Maintaining accounts can be challenging for any business. Many businesses entrust everything to an accountant. Others aim to save time and money by using specialist accounting software.
If you choose the right package, good accounting software can help your business manage accounts more efficiently. It can make the process quicker and more straightforward. The growing emphasis on e-filing - or submitting records electronically - means that the use of accounts software is even more attractive because many packages can make this process very simple.
However, not all businesses will benefit from accounting software. This guide will help you to decide whether your business needs an accounting package and, if so, help you select the right type of product. The guide will also help you plan your implementation effectively.
An overview of the different ways to keep business accounts
In order to run any business you need to keep accounts or pay someone to do this for you. Keeping accounts is a legal obligation, but keeping good records is vital to run your business effectively. There are many ways of keeping accounts.
Traditionally, accounts were kept on paper with handwritten entries. Many small businesses still use the traditional methods of bookkeeping, often using specially printed books to organise records. However, handwritten accounts can take a significant amount of your business' time and it is easy to make mistakes.
Computing spreadsheets can be set up to keep accounts. They can do the sums for you and update all data in a series of spreadsheets simultaneously. However, designing and maintaining a spreadsheet accounts system can be a significant task. Mistakes made in a spreadsheet may go unnoticed and not get corrected until the end of the year.
Computer based accounting packages can:
- save time by only requiring you to enter information once
- keep track of your business' debtors and creditors
- reduce delays between making a sale and generating an invoice
- automatically calculate GST/QST
- facilitate more accurate forecasting
- allow you to add payroll modules to calculate pay and produce pay slips
However, a computer accounting package can have some drawbacks:
- The package cost, although small in relation to your other costs, is higher than a paper-based system.
- You may need to purchase yearly maintenance and support for your package.
- An accounting package is designed to suit most types of business. However, if your business is very unusual you may find that you need to change the way you operate to suit the package.
- You will probably need some initial help setting up an accounting package. This will usually be a chargeable service, perhaps obtained from your accountant.
Choosing the right accounting package
Accounting packages can be used for all the important financial transactions in your business and you will rely on it to give you critical information about the health of your business. In order to make the right choice, you need to consider a number of different issues.
To get the right package for your business, you need to define your business requirements and then match them to the available packages. A good way to do this is to decide on the overall requirements first, then consider the more detailed requirements within that framework. For more information, see the pages in this guide on assessing your business' overall needs for an accounting package and on assessing your detailed requirements for that package.
Your package must meet all the statutory (legal) requirements that apply to your business and must continue to do so in the future, by, for example, submitting annual accounts that meet defined accountancy standards. Some requirements apply equally to all businesses, but others are specific to particular businesses and the way they operate. For example, a business that deals mostly in cash will keep accounts in a different way to a business that does not. If you have been running your business with manual accounts then you will probably be familiar with these requirements, but if not, your accountant will be able to help.
You need to consider what help you will need to set up, install and maintain your accounting package. For example, if you need to send in your GST/QST return, but a problem occurs with your accounting package, you need to be able to solve the problem very quickly to avoid penalties for a late return. You need a person or support organisation that you can rely on to sort out this type of problem. Understanding and defining your support requirements is a major part of choosing the right package.
Assessing your business' overall needs for an accounting package
In order to assess what your overall requirements for an accounting package could be, you need to gather some information together on your business. It may be helpful to consider the following:
- Is your business a corporation or do you operate as a self-employed worker? If the latter then you may be able to use a personal accounting package rather than one designed for a business, as you are unlikely to need payroll processing in this case.
- How many transactions – i.e. changes that you need to record in your accounts - will you have in a month? If the number is less than about ten, then you may find that a manual accounts system will be the best choice. If you have a high level of transactions per month, then you need to select a package that is designed for this level of activity.
- How many people will be using the accounting package at the same time? If you only have one person who does all the accounts work then you can use a simple low-cost package. If you need to have several people entering transactions at the same time then you will need something more sophisticated.
- What computer systems do you use? Personal computers with a Windows Operating System such as Windows XP are the most popular for business use, and there is a wide range of accounts software for this platform. If you use Macintosh or Linux then you may have a more restricted choice available. You may need to consider using a Windows based PC just for the accounting package in these cases.
Assessing your detailed requirements for an accounting package
Your detailed requirements for an accounting package depend on the type of business you have and how you run it. Ideally, you should look for an accounting package that can meet all your overall and detailed requirements. However, you may find that there is no available or affordable package and you may have to consider changing the way you operate your business in order to suit the available packages.
To make sure you don't buy an overly complicated system, involve the people who will use it in defining their requirements. They will know what is necessary and what isn't and are likely to be happy to use something they helped to choose.
Requirements you may want to consider for your accounting package include:
- Basic bookkeeping - for example sales and purchase ledgers, nominal ledger and invoicing.
- GST/QST calculations - your accounts system should be able to keep track of GST/QST and calculate your tax payment at the end of each tax period.
- Payroll processing - if you have more than two or three employees, consider a payroll function that calculates salaries and payroll deductions and also produces your employees’ Relevé 1 and T4 slips at the end of the year.
- The production of management information and decision support reports - you may need to prepare internal management reports periodically.
- Invoicing - any accounting package needs to be able to produce invoices, but you will probably want to be able to tailor the appearance of these and you may want to be able to send them by email.
- Credit control - an accounting package can help by highlighting where customers have exceeded their limits and provide statements to chase them.
- Compatibility with other accounts systems - including the one used by your accountant.
- Stock control - see the page in this guide on specialised requirements for your accounting package.
Prioritising your requirements for an accounting package
Once you have a list of your overall and detailed requirements you should put them in order of priority.
Your overall requirements should have the highest priority since these generally reflect aspects of your business that are very important and will not change – e.g. whether you operate as a business corporation or are a self-employed worker.
To prioritise your detailed requirements consider:
- how much time and cost a particular feature will save you
- what would be the consequences of omitting the feature
- how your requirements are likely to change in the future
You could give each detailed requirement a rating, for example:
- must have - without this feature the package is not usable
- advantageous - the feature would save a lot of time
- nice to have - useful, but not essential
You can now compare your list of requirements to the information that you have about each package.
To carry out the comparison, reject all accounting packages that cannot meet your outline requirements or any of your "must have" detailed requirements. From the remainder select the one that delivers the greatest number of your advantageous and "nice to have" features at a price your business can afford.
Issues to consider when making your accounting package selection
The market place for accounting packages is more complex than for typical office packages. You will probably require continuing support and maintenance to ensure that you have someone to call to solve problems if and when they occur.
You may want to work with your accountant to submit your business accounts. To make this process easier for both your business and the accountant, it is important that you can exchange accounts data electronically.
You may want to use some special stationery with your accounting package – e.g. standard or specially printed invoices, statements, receipts or credit notes. You may need these in multi-part or laser printer forms. Laser printer stationery is designed for use with a laser printer. Some businesses still prefer to use an impact printer such as a dot-matrix printer for accounts. In this case multi-part forms can be used so that several copies are printed at the same time.
The number of different accounting packages typically used by small businesses in Québec is fairly limited. You can easily obtain information about all these packages from the Internet.
An accountant could also advise you on the most suitable package for your business.
Specialised requirements for your accounting package
There are a number of more specialised requirements that you may need to consider when deciding on your accounting package. You can obtain accounting packages with all of these features if you need them, but the cost is likely to be higher.
Foreign currency - if you need to buy and sell in foreign currencies then your accounts may need to be more complex. You can purchase accounting packages that fully support foreign currencies, but these tend to be designed and priced for larger businesses. You can still operate with a cheaper package, but you will have to do more of the work manually.
Stock control - if your business sells products rather than services and you have a high turnover of sales, then you may benefit from a stock control function integrated with your accounts.
Retail point-of-sale - if you have a high volume of small value sales, e.g. if you have a store, then you should look for an accounts systems that supports this type of operation appropriately.
Electronic payments - there are significant benefits in paying invoices online using electronic funds transfer. Some accounting packages support this capability in an integrated fashion. If this would deliver significant benefits for your business then it is worth investigating how the packages work and the costs that might apply to this type of service.
Implementing your accounting package
Implementation is much more than just installing some software. Your implementation plan should consider the following.
Package installation - this will usually be in the form of a CD-Rom and may require you to register the package with the supplier so that it is fully licensed and works correctly.
Initial company setup - you will need to enter details of your business including the year-end date and other details. Your accounting package may have several different Charts of Accounts – i.e. the headings that you use in your accounts - so you can choose to suit your type of business. However, you may need to tailor this to your requirements. Your accountant should be able to advise you on this work, or undertake it for you.
Parallel running - you may find it useful to run your old accounts and the new package alongside each other for a while to ensure that you are getting correct results. However, it is difficult to maintain parallel running for very long because of the duplication of effort.
Training - the staff who work with the accounting package on a day-to-day basis should ideally have some formal training in the use of the package. You should time this training so that it is done shortly before the installation of the software.
Support - it is a good idea to purchase a support agreement from your supplier for your new accounting package, at least for the first year of operation so that you have a readily available contact to help sort out queries and problems. Many small businesses find that a support agreement is a good investment even after this initial period.
Original document, Accounting software, © Crown copyright 2009
Source: Business Link UK (now GOV.UK/Business)
Adapted for Québec by Info entrepreneurs