Thursday, May 29, 2008

What accounting system should I choose?

One of my MBA classmates asked me if I might be able to create a matrix relating accounting packages to size and industry. In her two paragraph inquiry she mentioned seven different software packages. The reality is that there are likely a thousand or more accounting programs on the market, each with their own set of advantages and disadvantages. What might work great for one company could be a disaster for another.

Choosing the right software is a critical business decision. Get it right and you’ll be extremely pleased. Get it wrong and you’ll spend countless hours doing workarounds and other labor intensive work to get the information and control a good system should provide.

Because there are so many choices in the market, it would be impossible for me to know all of them. As a Certified QuickBooks™ ProAdvisor, I am somewhat biased towards them and often recommend that solution. However, QuickBooks is a terrible program for many businesses.

I tend to recommend QuickBooks because it is inexpensive to purchase, easy to use, offers great customer support, is expandable within limits, and offers a variety of industry specific packages. The industry specific packages cost more to purchase but offer many great features for certain companies.

Being the most widely used makes it easy to find bookkeepers and staff who are trained and familiar with the software which can significantly reduce current and future training costs. There are also a number of third-party vendor options to enhance the package that can be purchased separately.

On the other hand, QuickBooks can only handle average cost inventory pricing. If you need LIFO, FIFO, specific identification or some other inventory pricing system, QuickBooks will not work for you. QuickBooks has other limitations as well but those are for another discussion.

Since there is no one size fits all accounting system, I recommend business owners start by evaluating any industry specific programs on the market. Industry specific software helps address business processes typical to an industry without adding extra customization costs.

I was involved in start-up bakery which selected QuickBooks prior to my arrival on the team. While I was trying to determine how to make QuickBooks cost a loaf of bread and then differentiate that from a sliced loaf of bread, I did some research and found specialized bakery software. The bakery software was admittedly more expensive (approximately $5,000 to buy and another $5,000 to set up) but infinitely more useful. The bakery software provided so many additional benefits that the added cost was more than worth it. The specialized software helped the start-up bakery operate at an entirely different level than what would have been possible with QuickBooks alone.

Sometimes it makes sense to use QuickBoooks for A/R, A/P, G/L and financial reporting while using a different package for inventory, costing, billing, or other specialized tasks. It just depends.

The total cost of the system will include the purchase price, setup, training, operating costs, advisory and support costs as well as future upgrades. All of these costs need to be considered when making a choice and compared to the anticipated benefits of the systems under consideration.

Here is where I recommend the value of a CPA knowledgeable in systems design. Armed with knowledge about your business, goals, plans, operations, processes, transaction flows and critical information requirements, a CPA can help you find and select the software that will be a strategic fit for your company.

1 comment:

Joy said...

I enjoyed reading your blog for the first time today. Alot of great information especially being a Realtor and having my own small business!