Accounting software is something that every SME needs but no business wants to think about. Yet the right choice will not only help balance your books, but can make your whole business more efficient and profitable. So how do you go about selecting the best finance package?

Published in Technology & Business, December 2002

Finance software is the great unsung hero of the computing industry. Don't laugh, it's true. While many major developments in commercial computing were initially driven by governmental requirements -- the counting of census results, the development of nuclear weaponry, the need to create an unbreakable communications network -- the widespread adoption of computing power by businesses was largely the result of accounts departments not wanting to spend another freezing winter night poring over ledgers trying to find where someone had missed the crucial decimal point.

As a result, finance software has long been a staple of the computing industry. Companies which spent the middle part of the 1990s agonising over whether or not to develop a Web strategy had invariably made the shift to computerising their financials decades before, even if that meant installing a costly mainframe which needed its own air conditioning. Chief financial officers tend not to skimp when their own comfort, or that of their balance sheet, is involved.

Naturally, when PCs made computing power affordable for much smaller enterprises, the finance software fraternity were quick to jump on the bandwagon. In the early days of PCs, getting the books sorted was a far more likely reason for purchasing a PC than word processing, which didn't really take off until graphical user interfaces became the norm. Once applications were judged on how they looked, finance software was quickly relegated to the "boring" category. But like toilet paper, just because it was boring didn't mean it was something you could just choose to ignore.

Despite this well established history, small to medium enterprises (SMEs) continue to face challenges when trying to choose the best finance package to meet their needs. In an era where every computing dollar is supposed to demonstrate return, is it enough to merely make sure the books balance? And how can you be sure the package you choose is doing even that?

State of the market

The market for SME accounting software in Australia is difficult to define for a number of reasons. On a very basic level, SMEs are spoiled for choice, since their requirements overlap with both the mass market at the low end (where companies like Quicken and MYOB vie for supremacy with packages originally targeted at individual users) and larger enterprises at the high end (where ERP vendors offer financials with a large side helping of anything else they can think of to justify the price tag--please BYO server).

This cornucopia of choice may well make a decision more difficult for the growing midtier SME. Of course, there's a potential upside: many companies make a virtue of offering products across the finance spectrum, claiming that this will provide an easier upgrade path as the business expands. (While the ability to migrate data is undoubtedly useful, switching from one system to another, even when both systems come from the same provider, is rarely a simple undertaking; avoid it if you can.)

Finding vendors who specialise purely in finance software is also proving increasingly difficult. Taking their cue from enterprise software vendors who promote their products as automating every aspect of business processes, most companies will offer addons to handle everything from customer relationship management to manufacturing to developing an ecommerceenabled Web site.

Again, the usefulness of this approach is debatable. While it may be reassuring to know that additional modules are available, installing a dedicated CRM suite is probably pointless if, for example, you run a business which only deals with a relatively small pool of customers. Don't be talked into purchasing components that you can't see an immediate need for; you can always add them on later.

Even within the pure financials space, vendors have long promoted a component based approach, selling separate plugins to handle general ledger, payroll, stock tracking, invoicing and so forth. This makes it easier to customise a system to your precise requirements, and avoids paying for options you'll never use. That doesn't mean you won't get them, though. Increased competition in recent years means that many vendors will now bundle the most common options in a single package, and at a lower price than previously.

While there are a number of global contenders, financial software is almost unique in that many of the major players for the local market are still based out of Australia. In large part, this reflects the requirement that software be heavily customised to reflect local requirements and regulations in areas such as goods and services taxes, payroll regulation, and the production of compliant tax documents.

Many global providers don't want to devote the energy required to do this to a relatively small market such as Australia, so they either license their core software to a local outfit for customisation or ignore the market altogether. Many of the better established software providers have been supplying PC software since the advent of DOS PCs in the early 1980s, when global competition was rather less pronounced, and have survived the consolidation that has swallowed up virtually every other category of local software development.

Continuing change in fiscal regulation also means that finance packages inevitably go through frequent updates. Sometimes these will be due to major changes that affect all companies -- such as the introduction of the GST in Australia in 2000 -- and others are more industry specific; all represent an opportunity for vendors to come clamouring for more of your cash.

The GST itself spurred a major boost in the finance software market. According to a CPA Australia survey carried out in 2001, 62 percent of Australian businesses installed or upgraded their computer hardware in response to the GST, while 76 percent installed or upgraded software.

Notably, two out of three businesses that were involved in an upgrade reported frustration with their new systems, demonstrating that, as ever, the IT industry has some way to go in producing truly business friendly systems.

Despite those obvious hassles, such updates are clearly more important than, say, switching to the latest version of Office simply because it has been released. (Paradoxically, despite the frequency of procedural updates, accounting software was one of the last areas to make the switch into the Windows world, with DOS versions of many leading products persisting well into the late 1990s.) Local providers are often speedier at providing updates to reflect new market conditions.

On the last page of this feature you will find a list of some of the major players in the Australian market. Many offer trial versions of their software for free download; virtually all provide detailed product descriptions online, so you can compile a shortlist without being endlessly hassled by pesky sales types. Remember, though, that packages designed to comply with requirements in the UK or US (the dominant suppliers of English language finance software) are unlikely to work in Australia without considerable modification.

Issues to consider

Before you go through the process of selecting a software platform, you need to carefully define your needs. Are you looking to computerise all your business procedures, or have you already computerised some and now want to extend those benefits into other areas? Ideally, you will want to use as few packages as possible, to minimise staff training and associated costs, but if you already have a working system for, say, payroll, you may be reluctant to replace it simply so it aligns with your new general ledger system.

On the other hand, you shouldn't underestimate the benefits of an integrated system. Getting staff to transfer information between packages, even if they do so electronically, wastes time and greatly increases the potential for errors. Consult with other companies in your field, or your industry association, to get a feel for what packages are already in use. This will help you avoid packages that are blatantly unsuitable for your particular industry, as well as potentially alerting you to specialised modules which fit more precisely with your own business model.

To get real benefit from your accounting systems, you also need to do more than simply transfer a penandcalculator approach to a PC network. The greatest benefit to your business is likely to be not just from greater accuracy and faster processing, but from the ability to produce custom reports demonstrating areas for potential growth or improvement. If you can achieve this, finance software will add real value to the business over and above mere compliance with legal and taxation issues.

Some of this will be defined by your software choices--packages that offer a wide range of ready-made reports will inevitably make it easier to drive the decisionmaking process--but your own input will always play a crucial role.

Specific issues which you will need to consider when selecting software include the following:

Frequency of updates: As noted above, most finance packages have frequent updates, with once a year being the bare minimum for most vendors. How are these updates delivered? Do you have to take the whole system offline to install them? And what is the charging mechanism? Some vendors provide updates free over a specified timeframe; others effectively sell their software on a subscription model. Make sure you've factored update charges into your overall cost calculation.

Customisation: Can you alter the package to fit your own business requirements? At the very least, you need to be able to add custom cost codes and product descriptors to reflect your own needs.

Localisation: Make sure the package you are being sold has been properly customised for Australian use. It isn't enough simply to re-label the VAT field as GST, for instance. Ask your supplier for details of local reference sites, and evidence of how long they have been operating in the Australian market.

Reporting: Producing detailed analysis of business performance is one of the most useful results of computerising your accounts. As well as producing standard business reports such as the Business Activity Statement (BAS) required by the ATO, your package should also allow you to define your own performance metrics and report on them.

Integration. Tying into other products and modules from the same vendor can normally be taken as a given, but what options does the system provide for exporting data other than that? Export of reports into an Excel-compatible format is normally an essential element if you want to carry out some rough-and-ready analysis of your own, while larger packages should store their information in a standard database format (such as SQL or XML) rather than a proprietary system. Systems from larger players will generally also offer tie-ins to other packages such as backup software.

Ease of use. Finance packages should conform to the conventions of the platform you're using; with a 20year heritage in desktop finance software, there's no excuse for illogical menu layouts or arbitrary procedures. Ease of use also encompasses external factors. Is training for the software readily available in your area, or will you have to pay to transport staff elsewhere for them to learn the package?

Platform. While the vast majority of businesses now run on some version of Windows, companies committed to another platform (such as the large design community which has remained loyal to Macintosh) will be happier if they can stick with their chosen OS. While Mac choices are more limited, a number of companies do provide accounting software. Linux users may have to wait a little longer, or install a Windows emulation system. If you choose a highly specialized vertical market provider, you may find that elements of the product still run based in DOS, which could cause problems down the line.

Scalability. The system you choose must be able to grow as your business grows, within realistic limits. Providers should be willing to provide an upper limit on the number of users (or overall size of business) their product can handle. It can be just as pointless to overprovision yourself; installing a full ERP system for a five-person company is a clear case of overkill. Equally, a spreadsheet system, no matter how elegantly designed, can't really compete with properly designed multi-user software.

Security. Financial data forms the backbone of your entire company, so the ability to enter and alter information must be carefully controlled. As such, security issues extend to error correction as well as basic data entry; nobody wants to be the next Enron.

To consult or not?

For many businesses, spending a large amount of time considering all these issues may negate some of the value in installing or upgrading financial software in the first place. For that reason, a large number choose to employ a consultant to select and implement their chosen financial solution.

Of course, employing a consultant automatically increases the cost of your chosen solution. Many software providers will include a limited degree of consultancy as part of their overall software package, but this isn't much help until you've reached the stage of selecting a particular vendor. Any paid consultant should be able to display expert knowledge in your chosen platform, have familiarity with the operation of businesses of a similar size to yours, and either provide direct training or point you to a useful training supplier. A good "middle-ground" step before working with a consultant may be to consult with your existing accountant or financial services provider. This can offer at least two distinct advantages.

Firstly, if your accountant already uses a specific system in-house, choosing compatible software could make life a lot easier for both of you. Indeed, your own role in entering information may be minimal. According to the CPA, a third of companies with computerised recording keeping rely on their accountants for the majority of data entry.

Secondly, your accountant is far more likely to be aware of relevant recent financial changes than you are, and will also presumably be familiar with your company's overall trading patterns, allowing them to suggest areas where automation could be useful. That said, a little cynicism is often wise. Don't be afraid to ask your accountant if they will receive a commission for recommending a particular piece of software. (That in itself doesn't invalidate the software, of course, but it allows you to make a more informed decision).

Another option which has become more realistic in recent years is to consider outsourcing some of your financial software requirements. Although this may seem anathema at first glance -- surely tracking your overall performance is an essential function, isn't it? -- it doesn't represent such a radical step. After all, most companies outsource the final preparation of their financial reports to an accountant, who certainly isn't doing the work by hand.

Outsourcing has also been popular in areas governed by complex legislation, such as payroll. Provided that you still have ready access to information, it may well make sense to consider outsourcing to specialist providers. Some software companies provide this facility, along with specialised consultants and general-purpose application hosting companies. Paying ongoing monthly fees will undoubtedly be easier on your cash flow, and may also offer tax advantages, if only because you don't have to spend so much time worrying about depreciation.

Software providers

As we've noted earlier, the SME finance software market is highly fractured and specialised. This alphabetical listing covers the main contenders in the Australian market, but doesn't claim to be absolutely comprehensive. In particular, you should check with other companies within your specialised industry as there may well be a package aimed specifically at that market.

Product listings include products relevant to the SME space.

ACCPAC
Key products: ACCPAC Advantage, ACCPAC Pro. Also offers nonfinancial components, owned by Computer Associates.
www.accpac.com

Arrow
Key products: Arrow Financials. Australian developer, founded in 1989.
www.arrow.net.au

Attaché
Key products: Attaché Business Partner, Attaché Catapult, Attaché Payroll, Attaché Alex, Attaché ODBC, Attaché Optimist. Australian developer, founded 1981.
www.attache.com.au

Epicor
Key products: eBackOffice. Offers CRM and hosting services as well as accounting packages.
www.epicor.com.au

Frontstep
Key products: Syteline. Aimed at larger enterprises.
www.frontstep.com

JIWA
Key products: JIWA Financials. Australian developer, offers finance and development modules.
www.jiwa.com.au

Microsoft Great Plains
Key products: eEnterprise, Solomon, Dynamics. Midtier provider, acquired by Microsoft in 2000.
www.greatplains.com

MYOB
Key products: MYOB AccountEdge, MYOB Accounting, MYOB Accounting Plus, MYOB Premier. Many products aimed at small business, but also has systems targeted at accountants. Dominates the Australian market.
www.myob.com.au

Oracle
Key products: EBusiness Suite Financials. Built on Oracle's database technology; mostly aimed at larger businesses.
www.oracle.com.au

PeopleSoft
Key products: PeopleSoft Financial Management Solutions. Aimed at larger enterprises.
www.peoplesoft.com

PRONTO
Key products: PRONTO. Australian developer, also has CRM and project management modules.
www.pronto.com.au

Quicken
Key products: QuickBooks Pro, Payroll Premier. Dominant player in the small business accounting space, owned by Intuit.
www.quicken.com.au

Sage
Key products: Sage Line 200, Sage Line 600. UK provider with some local market presence.
www.sage.com

Sapphire One
Key products: SapphireOne. Includes modules for payroll and ebusiness.
www.sapphireone.com

Sybiz
Key products: Sybiz Vision, Sybiz Visipay, Sybiz Vision Service Manager. Australian developer, released world's first Windows accounting package in 1991.
www.sybiz.com.au