CPE Professional Resources | Post
Choosing an Accounting Solution for your Small Business
Has your business reached the point where you need a better organized and more robust solution than a series of complicated excel workbooks? Do you have multiple applications you are utilizing that don’t share data requiring hours of manual data entry, which leads to input errors? If so, it is time for you to look for a new solution. But where to start? There are more choices than just QuickBooks out there, but you need to figure out which solution is the best choice for your business.
The most critical decisions we will be talking about in this article are:
Does the application provide access to critical functionality to meet specific business needs?
Does the application adequately secure sensitive and confidential information?
Can the application process the anticipated volume of transactions generated by the organization?
Is the application capable of providing adequate financial and operational reports to team members?
Should we utilize a cloud-based or on-premise solution?
1. Assess Functionality for your Small or Medium Business Needs
Figure out what functionality your business will need. We have put together this handy checklist to help you figure out your organization’s needs.
- Customizable chart of accounts
- Real-time reporting
- Deferring revenues and expenses to future periods
- Use of categories and subcategories to facilitate easier reporting
- Multi-currency capabilities
- Budgeting and forecasting capabilities, including budget-to-actual reporting
- Account schedules to facilitate reporting in the form of Key Performance Indicators (KPIs), chart and graphs, and Excel analyses
- Bank and credit card feeds
- Quotes, sales orders, invoices, payment receipts, and credit memos
- Accounts receivable reporting
- Automatic generation of customer statements
- Automatic escalation of customer issues, such as delinquencies
- Bank feeds to apply inbound payments to open invoices
- Support for alternative payment methods, including PayPal and gift cards
- Prioritization of payments to vendors based on discounts available and overdue penalties
- Electronic vendor payments
- Requisitions, purchase orders, purchase invoices, purchase credit memos, and accounts payable reporting.
- Form 1099 processing
- Control of purchasing, receiving, and selling inventory items and calculating the cost associated with each inventory item
- Item tracking and tracking items by specified attributes
- Inventory item search by several fields, including SKUs, manufacturer’s part numbers categories, and product attributes
- Use of business intelligence to forecast inventory demands
- Automated reordering of inventory parts based on predefined stocking levels
- Item substitution features facilitating recommending alternative items to customers when requested items are not available
- Processing returns and canceled orders, including managing customer refunds
- Manage vendors more effectively by recording all vendor agreements in the application to facilitate on-demand recall of items such as discounts, pricing, and payment methods
- Create vendor item catalogs to cross-reference vendor part numbers, Universal Product Codes (UPCs), and internal part numbers
- Manage multiple ship-to and bill-to addresses for each customer
- Manage partial shipments and track backorders
- Define special pricing arrangements for customers, including those based on minimum quantities, units of measure, currencies, and time periods
- Calculate customer “best price” by sales line item based on specified conditions
- Integration with CRM applications to enhance sales opportunities and to provide better customer service
- Create jobs and projects in the application and track revenues and costs against budgets/estimates
- Schedule organizational resources, such as team members, inventory items, and tasks, directly to specific jobs
- Create organizational capacity plans for designated time periods
- For example, lot tracking for the foodservice industry
- Specialized inventory tracking, etc.
Need more help with your Mid-Market Accounting solution? This session covers integrated and ERP solutions that should work for businesses in the $10 Million to $1 Billion range. If your system has been in place for seven or more years, it is time to consider an upgrade or replacement system.
2. Determine Security Concerns With Your Accounting Solution
Security concerns should be one of the very first things you consider. Unfortunately, a data breach is a genuine possibility for all organizations in today’s world. Not to mention, a data breach is very expensive costly, and at the very minimum, a huge embarrassment, and at the very worst, it could put you out of business. Properly planning, accounting for, and implanting your security measures is as critical as the main functionality of your accounting solution. Make sure that the following measures are available in the solution you choose.
- Does the application support separate user IDs and passwords for each user logging into the application?
- Can each user’s rights and privileges within the application be appropriately established such that only the functionality necessary to perform one’s assigned job is available in the application?
- Are audit trail reports available to identify every action taken by a user over a specified time period?
- Is sensitive information such as customers’ credit card numbers encrypted?
- Are controls in place to ensure that only authorized users can access and link data from the application’s database using tools such as Open Database Connectivity (ODBC)?
If you need even more help with Security and Privacy, attend this great K2 Course on K2'S Implementing Security And Privacy Policies.
3. Consider Complexity and Scalability of Your SMB Accounting Solution
Not all SMB solutions are created equal in processing large volumes of transactions or complex invoices.
- Consider the volume of the volume of transactions in your organization.
- Consider the complexity of your chart of accounts and average transactions.
- Failing to consider these questions could result in the organization requiring a “rip-and-replace” of the application much sooner than anticipated.
4. Evaluate Financial and Operating Reporting Features of the Accounting Software
While most small business solutions do a decent job of recording transactional data, this data is of little organizational use unless it can be quickly summarized and reported in a manner that team members can use to advance the objectives of the organization.
- Ensure that you choose the solution that will give you the predefined reports that your organization needs and utilizes regularly.
- For example, these reports typically include balance sheets, income statements, accounts receivable aging reports, accounts payable aging reports, transaction journals, and the like.
- At least some minimal capacity to customize these reports within the application and save the customized version of the report for further recall.
- Ability to export the reports to other applications – such as Excel, Word, and PDF files.
5. Assess Software Licensing Options – Cloud or On-Premise Solutions
Increasingly, many business management applications are migrating to the Cloud. However, not all businesses embrace the idea of having servers that are not under company control. Each option comes with its own set of pros and cons, and you will need to decide which will work for you.
First and foremost, it is impractical for any business without consistent, high-speed, reliable Internet access to consider migrating to Cloud-based solutions; they just will not work without the internet.
- With cloud-based, users are afforded access through subscription instead of traditional software licenses. These organizations typically only pay for the number of users working with the cloud-based resource.
- In a traditional computing environment, if a local device containing data is lost, stolen, or compromised, then a significant data breach has likely occurred. However, if the small business organization uses a Cloud-based solution, there would be virtually no data on the lost device that could become compromised.
- Security procedures found in the data centers used by most Cloud-based solution providers are generally stronger than the security procedures found in small businesses.
- Licensing in a traditional on-premise environment typically involves purchasing software licenses – one license per user – and then paying “maintenance” or “upgrade” fees. If the license is a “named user” license, generally, it cannot be transferred legally to another user, even if the original user leaves the organization. This often results in software licenses that have been purchased but are no longer in use.
- If a solution under consideration is installed on local computers/servers, then traditional security methods available in the application should be evaluated to ensure that they adequately address security and privacy concerns.
Check out our free podcast to learn even more. Or check out this great K2 Course on Choosing your Mid-Market Accounting Solution. Once you are done evaluating your small business needs for your solution, read our next article on the various SMB Accounting Solutions out there for you!