For new businesses, choosing accounting software is relatively easy. However, once your business outgrows these products, finding a replacement is far more complex.
When your budget is under $1,000 there are very few options. The two major packages, MYOB and Quicken, are readily available from major retailers and come with a handy evaluation version so that you can try before you buy. You can install them yourself and get going with relative ease.
However, once your business outgrows these products, finding a replacement is far more complex. For one thing, you may not be able to buy it from a retail store but finding out what packages are on offer for SMEs is surprisingly difficult even with an Internet search.
Not only is the cost significantly higher than micro-business packages but the range and type of package varies, making it harder to make a reasonable comparison. Generally, you can't try before you buy and be warned: most solutions require investment in implementation, generally at least equal to the cost of the software licences.
For any growing business, an investment in the new package will be significant, so it is vital to make the right choice. So how do you do it? Try following this seven step guide.
1. Know what you want
The most crucial part of selecting your software is to know your requirements - in detail. A simple list of functions and features is generally not enough to differentiate an average fit from your ideal solution. Here are some tips for putting together your requirements:
- Don't just duplicate the system you already have. This is a perfect opportunity to improve the way you do things. Design your ideal business processes, and use them as a basis for your software requirements.
- Get down to the detail. For example, don't just say "able to handle stock transfers". How do you want it to handle them? Do you want the stock checked out of one location and checked into the other? Do you want it to appear as "in transit" while it moves, or do you want it to be received immediately? Do you want to produce documentation such as picking slips? Do you want to record the transit costs and include in cost of sales?
- Include everything, no matter how obvious you think it is. Don't make the mistake of assuming that the new accounting system will do everything your MYOB or Quicken software can handle.
- Use plain English, without industry jargon - something which software vendors may not understand!
2. Search widely
If you want to find the perfect solution, you will need to do your research and shop around. Finding what software is available for SMEs is surprisingly difficult. It's no wonder that many businesses only consider two or three solutions, but this can really hold back your chances of finding the right product. Consider the following sources:
- Internet searches
- Your industry association
- Colleagues and suppliers
- Competitors
- People you may know who work in the IT industry
Look outside the square. Some accounting software vendors which have traditionally only served the top end of town now have offerings specifically aimed at the SME market - for example, even SAP now has an affordable alternative for small business.
Don't just search for accounting software. If you also look for categories such as ERP (Enterprise Resource Planning) software you may find some packages that you missed, and also look for specialist software for your industry. For example, if you provide professional services, you could look for PSA (Professional Services Automation) packages.
3. Narrow down
Now that you have your "long list" of software packages, you need to eliminate some fairly quickly or you will find the evaluation too time-consuming. Get on the phone to each of the vendors and find out how they handle your top ten requirements - the show-stoppers. You will also need to get an idea of price to make sure it is not way out of your budget. Vendors will often be reluctant to give pricing over the phone but be adamant - if they won't give ball-park pricing, ask them for a likely price range. At the same time, ensure they include all implementation costs as well as the licencing.
Also find out about their current users, for example, what type of businesses are they, and what size? Are their existing users in similar industries? From a size perspective, look at where you fit in their user base. If you are their smallest user you may find that you don't sit high on their priority list; however if you are their largest user then you have no guarantee of the scalability of their software. You should consider the growth of your organisation, and think about where you will be in three to five years time.
If you still have more than three vendors on your list, feel free to send these vendors your detailed requirements list and ask them to self-assess their capability for each item while at the same time confirming pricing. You should be able to narrow down to no more than three by now.
4. Seeing is believing
For your shortlist of three packages, a software demonstration is a must. This not only ensures that the software meets your requirements but enables you to assess the product usability and your fit with the vendor or reseller. At this stage, we would recommend:
- Always using your own data for the demo, not the vendor's canned data - for example, to evaluate the purchasing process, take in sample purchase orders, goods receipts & creditors invoices; to evaluate sales take sample quotations, customer orders, picking slips, delivery documentation and sales invoices.
- Tell the vendor beforehand what you want to see at the demo, and make sure they stick to the script
- Score each demo against your requirements list, and take plenty of notes so that you can compare each product later
- Don't be swayed by sales hype and features that you don't really need - for example, don't buy a sophisticated reporting package if the basic report writer will give you the information you need.
5. It's not just about the software
Look at the vendor:
- How large is their organisation? Where are they located?
- What experience do they have with businesses similar to yours?
- Are they financially stable? Ask for financials - if they are doing OK they will generally be happy to show you.
- What ongoing support do they offer?
Always speak to some of their existing clients for a reference check. Don't just ask them about the software, however. Be sure to find out about their support, how the implementation went, and generally if they are happy with the relationship.
If you are buying through a reseller who will be providing ongoing support, you will need to answer these questions for both the software publisher, and the reseller.
6. Get it in writing
Make sure the vendors back up all of their claims in writing. One of the best ways of doing this is for them to self-assess against your requirements and then include this in the contract when you purchase the software. Claims made in software demonstrations are very easily forgotten when you go to implement the software several months down the track.
Also be sure to get pricing in writing, and be clear on whether their implementation costs are fixed or estimates. Look at the contracts, particularly in regard to ongoing support and maintenance. Be aware that annual maintenance charges are generally around 20 per cent of the software licence cost.
7. Ask for help!
While many small businesses would find it hard to justify engaging a consultant to do an entire software selection project, some external and professional help for key tasks can make all the difference. Consider getting help from a consultant to prepare your business requirements, or to review your shortlist.
While the process of finding software may appear daunting, it is worth spending the time to make the right choice. The more time you spend on planning, the less trouble you will have when the system is implemented - and hopefully it will be many years before you have to look for accounting software again.