Information is an essential resource for all businesses today and is the key to growth and success. However, companies have to ensure that the information held on their IT systems is secure. 

Controlling costs: accounting software versus hosted services

by Alison Bowie

Buying a new accounting system is a serious issue and something that should not be entered into without doing your homework. "Accounting systems are the backbone of a business," said Jeremy Roche, CEO of software specialist CODA. "Get it right and you can make good decisions. Bad data equals bad business."

After all, it is not just your staff that the new system will affect, your customers and vendors will be affected too. A wrong move early on could potentially damage your company's reputation and the close relationships you have worked hard to build.

Before you select a new accounting system, it is vital that you really examine your business and determine not only what your accounting needs are now, but what they are likely to be in the future.

"You need to take a good look at your business - where it currently is and where it is going," said Roche. "You do not want to change an accounting system very often, so it is certainly not something to go into lightly.

"You should look at not only what your requirements are now, but also where you see the business going over the next three to five years. A company may start off being UK-based but then may start exporting somewhere else, for example. If you do not buy a system that allows you to expand, you will find yourself wasting time and effort, and that time wasting can eat into margins."

In May, CODA also launched CODA 2go - a web-based accounts application or SaaS (Software as a Service), the latter a key growth area for the business.

MKW Group accounts office manager Zoe Minto agrees that it is imperative SMBs really think about their key accountancy requirements before committing to a particular system.

"The software must suit your needs, be user-friendly, not visually difficult on the screen presentation, be easy to install and have immediate help when problems arise," said Minto. 

Forward planning

When considering a system upgrade, companies need to map out a tight timeline to ensure as smooth a system changeover as possible, thereby minimising any disruption to the accounts functions.

NetSuite director of professional services Toby Davidson also stresses the importance of preparation when considering purchasing a new system.

"Look at the current infrastructure that you have. This may not be suitable for certain types of systems. You also need to look at what staff you have. You do not get where you want to be without business intelligence."

It is important to consider the adaptability of the software so that it remains relevant to your business as it changes and grows. "Particularly with the smaller end of the SMB market, the question you should be asking is, ‘is it going to grow with you?" added Davidson.

At Intuit QuickBooks, small business product manager Lesley Avann believes there are several points to address when looking at suitable systems if you are to get the best from your investment.

They include ease of use; compliance; stability of the package; flexibility and the ability to customise; plus hardware issues, such as should it be networked or standalone, and what the minimum system requirements are.

There is also the issue of system compatibility. "Small business owners should choose a system that can grow with them, allowing users to be added or functionality to be increased without hassle," said Avann.

"In addition, it should be able to run all day if they need it or be quick to launch if they just need to dive in and out for quick transactions or reports. Daily and monthly expected turnover should be considered and a package chosen which is robust enough to handle their needs."

A system that is user-friendly, but sophisticated enough to meet SMBs' specific needs, is important. "The package should also be simple to use and not require re-learning if it is not frequently used, but have the in-depth functionality to handle their most complex functions. Financial data can be sensitive, so while allowing multiple users will be a must for most businesses, the package should allow for control over user permissions," advised Avann. 

Hosted services

One of the most important issues to consider is whether to buy application-based software or a hosted Software as a Service option (SaaS).

The arrival of broadband has meant a surge of web-based solutions offering access to real-time data, the provision of secure off-site data storage and constantly updated software. 

Software as a Service

So what are the benefits of taking the hosted route?

Richardson believes there are many good reasons for taking the SaaS option and cites customer London-based Rococo Chocolates as a good example of how a system like NetSuite can work well for SMBs.

Rococo financial controller Gerry Kerins said: "I was getting tired of the constant support thing, with add-ons and upgrades that did not deliver what we needed.

"With a growing business you want to keep your head above water and be able to look for which direction to take.

"That is the hard thing because you get involved with the nitty gritty of keeping the IT system going. I now have time to concentrate on real business matters."

The NetSuite system allows everyone involved in an order to view relevant real-time data within minutes of it being received, explained Richardson. And it means that the master copy of the data is no longer on an individual's hard drive, but stored on NetSuite's sophisticated data server centres in the US.

The "killer feature" for Kerins is the system's dashboard interface that can be configured to show essential information to any department.

Richardson added: "The user gets to see real-time information. The sales team can go in and look at an invoice, and the finance guys can see exactly what is going on. There is tremendous visibility, which allows the finance team to focus on financial planning and budgeting. It makes it so much easier to follow an audit trail. The workflow and streamlining is quite incredible." 

Data security

Web-based software solutions can offer a number of advantages such as compliance and access.

"The system is regularly updated so you always remain on the latest version, meaning support should be standardised," said Avann.

"It also means that web-based information can be accessed remotely, there is no need to install software locally and it is easy to add new users at any time."

PULL QUOTE "Security can be an issue. Where is your data stored? What are the risks of losing data, data corruption or keeping data secure? Users should also consider the system requirements and, if broadband is required, just how robust is the service in your area? Is your browser secure?" 

Roche has seen an increasing number of SMBs switch to a web-based system - a move he sees being driven by the post-Facebook generation who may be more comfortable with the transfer of data over the internet than their predecessors. "Many people do not need to touch and feel a piece of software," he explained.

However, users should be aware of possible drawbacks to choosing these systems, including concerns for data security.

Avann explained: "Security can be an issue. Where is your data stored? What are the risks of losing data, data corruption or keeping data secure? Users should also consider the system requirements and, if broadband is required, just how robust is the service in your area? Is your browser secure?" 

Cost implications

Before making a decision, buyers should consider seriously the cost implications of buying a new system and review the pros and cons of opting for either a web-based system or an application-based programme.

"It is really important that you have different costing models," said Richardson.

With a traditional application-based system you have to buy the hardware and the licence. There may be a lot of ‘hidden' factors within the purchase. You could be looking in the region of £20,000. Between a quarter to a third of the initial outlay could be ongoing costs. This could add up to £5,000 to £7,000 per annum without upgrades.

Robinson said: "With software as a service there is a fixed fee subscription and around £3,000 to £4,000 ongoing costs. Upgrades and maintenance and hardware renewal are all covered in the subscription. Although there will be a slightly higher licence fee, you do not have the same level of ongoing costs to pay."

He also believes a SaaS option offers the highest levels of security. "Data security is absolutely key to software as a service. For data transfer on the web NetSuite uses 28-bit encryption from our secure data centres right through to the browser. Our data centres use the latest biometric security." 

Software applications

Application-based systems can offer advantages such as easy access to information. If it is local you can always get to the data. They also offer privacy and security, with a low risk of data loss, data corruption or keeping data secure.

Avann said: "There is also the issue of control. The user decides when to update, verify and backup information and how much information you store."

But on the downside, it may be more difficult for the user to ensure the application is up to date with regulations and legislation. And if you want to update data remotely, you have to take the information with you.

"You also need to consider system requirements. Hardware needs to be available to support data storage, concurrent usage and future needs, plus licences are required for each user," added Avann.

There are a number of important issues to consider when looking at different accounting systems.

• How easy is it to rectify a problem?
• Can you safeguard historic information (closed periods)?
• What is the accessibility of historic data?
• Is there an audit trail to view activity?

Just remember that before you invest serious time and money in a new accounting system, it is vital that first you fully identify your business needs now and for the next few years. This way you will ensure that you are buying exactly the right solution to help your company prosper in the months and years ahead.  

Checklist: choosing an accounting system

1 Take time to think about your business. Consider how you plan to develop the business over the next five years and find a system that can grow with you.

2 Conduct background research and shortlist vendors that can provide you with what you need.

3 Do you want to buy software and a server or would an online service (SaaS) be an attractive option? 

4 Evaluate suppliers based on their heritage, product and client references in businesses with similar characteristics to yours. Arrange to see or trial the shortlisted products to measure functionality against your business requirements.

5 Make the most of the solution you invest in. As your business grows and develops, find out what additional features and functions your accounting system may have to help you.

6 Ease of use. Will there be a large overhead while you set up and get up to speed or can you use it immediately, fix any mistakes and learn as you use it?

7 Costs, including ongoing fees for required maintenance and software upgrades.

8 Reporting. How easy is it to access your information? Handling cash-flow is one of the biggest issues for SMBs. Will a system help you get a view quickly or make you take your eye off the ball while you are implementing/upgrading?

9 Robustness. Will your data be safe, will the system crash?

10 Reputation. Will your supplier still be here in  
a year? 

Case study: recruitment consultants turn to ALBACsip

Independent recruitment consultants, The Personnel People, has upgraded its payment system to Albany Software's ALBACSip, in a company wide upgrade of its accounting system. 

With offices in Norwich and Great Yarmouth, the agency operates across East Anglia, placing staff in jobs from construction to catering. One of its concerns is to ensure that a complex workforce of temporary and permanent workers is paid in the most efficient way. 

The Personnel People payroll supervisor Donna Howlett said: "All our temps are paid weekly directly to their bank accounts. All staff payments and invoices are generated through ALBACSip. The difference in terms of time and cost saving between electronic payments and cheques is phenomenal."

Ttransactions are mainly direct credits, including internal staff salaries and weekly wages for between 200 and 600 temporary workers.

Howlett said: "The Albany system is a lot simpler than our old-fashioned method of issuing cheques and as we have instant verification that all the money has been sent, nothing can be lost in the post. We do not use cheques at all any more."

Late payment problems, typically caused by slow cheque processing, are a thing of the past.

Howlett said: "Our old system failed frequently. When we tried to send payments it would crash or not connect to the bank, which was nerve-wracking and time-consuming as we always have to get a lot of people paid in a short period of time Р problems we have never experienced with the Albany system."

The upgrade to ALBACSip was straightforward and Albany provided staff training on the new system.

Howlett explained: "We upgraded as the old system was a little dated. ALBACSip allows us to be flexible."

ALBACSip is integrated with applications such as TempAid 5 and Sage, and it electronically prepares and submits payment based on data extracted from these programs.

Time and cost savings are one of the main benefits of the new system. Howlett said: "Transactions that took days by cheque take minutes with ALBACSip and are also a fraction of the cost of cheque payments. I cannot fault the system. It has absolutely maximised our resources and made the business run much more smoothly as a result."