. They may put up some resistance to those grand plans. That's why you need to appoint a project manager, someone who can rally the troops and shepherd the project through the various phases of implementation. That person could be an employee or an outside consultant. Either way, make sure they have the knowledge and people skills to make it happen.
Change is never easy, especially when it comes to a core business process like accounting. But if you play your cards right, it can be very lucrative. Honor International, for example, is on pace to increase its revenues 40 percent this year. Before the company purchased the new system it was averaging $9 million in annual revenues; after they implemented it last year, Gil noticed a jump to $11 million.
"It's like magic for us," Gil says. "My inventory levels change here and it's automatically updated on the Web site. It changed the whole business."