By Kelly Kolke, Grant Thornton LLP
Beyond AccountingCompanies & People Engineering
If it weren’t for accounting software, the personal computer may never have taken off. Back in the 1970s computers were mainly used by hobby enthusiasts. Everything changed with the introduction of the first “killer app”...
If it weren’t for accounting software, the personal computer may never have taken off. Back in the 1970s computers were mainly used by hobby enthusiasts. Everything changed with the introduction of the first “killer app” — a piece of software so useful that people wanted to go out and buy the new technology. When the accounting software program VisiCalc was loaded onto the Apple II in 1979, business people finally had a good reason to invest in a personal computer. It was the first computer spreadsheet program and was the beginning of a revolution in how we use technology at home and at work.
Today, accounting software not only can provide back-office basics, but also it can be a tool to help you grow your business by providing detailed reports that allow you to be more efficient and make better business decisions.
For any sole practitioner or small business looking to invest in new accounting software, the best place to start is by clearly defining your needs. This assessment may indicate that an off-the-shelf program is just fine, or it may show that you’d be better off with something a bit more sophisticated. Your needs might be complex enough to warrant a custom-designed program or require the help of a value-added reseller (VAR) to assist you in the decision-making, installation and training. For firms with more than one practitioner or working on multiple projects, more complex software provides accounting functions and it can also help you to track various key performance indicators.
You may want to start with a simple program that can do all the basics — things like invoicing, payroll, cash flow management, and cheque printing. For a sole practitioner, ready-made programs like QuickBooks or Sage 50 (formerly Simply Accounting) may be enough. Programs like this are relatively straightforward, but remember that you will still need to invest in training and ongoing support to get the most from them.
At a minimum, you should be able to use your off-the-shelf accounting software to perform bank reconciliations and prepare financial statements (balance sheet and income statements) that can be reviewed on a monthly basis. Other programs may allow you to create accounts payable, accounts receivable, work-in-progress and job costing reports for more accurate cash-flow management. Companies looking for software that has more functionality might consider a program like Sage 300, the newly re-branded name for Accpac, which is also available as a web-based program.
Some consulting engineering firms integrate their accounting software with time tracking software and project management software. Integrating all three makes tasks like cost tracking, billing, forecasting, and efficiently managing multiple projects across multiple practitioners much easier. Integration of all three also gives the ability to do things like “milestone billing” on projects, thus improving cash flow. Project management and job tracking functionality can be further supplemented with software that does job cost estimating and tracks cost-to-budget variances.
Questions to Ask
As you evaluate potential software solutions, here are other questions you should ask.
• Does the program give you everything you need, or are you being sold more than you need? An engineering firm probably won’t need an integrated point of sale (POS)/inventory tracking system, for example.
• How easy will the program be to implement and to use? Even off-the-shelf programs will require an investment in training so that you can make the most of them.
• What is the cost of ongoing software support?
• Is the program scalable so that it can grow with your business?
• How easy will it be to integrate the software with legacy systems you’re already using?
• How good is the software at protecting your sensitive financial data?
• What are the technical requirements for on-site data storage? More and more professional services firms are turning to cloud-based programs, which reduce the need for on-site data storage and can allow multiple users to access the program from multiple locations, including from a job site.
Even if you already have staff managing your accounting function, the right accounting program can streamline and simplify their efforts, not to mention the downstream benefit of using detailed financial and business reports for more accurate planning and decision-making. And for small firms that outsource the accounting function to a bookkeeper or accountant, an investment in accounting software may reduce these fees. However, remember that you need to balance the fee savings with the fact that you will need to take on the task of accurate and timely data entry — something that hasn’t changed since the days of VisiCalc.
As you do your cost-benefit analysis, keep in mind that you’ll probably still need to rely on your accountant to help prepare end-of-year tax filings and help with more complex accounting and tax matters.cce
Kelly Kolke, C.A. is a partner and national leader of professional services with Grant Thornton LLP. He is based in Nova Scotia. E-mail Kelly.email@example.com.