Directors’ Briefing Information technology
Choosing
accounting
software
Choose the right accounting software module to automate the calculation and
package and you will save time and money, payment of wages.
make fewer mistakes, and obtain useful
management information. 1.2 Accounting software provides a wide range
of up-to-the-minute management reports
Accounting software is designed so people at the touch of a button.
who are not accountants find it easy and
straightforward to use. • For example, aged debtor and creditor lists,
the bank account balance, tax and VAT
This briefing explains some of the key issues to owed, balance sheet, profit and loss, stock
consider before you make a purchase: values and performance against budget.
• Other useful calculations, such as project
• The benefits of computerising your profitability assessments, can be produced
accounts. by linking into job costing software.
• How to establish the basic accounting
needs of your business. 1.3 The software makes it easy to prepare for
• What level of software to choose. your annual accounts, or your audit.
• What costs are involved.
1 Why computerise?
Basic accounting software is cheap and easy
to use. Unless your business processes a
very small number of transactions each month
(fewer than ten), it will almost certainly save you
time and money.
1.1 A computerised system can automate
many tasks.
• Book-keeping is simplified and automated.
For example, when you enter an order,
the software will update the stock and
customer records and allows you to
translate the order into a sales invoice.
• Bank reconciliations, VAT returns, monthly
management accounts and other tasks can
be completed quickly and accurately.
• Some software supports electronic banking
and online tax filling. This could save time.
• Most packages let you add a payroll
England Updated 01/02/11
Directors’ Briefing 2
1.4 You can make further improvements by 2.5 What special needs does your business ➨ If you use an
integrating different processes. have? accountant or a
consultant, a good
• For example, you could use the information • For example, do you have more than one brief is vital.
contained in your ledgers to generate debt- business, or trade internationally?
chasing letters or mailshots automatically. • If you run an online business, can the
software integrate with your e-commerce
solution?
2 Identify your needs If you buy and sell in different countries,
check that the software can cope with the
Take a ‘top-down’ approach when selecting currencies you deal in.
accounting software. Outline your ideal system
and decide your priorities. This gives software
suppliers a basis from which to prepare a 3 Ease of use
proposal, and reduces the chance of having to
make costly changes later. When purchasing software, the main trade-off
is between ease of use and functionality.
2.1 What are your business objectives?
3.1 Can the software interface be tailored to
For example, you may aim to capture ten suit your needs?
per cent of a given market within five years, Features to look for include:
or to open ten new shops across the UK.
• The ability to add new fields and controls.
2.2 Who is going to use the software? For example, do you want your sales ledger
to contain additional information, such as
• Involve the employees who are going to be the name and contact details of the person
directly affected by changes you make. who placed the order?
What would your employees like to see in a • The option to set defaults for fields.
future accounting system, and what are the For example, do you want your payroll
limitations of your existing system? software to add a list of standard benefits
• Fully involve your accountants from the automatically each time a new employee’s
start. Check they will be able to use the details are entered?
information generated by the software to • The option to define a range of values.
produce your end-of-year accounts and to For example, can you minimise data entry
satisfy the requirements of the annual audit. errors by defining entries in advance?
• The option to customise screens.
2.3 What management information is crucial For example, do you want the screen layout
to the running of your business? to look like your working documents?
You may need to involve an accountant or
outside consultant to help determine what 3.2 Can you paste information from other
information you will need to extract from the programs?
system. This saves time and allows you to make the
best use of all your software.
• For example, a retailer needs instant
access to stock information, while a hotel • Ensure you can import and export
will want to know about occupancy rates. information between the accounting
• A consultant may be able to identify new package and any word processing
ways in which you can use your financial packages, spreadsheets and databases.
data to improve your business.
2.4 Can the software handle all the book- 4 Flexible information
keeping tasks you need it to perform?
These might include: 4.1 Start by looking at how the software
handles sales and purchase transactions.
• Sales, invoicing and receipts. Most software provides these functions in
• Purchases and payments. the form of a sales and purchase ledger.
• Banking and cash management.
• VAT, tax and accounts. • Can you input detailed information on your
• Stock control and payroll. customers and suppliers?
4.2 How flexible is the structure of the nominal
ledger?
Directors’ Briefing 3
Most accounting software is constructed • Will your accountant be able to use the
around the nominal ledger, which brings reports to prepare year-end information?
together your assets, liabilities, income and
expenses. A ledger with a flexible structure
allows you to define the best accounts 5 The options and costs
structure for your business.
• Can you categorise different items Your greatest costs are likely to be incurred
according to departments or cost centres? in setting up the system and training your
• More flexible systems allow you to define employees to use the software.
how your accounts are allocated.
• Can you structure the order in which 5.1 Sole traders with simple book-keeping
your asset, liability, income and expense needs may be able to use ‘money
accounts appear? management’ software.
Simple systems require items to appear
in the order in which they occur on the • Well-known packages include Microsoft
balance sheet or profit and loss account. Money Plus and Simply Books.
• Does the software allow you to input a full • Remember that these packages may be
range of transactions? designed for managing personal finances
• What budgeting facilities does the ledger and often have limited business capabilities.
allow for?
• Can you generate separate ledgers to track 5.2 Accounting packages have been developed
specific pieces of information? to meet the needs of most small
“
businesses.
4.3 The more flexible the software is, the more Software as a
you can tailor it to your business. This • Well-known packages include Sage Instant Service (SaaS) is a
can make a major difference to the overall Accounts and Sage 50, Intuit QuickBooks compelling model
usefulness of the software. SimpleStart and QuickBooks Pro, Mamut for acquiring,
One and Microsoft Money Plus Home & using and paying
Business. for accounting
Compliance software. It is fast
5.3 More advanced accounting packages to implement and
The simplest accounting packages are easy come in modules, with each module offers low upfront
to use and often look more attractive. But handling one aspect of financial costs. No large
they may not provide you with a sufficiently management (eg sales ledger). initial outlay of
high level of compliance. capital is required
• Well-known packages include Sage 200 to license the
A Check that the software provides an and Pegasus Opera. Most businesses use software and the
audit trail. at least three modules (sales, purchase and solution is typically
nominal ledger). purchased on a
• You must be able to track all deals that per-user, per-month
occurred during the year. 5.4 Multi-user networked systems generally basis, easing the
For example, the software should allow demand more computing power than burden of licensing
•
you to delete an incorrect entry, but
should also retain this information for
you to check if necessary.
The software should conform to good
•
single-user systems.
Check your existing hardware can run the
packages you are considering.
software.
”
William Parker, UK
country manager,
accountsIQ
accounting practices. Updating your IT and accounts systems at
For example, an invoice should remain the same time will be expensive.
open in the next accounting period if • Most Windows packages need at least
you have only received part payments. 256Mb of RAM and 500Mb free disk space
on a 1GHz processor.
B Check how the software manages the
back-up procedure. 5.5 You may want to consider a hosted
accounting package.
• The software should ensure that you do
not accidentally revert to using old data. • A hosted package runs on a server
• You should be able to keep records as operated by another company. You pay
long as required. a regular fee to access the software over
For example, most account information the Internet.
needs to be kept for six years and most
payroll information for three years.
Directors’ Briefing 4
• There are no upfront costs and You may need to shop around for advice. Find Expert
management costs are lower as the someone who understands the needs of your contributors
hosting company takes care of the business and also understands the capabilities
infrastructure and technical support. of different software packages. Thanks to William
• Hosted packages allow you to access Parker (UK country
your data anytime, anywhere and make it 6.1 Most accountants can advise businesses manager, accountsIQ,
easier to collaborate with your accountant on what software to choose. But some are 00 353 1 7074481).
or advisors. far more experienced than others.
• However, your company’s financial data
resides outside your business, so you need • Your own accountant may not have
total confidence in the hosting company. experience of a sufficiently large number of
• Hosted accounting applications have software packages.
evolved significantly and with the advent • Accountants may be primarily interested in
of broadband have increased in availability how well the software tracks transactions,
and popularity. which makes auditing easier. You may be
• The number of companies using SaaS interested in the possibility of obtaining
(Software as a Service) systems has risen management information that will help you
considerably in the last years and now run your business more effectively.
represents approximately 10 per cent of
the total market for accountancy software Some firms of accountants are software
used. resellers (see 6.2). They will have IT
• Hosted packages include Kashflow, Xero departments dedicated to accounting and
and accountsIQ. other software.
5.6 Look for accredited software. 6.2 Most software is purchased through
resellers, which can provide expert advice
• The Institute of Chartered Accountants on the products they sell.
in England and Wales maintains a list of
accredited accounting software. Visit www. • Does the reseller supply businesses similar
icaew.com for more information. to yours?
For example, an advertising agency with
5.7 Different users will need different amounts specialised billing requirements may prefer
of training. a supplier with experience in dealing with
such needs.
• The person responsible for managing • What is the reseller’s track record in
your accounts will need a more detailed providing support and training?
understanding of how the system works. Ask if you can speak to businesses it has
• Employees responsible for particular supplied about their experiences.
functions need to be able to perform those • Many resellers are also software
tasks only. developers. They can customise the
For example, a sales person may only need software to meet your exact needs.
to know how to raise an invoice. Ensure the benefits of having a system
• Thorough training can be costly, but is far customised will outweigh the costs.
cheaper than learning by trial and error. • Resellers can also give you advice about
your IT requirements.
5.8 Maintenance and support are key aspects • Remember that advice from a reseller is
to consider when purchasing your software. likely to favour the packages they offer. You
may wish to seek impartial advice.
• You may need to pay an annual fee to © BHP Information
receive ongoing technical support. 6.3 Be wary of any software which does not Solutions Ltd 2011.
• You may need to update the software from already have a large ‘installed user base’. ISSN 1469-0470. All
rights reserved. No
time to time. part of this publication
Ask about the vendor’s track record in • A large user base removes a significant may be reproduced or
providing support for older systems. element of risk. It usually indicates an transmitted without the
written permission of the
• You may need to upgrade your computer established product with better support publisher. This publication
system periodically. and more investment in upgraded versions is for general guidance
• Using a hosted package will reduce of the software. only. The publisher, expert
contributors and distributor
supports costs and maintenance disclaim all liability for
considerably. any errors or omissions.
Consult your local business
support organisation or your
professional adviser for help
6 Making a purchase and advice.
Published by BHP Information Solutions Ltd, Althorp House, 4-6 Althorp Road, London SW17 7ED
Tel: 020 8672 6844, www.bhpinfosolutions.co.uk