Accountancy software: A buyers guide

It’s very simple: businesses that don’t control their finances tightly are in serious danger of going bust.

Ocean, a successful mail order catalogue business, was a nicely profitable company turning over around £10m, but within a few months lost control of its finances, stopped paying some key suppliers – who consequently stopped supplying goods – and thereby turned profits into losses. The company itself went bust, though the assets of the business were bought out by another mail order company which continues to trade as Ocean.

Having the right accounting system for your business is not sufficient to ensure financial control, but is necessary. There are a wide variety of software solutions out there, some with variable add-on options, suitable for all sorts of company from small businesses with simple accounting needs to medium-sized, more complex businesses. As certain types of system are better suited to certain types of businesses, clearly, the key is to get the right one for your company.

THE KEY FEATURES

There are a number of features you need in an accountancy system, such as standard financials, general ledger, receivable and payables, profit and loss balance sheets, and invoicing. Sales order processing, inventory management, multi-currency, e-commerce transactions, CRM (customer relationship management) and network capability will be essentials for larger organisations, but these are usually sold as modules.

The most basic systems currently on the market offer single-user access and proprietary databases, while the more sophisticated systems use SQL server (a network-based database package you’ll need to buy separately), which results in faster processing power and multi-user capability.

You can upgrade to more substantial versions of a given supplier’s system, though each step up is quite involved and time consuming. You’ll need a reseller for this: these are not packages to buy off the shelf and install on your own the way you would a new version of Microsoft Office. Resellers are specialists at installing accounting software systems, and will provide consultancy advice on system suitability, installation support (including designing the reports you want from the system) and training. This can take anything from three days to several weeks depending on the complexity of the system.

Most packages are pretty intuitive and the tendency to use a Windows-based platform means your accounts staff should find most aspects of available packages familiar. Online training is also available for the more popular packages, as well as classroom-based training.

ESTABLISHING YOUR REQUIREMENTS

If you are considering a new accountancy software system, it is probably driven by a need – perhaps for more management information, or more users, or more speed. In order to get a clear sense of your accountancy system requirements, you should review your overall business. “You have to be clear in your own mind why you need a new system. It can be for technical reasons, the processing is too slow or you may have changed your hardware platform,” says Paul Booth, technical manager of the Institute of Chartered Accountants of England & Wales (ICAEW). “Or you may have opened more offices and need something that will run in several locations on a network. The key factors for change are a need for better functionality, better reporting and analysis, and web trading integration.”

Stephen Temple, director of accounting firm Mazars, says: “The most important thing is to do an internal assessment of what you need from the business, the type of transactions, IT platform, e-commerce strategy and how you want the business to grow.”

If you handle e-commerce transactions, you will need to purchase specialist software. Microsoft and NetSuite both have their own e-commerce solutions. Other suppliers work with software developers offering products for different programmes.

Stability and security are key issues and as your main point of contact will be the software reseller it is important to establish precisely how they work. Temple stresses: “You should control software upgrades as opposed to letting the reseller have unlimited access to your network. Best practice is for the supplier to have access only to a test environment so that you can test the upgrade before applying it to your system even though this may be more expensive.”

It is advisable to involve your auditor or accountant in the selection process, as they can provide input about the type of system they think you need. Presenting accounts in a compatible format can reduce accountancy fees. Booth says: “It is helpful to have a system an external accountant is already familiar with and this could make the bills smaller. The accountant is likely to know the pitfalls.”

THE MAJOR PACKAGES

There are a number of different ‘families’ of accounting software systems; each offering different packages from basic to sophisticated. It is worth choosing the one you think will best fit your needs in the medium term, at least, because upgrading within a family is far easier than changing from one to another, in terms of data conversion, set-up (charts of accounts and reports and so on) and user training.

There are too many packages for us to describe them all here, however read on for descriptions of the main players:

ACCESS ACCOUNTING

Access has been around for a long time and has a substantial user base globally. Its database-driven packages use Windows, and range from one to 500 users. Its entry level Foundations XP for up to three users costs £400, while Horizons, for 10 concurrent users, costs between £1,000 and £3,000.

Expect to install a Horizons system and be up and running within two to three weeks. Horizons offers management reporting, data analysis, multi-currency processing, security and control over the configuration of the system. Dimensions Lite is an SQL server database option, costing £2,500 for five users. The Access systems can be upgraded adding more advanced versions based on a standard, intuitive user format.

“Software is now very affordable. There is no reason not to buy a SQL server database system and this is more important as statutory requirements mean that data has to be kept for six years. Dimensions Lite appeals to businesses looking for dynamic growth as they can move to the next level of product without data conversion,” says Access Accounting corporate projects manager Kevin Misselbrook.

MICROSOFT BUSINESS SOLUTIONS NAVISON 4.0

Microsoft Navision is designed for mid-size companies. The basic package includes payroll, inventory and job costing. The user interface is based on Microsoft Outlook, creating a familiar working environment reducing training time. This is a scalable solution with advanced modules such as CRM, e-commerce, inventory management, order processing and Outlook integration. Expect to pay from £5,000 to £7,000 for the entry-level package for two licensed users. The annual enhancements package covers software updates and costs 20% of the total system. Telephone support is additional.

Paul White, Microsoft Business Solutions’ director of product group, says: “Customers are increasingly dissatisfied with older applications that do not support other sides of their businesses. The products we provide mean that information is more freely available. We are doing this so that customers can make the most of their existing systems.” Microsoft’s CRM software, for example, integrates with the Navision software and offers detailed sales reporting. White adds: “If an existing customer phones with a new request, it is essential to input the information. Remember that the way a sales team feels about a CRM system influences whether they use it.”

NETSUITE SMALL BUSINESS

This is a pretty new web-based ASP solution – meaning the software runs on NetSuite hardware at its offices, and you simply access it over the web. Instead of buying it for a large lump sum up front, as with the other packages described here, you pay by the month. It is suitable for single or multi-location offices with unlimited users. There is no specific hardware investment, though you will need a broadband connection. NetSuite Small Business costs £60 per month for the application, and £40 per user per month. There is also an installation fee of 50% of the annual licence fee.

“NetSuite is an inter-operable suite of software,” says NetSuite director of international products Craig Sullivan (above). “It is often difficult as a small business to really focus on the cash and what is happening in different systems.”

SAGE

Sage is the oldest and best-known of accounting software packages. It has expanded substantially in recent years, and now offers everything from very basic packages smaller than you are likely to need to very substantial systems far larger than most of you will need.

Sage Line 50 is aimed at companies with up to 50 employees and a £5m turnover. There are three levels: Accountant at £495 for two users, Accountant Plus £695 with enhanced features for two users, and Financial Controller at £995 for up to 10 users. The Financial Controller version offers sales order processing, stock control, delivery notes and improved project costing. The system can be integrated with Sage Payroll and web trading software from other suppliers. The downside is that at present it can only operate in a single location.

Sage has overhauled Line 50 to simplify the user experience. “Before a lot of functionality was hidden and it was quite difficult to use. The functionality has been kept but it has been rearranged with a clean Windows look and feel, and a dashboard style interface,” says Sage head of commercial development Jayne Archbold.

Line 100 is Sage’s mid-range business product. It has an extensive range of modules and third-party applications, enabling you to get a good fit for your specific needs. It is designed for businesses processing large numbers of transactions and for multiple users. It also integrates with industry-specific software products. The core modules offer more depth than Line 50, as well as sophisticated multi-currency handling. All this means that setting a Line 100 up is likely to be longer, more complex and more expensive than with Line 50.

SUNSYSTEMS

Not related to the Sun IT hardware company, this accounting module would suit a business with at least a £10m turnover. It is a scaleable solution and is especially relevant to businesses with satellite offices. It offers ledger accounting, budget control, analytical/project ledger, multiple budgets, dual base currency, tax reporting and customised reporting, and e-commerce transactions. It runs on Windows with a SQL or Oracle database, or Unix with Oracle. It costs £10,000 for software for a four-user licence, and £10,000 for services/installation; annual maintenance is 20% of the current list price of the software. Price is likely to be a deterrent for many.

SAP

SAP’s Business One is a SQL server-based product aimed at larger businesses with up to 200 employees. It is ideal for companies with multiple sites. It comes with sales order and purchasing processing, service monitors, basic line manufacturing controls, plus a standard CRM package. E-commerce modules are available from Netpoint Praxis or ePages. The single-user licence costs £2,000, however volume discounts are available. The standard maintenance is 20% of the licence cost and the system cannot be leased.

SAP channel development manager Mark Weir says: “Many people associate SAP with large drawn out installations. SAP Business One has been developed for the segment of the market with turnover from £1m to £50m. If you look at standard accountancy solutions they have been developed around the needs of accountants, but this hasn’t really addressed the needs of business. That is why we offer CRM as a standard feature. It is not a plug and play product; installation takes two weeks.”

PEGASUS

Once a big name, we come across Pegasus less often these days. It now offers Opera II version 4, built around Microsoft’s SQL server database. It has standard financial applications such as sales, payroll, purchase, multi-currency and online analytical processing. It can also be integrated with Pegasus Payroll and HR applications. Opera II costs £5,000, annual maintenance is 15% to 20% of the initial cost.