All you need to know about upgrading your accounting software

How to choose best accounting software
07 Sep
2018

How to choose best accounting software

For as many people that are completely happy with their existing software, there is a business that is not. In the middle are the companies that are flirting with the idea of improving their software processes. Many people understand how accounting software can save you time, but fail to decipher if they are ready or not to go through with an upgrade.

Upgrading your software can mean two things:

  • You’re buying a new and improved version (such as moving from Software version 1.0 to Software version 2.0) of your existing solution.
  • You are upgrading by purchasing new software altogether. This new system may have many benefits over your existing solution and is thus still an “upgrade” by the definition of the word.

The common components of accounting software can be found in almost any solution, such as AP, AR, GL, and even payroll. This means most people who are upgrading, choose to upgrade because they are looking for more advanced components or industry-specific components, such as job costing or fund accounting.

This could mean saying goodbye to spreadsheets and purchasing their first software program, or it could be transitioning from a generic solution to a more industry-focused ERP.
Whichever direction you go in, there are a lot of things you need to know before deciding on an upgrade.

There’s Always a Bigger and Brighter Option: Choose What Fits You

If you’re looking to upgrade your existing processes, you’ve already figured out that a better option is out there. In fact, you may even purchase new software, only to find newer and sleeker software shortly after. Akin to most technology these days, the world of software is always evolving. It’s important to keep your eyes on what your business needs, not what your business wants.

This also means you shouldn’t be upset with whatever solution you have. In fact, a software upgrade isn’t for everyone. Sometimes the old saying “If it isn’t broke, don’t fix it” can apply, and there is, of course, no need to invest in a software that won’t make your business better.

So how can a software solution make your business better? One way is by considering industry-specific software.

A generic solution can handle these additional needs to an extent, but an industry-specific option will be narrower in knowing the info you desire by using the program. Not only that, but your software support provider is going to have far more experience working with companies in your industry than a generic software company.

For example, a construction company can get by using generic accounting software. But in construction, you have things like job costs and estimates to worry about. A nonprofit organization may try to initially save on operating costs by going with generic accounting software. Unfortunately, these are built with for-profit companies in mind, and because of this, they lack nonprofit features such as fund accounting or donor management.

Better Reporting Will Help You Make Better Decisions

better report by new accounting software

When shopping for new software, a lot of companies focus more on certain aspects of reviewing software (such as price) while not paying attention to certain features that will help them run their business better. The main feature that isn’t given enough attention is the reporting, which the software can offer you.

Reporting is essential for every business, as its main priority is to give you a better view of company operations, and thus make better decisions. Primarily, it provides accurate financial information. This could be something as basic as recent cash flow or be a full budget/forecast for the next calendar year broken down by month.

For example, as mentioned before, a construction company may look to upgrade to a system that offers job costing. Rather than having one cost (the overall cost of the job), you can break down your jobs into costing categories such as labor costs, material costs, equipment costs, subcontractor costs, etc. Better reporting in the software will let you know where you can cut costs to help improve your bottom line, which in theory should help justify the cost of any new software investment.

A nonprofit organization may be receiving some additional funds/grants intended for use on a specific project. In theory, fund accounting stresses the importance of accuracy and accountability instead of profitability (making it about reporting standards and disclosures rather than profits). Nonprofit organizations need to produce accurate accounting reports for government agencies (such as the Governmental Accounting Standards Board, or GASB) or any fund sources that want proof of their contributions being allocated correctly.

Sometimes the costs don’t justify the means

Buying software is about adding value to your company. While it does incur a cost of its own (to purchase or rent the software), the end result of being more organized and having a better view on your financials or operations should justify this cost. But where does the line get drawn?

One major question to answer is, “Do I upgrade my existing software, or purchase a different option?” Sticking with your existing software, but purchasing a few add-ons, or perhaps just updating to the newest version will likely entail the lowest cost (compared to purchasing a completely new system). If you’re looking to make the investment into a completely new system, consider not only the cost of the software, but also the indirect costs that will come from this purchase.

Common indirect costs of buying software:

  • Time spent retraining staff to learn the new system
  • Time spent migrating existing data into the new software
  • The cost of any data migration

These costs add up fast, so you need to make sure the added benefit of functionality is worth the cost. The additional benefits of an improved software solution are truly invaluable, but not every business is in an ideal situation financial to pull the trigger on making a switch. Make sure you plan for every twist and turn that the market can throw at you.

When thinking of upgrading software, the question you should ask is, “What is my primary motivation for wanting to upgrade?” If it’s to find an industry-specific option or to add new features not included in your current option, then a new solution is probably for you. If it’s due to support issues or a program being outdated, perhaps a simple update or buying a newer version of your existing software is the right play. Regardless, a change isn’t for everyone, and you’ll need to make sure your business has the resources to devote to an upgrade.

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