How do I Select an Accounting System?

by: SBC Staff

Please Note:  If you have a very small business you can ignore the remainder of this article!  Very small businesses should start with QuickBooks or QuickBooks Pro and move on when they’ve outgrown these smaller systems.  This article applies mainly to larger small businesses.

If you've begun thinking about replacing your accounting system, or buying your first one, you know that there is a dizzying array of products to choose from.  Most of them provide adequate accounting functions, but the manner in which they handle payables, receivables, sales orders, purchase orders, inventories, job costing, manufacturing and many other functions vary greatly with respect to built-in functionality, ability to customize, flexibility in how the system is set up to accommodate your business needs, ease of use and the amount of time it takes to train your users.  Since full accounting systems, installation, configuration, customization and training are not cheap you need to be very careful in how you approach this purchase.  It is all too easy to spend tens of thousands of dollars before you realize the system chosen will not meet your needs or will require changing the way you do business to fit the capabilities of the software.  Since you cannot possibly test all the systems in a production environment before you buy, how should you approach this project?  The following is some summary advice that can serve as an action plan to put you on the right road.

First, there are several semi-annual or annual publications that rate the major software packages that are available.  Either get one or consult with someone who has one.  You will find listings of capabilities or limitations for each software package grouped by functional module, such as general ledger or accounts payable.  Some of these publications also include software that can be used to input the capabilities that are most important to you and have the software calculate which packages meet the majority of your needs.  For example, if you utilize a general ledger account methodology that contains 12 alpha-numeric spaces, you would not be interested in a general ledger system that allowed only eight; if you require the system to run on a UNIX server, you wouldn't be interested in those that do not; if you require grouping your inventory into categories eight levels deep, you would be severely hampered attempting to use an inventory management system that only allowed you to go four deep.  Of course, you have to be careful with this type of analysis, since a software package may provide other, more efficient ways of accomplishing the same thing.  For example, the inventory system that appears to allow item groupings only four levels deep may have other features that accomplish the same thing.  For this reason, you need to be very careful in determining what your criteria should be.  Leave it somewhat flexible.  If you find a particular package meets most of your needs but seems to have several glaring omissions or problems, make a note of them so you can follow up with your consultants and understand how such issues are dealt with.  Also keep an open mind.  There are times when you should consider changing the way you do business.  Software my provide you with ideas for doing things more efficiently.  At any rate, the analysis will help you become familiar with the capabilities of the systems that are on the market.  We would not recommend ever making your choice based solely on this analysis, but it is an excellent place to start.

Second, once you have narrowed your choices down to the top four or five that appear to meet your needs, its time to talk to the people who represent these packages.  Accounting software is almost always sold through a reseller channel.  It should be relatively easy to find the local resellers of the products in which you have an interest.  You can call the company that develops the software to get a recommendation.  Once you have the names, call the resellers to set up a meeting.  During this meeting, you can ask about those areas where you perceive their software has limitations to understand how the reseller would deal with such a limitation.  Be prepared to share a lot of information about your business so the reseller can understand how his software might work in your business.  Ask to have a demonstration copy of the software available for your use at your site.  The reseller should be happy to not only provide it, but will install, configure and tune it to work on your test system.  Plan to have a small server and several workstations dedicated to the testing so you see how the software works in a multi-user environment.  You might also request a test script that can be run to simulate high volume activity on the test server to see how the system reacts under stress.  The reseller should be able to provide you with the script.  Be aware that you may have difficulty testing several accounting systems at one time on one server.  Many accounting systems have their own configuration requirements that may not be compatible with others.  If this is the case, you will need to either have additional servers available or stagger your testing. 

Third, once you are ready to begin testing, allocate sufficient personnel to the project and allocate enough of their time to make the testing realistic.  Use of subset of your actual data for the testing.  Use people for data entry that typically perform data entry functions.  Let accounts payable people test the accounts payable module; let inventory people test the inventory and purchase order modules; let billing test accounts receivable and so on.  You'll learn a lot about usability of the system from the user's standpoint this way.  Evaluate the system based on your mission-critical functions and its ability to perform efficiently and accurately.  Have the results of your evaluations written in detail.  Use them to further consult with the resellers.

Fourth.  You have your preliminary evaluations and production testing done.  Do any of the packages bring value to your organization?  Odds are, several will seem to be just fine.  If you have a clear preference, you're among the lucky few.  More likely than not, more than one will fit the bill and your staff will be divided as to which packages they prefer.  You will have to prioritize carefully at this point.  If accounts payable is strongly in favor of one and inventory another, its probably because one system is much better than the other in one category and vice versa on the other.  If accounts payable has only two people and inventory affects 35, your choice is fairly clear.  If not, you'll need to cultivate some compromises here.  Under any circumstances, try not to alienate anyone on your testing team.  It will make conversion difficult once your decision is made.  At this point, you're ready to begin serious negotiation with your resellers.  While you shouldn't make your decision based solely on price, price is, nevertheless, important.  Resellers usually have some discretion on discounts, but they will not be very large.  Concentrate instead on the services required in addition to the software.  Installation, configuration, data conversion, customization and user training will likely be more expensive than the software unless your company is small, there is not a lot of data to convert and your operations are fairly simple.  Concentrate on finding out what breaks the reseller can give you on services more intently than on software.  They have more discretion in this area.

Fifth.  You have decided on your software and made your deal.  You're done, right?  Actually, you're just beginning.  You need to cultivate a good relationship with your reseller/consultant.  Do your homework concerning your specific needs and be very clear about what you expect from the reseller and what you're willing to pay for.  Give them a very clear roadmap that will allow them to configure your new software to meet your needs.  Nothing sours a relationship like miscommunications that result in the reseller performing work you didn't need, didn't want and do not want to pay for.  It happens all the time.  Don't let it happen to you.  The reseller will come to you with questions if your directions are misunderstood.  Stay involved throughout the process.  Stay flexible and make informed changes as necessary along the way.  Regardless of how thorough your investigation was, there will still be unexpected issues that arise.  Deal with them immediately and decisively and move on.

As always, if you require assistance with this process, give us a call!  We’re here to help.  We also have an ebook available on this site which contains a complete discussion of the accounting software selection process along with many valuable tips for saving money and making the process more manageable.  It is called "The Accounting Software Selection Process -- Tips from a Reseller Turned Advocate" and you can read more about it by following this link.