(This article originally appeared in the Philadelphia Inquirer)
Maybe you’re a startup and doing your accounting manually on spreadsheet. Or maybe you’ve got an existing system but you can’t use it to manage your orders and inventory or that it can’t keep up with the needs of your growing business.
Perhaps you’ve been using a simple bookkeeping system and now you find you need a business system that’s more specialized for your industry.
All of these reasons are why you may need to buy, replace or upgrade your accounting system, and it’s why the accounting software market is projected to reach a size of almost $20 billion by 2026.
So if you’re in this situation, here are a few things to consider.
Back in the day you would install your accounting application on your desktop computer or server. But that model doesn’t work as well as the cloud.
Why? Because when you buy a cloud based accounting application — or you use a managed services company to host your application — everyone who has permissions can access this data wherever they are and usually from any device.
While not guaranteed, cloud based or hosted accounting applications are generally more secure because they’re protected by a service provider whose business invests more in the tools and resources needed to provide protection.
Cloud applications can also be more easily integrated with each other and that provides you with more options when you want your accounting system to bring in data from other databases. They’re also more easily supported and upgraded by their vendors.
“Cloud based systems make it easier for remote access,” says Carmen Adames, who runs an accounting and bookkeeping service in North Wales. “People can access from anywhere, even from their phones. They can easily get into the app do things like pay bills or send invoices.”
Martin McCarthy, the managing partner of accounting firm McCarthy & Co PC in Blue Bell agrees. “A cloud based system streamlines things so people from the field can, can get reports and do work out of the office,” he says “And if something happens locally like a power outage it allows you to continue to operate your company.”
People get so wrapped up in the features of an accounting product that they forget what’s more important: the company behind the product.
In 2022, accounting software applications are pretty mature and most are cloud-based. They’re constantly comparing themselves and upgrading their products to stay competitive. So although features are important, they’re not as important as the long term viability of the company providing the software.
Dig into their financials. Get referrals. Take a day and go to their user conference so you can meet other customers and tech people from the company. Evaluate their partners and the products they offer. Ask about their future goals and plans. Determine if the product will grow with you.
Selecting an accounting application is a pain in the neck. Your goal is try to minimize the chance that you’ll ever have to do this again. Make sure the company will grow with you.
You’ll ultimately have to see the software in action. So do this multiple times and involve anyone from your company who will be impacted by the system.
Send sample data to the vendor and ask them to incorporate it into their demonstrations. Insist on evaluating the outputs — invoices, orders, reports — from the system beforehand. Have the demonstrator run through every key process in your business — from taking an order to making payments.
Make sure you get access to a fully-functioning system so that you and your team can practice on their own. Don’t just settle for an answer. Make sure the demonstrator shows you. And don’t worry about when you’re going live with a new system.
“There’s never a great time,” says McCarthy. “So do the project when your staff has the most flexibility.”
Very small businesses can get away with simple invoicing applications like Invoice2Go, Square and PayPal.
Smaller businesses can be perfectly happy with the mainstream, horizontal applications that are popular on the market like QuickBooks, Xero, Zoho Books, FreshBooks and Wave to handle most of their operations.
But as your company grows you’ll need something more scalable like Sage, Microsoft Dynamics, SAP Business One or NetSuite. And, depending on the type of business you run, you may want something more industry-specific like Procore and Vista for construction, Epicor and SYSPRO for manufacturing or Revel and Toast for retail and restaurants.
Beware that some of the more niche industry players — which may offer more specific functionality — may not have the resources or community that the larger players do. Even if it’s not critical right now, getting a solution that is made for your industry or integrates with other industry applications will likely serve your company’s unique needs in the future.
“We represent a lot of contractors and companies in the construction industry and they have specialized needs,” says McCarthy. “Imagine a company that operates with eight different unions in different states, and they have different workers’ compensation rates that drives their costing. Some of these companies prefer a construction focused software that does this stuff out of the box.”
Most good accounting software companies have independent partners who implement their systems. Hire one. Having the right partner will ensure that you’re setting up your system correctly, migrating the data, and receiving the training and support you’ll need.
“Also make sure to involve your accountant,” Adames adds. “They will want to see the profit loss and balance sheet in a certain format. Get recommendations from them first.”