Choosing the right accounting software for your business...

A business partner recently asked me why I use Xero, Quickbooks and Sage (amongst others) to run my clients accounts, instead of picking one and moving everyone onto that system. A good question and from a purely selfish practical perspective moving to a single system would be heaven, but it’s not that simple. As I have written about before, in business there is no such thing as a one size fits all and that includes accounting software.

The way I explain it is to put two small business owners in a pub chatting over a pint.  They started their businesses about the same time and both turnover the same amount of money. They have grown their businesses together and recommended software, systems and processes to one another and used each other as a mentor along the way. So, in many respects they could happily be running the same accounting software – or not, and here’s why.  One sells widgets and the other is a consultant.

The widget business is high volume low value sales, holds stock with varying cost prices as a result of import currency fluctuations, has a significant volume of purchase ledger transactions and has some products that are manufactured or assembled on site prior to despatch. They sell on line via their own ecommerce site and via other channels such as Amazon and eBay. They have also developed a wholesale channel meaning they sell the same product at 4 or 5 different price points with varying margins. They have offices and warehouses with fixed computer terminals.

The consultancy is much easier. Low volume high value sales invoices once a month to a small number of clients. The consultancy works on a fixed rate meaning the only variations are hourly, half-day and full day rates. The purchase ledger is very small so they use Flat Rate VAT. Every so often they subcontract but that is handled by a one-in-one-out invoicing procedure with mark-up and is analysed as a separate line on the P&L. The consultancy is mainly delivered at client sites and so the business does not need an office. The consultants work from home and use cloud applications to communicate and share documents.

So, you can see why these two businesses’ specific requirements demand different systems. Yes, there are some applications that in this example could manage both, but what I have found over the years is some are significantly better at particular functions than others e.g. stock control. Therefore, whilst many accounts packages offer a broad range of functionality, sometimes we pick and choose because our experience suggests one is better than another.

The other very good reason is our clients wishes. Whilst we work with a lot of start-ups and those that come to us as part of a move from manual accounts to software based accounting and are therefore in need of a recommendation; we also work with established companies that need our accounting expertise but already have systems in place.

We have witnessed a huge change in the accounting software market in recent years but the fact that they vary from a few £’s a month and cloud based to on-premise solutions that cost hundreds-of-thousands-of-pounds and take weeks to implement does suggest that there remains demand for a range of software applications with different functionality. Whilst this is the case, we will continue to work with our clients to find and use the best system for their needs, not ours!

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