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A buyers guide to accounting software for start-up businesses. By Nigel Harris

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15th Oct 2006
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Most accountants would agree that good financial management information is essential to the success of any new business. Appropriate accounting software can make it easier to produce this information on a timely basis. Many of the major players in the accounting software market have recently launched specific packages for new businesses. Are they any better than what was already available? With even more choice, how does a new business owner choose the best package for them?

#1 Ask your accountant
The best person to ask should be your accountant. We would say that, wouldn’t we – but with good reason. A start-up business has a lot to learn and the accountant can be an essential support in the early days, so it makes sense to use an accounts package with which your accountant is familiar. To start with it means he can help you to set it up correctly and can provide telephone help. Later on he will be able to take your data and work on it back in his office, or extract a version of your data that he can use in Excel or a final accounts software package. And if all else fails he can probably introduce you to a reliable local bookkeeper who can help run your accounts on a temporary or part-time basis. You lose these benefits if you go online and buy cheap software that no-one has ever heard of.

Take a test drive
Many suppliers will let you download their software and run it in demo mode or for a limited period so you can get a feel for it before you buy. Do this if you can. If not, at least check the minimum hardware and operating requirements before you buy – some of the latest packages will only run under Windows XP. Most will ask you to register the software online, so you’ll need to be able to get online when you install it or within a specified period.

Getting started
Many accounting packages designed for start-ups use a wizard, ie a series of on-screen questionnaires, to lead you through the initial setting up. Some of your answers will be irrevocable – typically your choice of accounting year end – so some initial planning is required before you plough on. Your accountant will appreciate the opportunity to advise you at this stage – rather than complaining later that your ill-informed initial choices have made his job a whole lot harder! Choosing an appropriate chart of accounts and the right VAT accounting option are also essential at this stage. Some software explains the options available, others expect you to know what you want.

Many of the dedicated start-up packages provide tutorials, help sheets or online help articles to guide the new business owner through these initial decisions, so take time to explore your software and the supplier’s website. For example, Sage Start-Up comes with a whole second CD-ROM full of such help materials.

Decide at what point you will first log financial transactions. When will you first record sales – at the order/quote stage, when an invoice is issued, or when the customer pays you? Some software packages don’t offer you a choice, so make sure you are happy with the route they require you to take. If you want to be able to print sales invoices and track customer accounts ensure the chosen package has this facility. Can invoices be printed onto plain paper, or can you format invoices to fit on to pre-printed letterheads? Is the presentation acceptable? The leading software suppliers can also supply pre-printed customer invoice and statement stationery (at a price) to fit their software.

The bank reconciliation is the key to producing reliable data for your accountant and keeping your accountancy fees down so you can afford to buy more useful advice and planning services from your accountant. Learn how to reconcile the bank account, either using the software’s own help or by getting help at the outset from your accountant. This is the single most useful thing you can do to make sure you keep reliable records.

All the software reviewed on AccountingWEB so far will handle VAT quite competently. You can be confident that any software accredited by the ICAEW will meet this minimum requirement. However, only MyBusiness will allow you to use the VAT Flat Rate Scheme, so if your accountant recommends this scheme you have a short list of one! Make sure you understand how data must be entered and which reports must be printed when you come to the end of a VAT return period. Again, a bit of hand holding by the accountant for the first quarter should set you on the right path.

Reporting
Getting the information into the computer is only half the battle. Getting it out in a meaningful fashion is the other. What you want to know is things like:

  • How am I doing?
  • Am I doing better than last month/year?
  • How much money do I have?
  • How much VAT do I owe?
  • Who owes me money?
  • What bills have to be paid this month?

Good software will come with a ready-made set of reports covering all these and more. Very good software will display or remind you of important financial facts without you needing to ask – often referred to as the “dashboard” it might display information such as the current bank balances, overdue invoices or a monthly sales graph.

Some packages provide only basic reporting because they expect you to use your accountant for this, thus making sure that you get some advice and commentary on your results rather than a handful of printouts. At this level don’t expect to be able to design your own reports or to tailor the output very much, if at all. If that’s your thing, make sure you can export either the data or reports into Excel so you can work on them yourself.

Value for money
The latest trend in accounting software is subscription-based pricing. The ticket price may well be for just 12 months use and not an outright purchase, so make sure you are happy with the future commitment you are taking on. Does the price include telephone support or do you have to pay extra? If so, is the support line open during the hours you are likely to want it? Many only operate 9 to 5 on weekdays, which will not suit a business owner who can only do his bookkeeping in the evening and at weekends.

If you plan to grow your business significantly, is there an upgrade path to the fully featured version of this accounting software? You may need a much more sophisticated package if you want to computerise your stock control, process sales or purchase orders, use foreign currencies or need several concurrent users to cope with the volume of transactions. Established SME software suppliers such as Sage and QuickBooks have start-up packages that you can migrate to their grown up packages.

Single product suppliers can’t offer this option, although your accountant may be able to help you achieve a degree of data transfer using a CSV file via Excel so it’s worth checking before you start again from scratch. However, many so-called "start-up" packages will take a new business up to a reasonable size before they can no longer cope, and some come as multi-user from the outset.

Time to go online?
The other growth area this year seems to have been in online accounting services, where software is hosted by the supplier and you simply access it over the Internet using a normal browser. The ubiquity of broadband is starting to make this a viable option. The program and your data are both held by the hosting company, meaning that you can access your accounts anywhere in the world if you can get online. Most of these packages are written specifically for the internet so direct comparison with desktop packages is not so easy, but they typically offer a full range of accounting modules and most allow you to give your accountant direct access to your live accounting records, which enables them to give you a more pro-active advisory service. If you need to access your accounts from various locations, or have been offered an online solution by your accountant you should consider this option.

Further reading
Sage StartUp
QuickBooks Simplestart
MyBusiness
TAS Zebra
WinWeb
More
Online accounts overview

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Replies (7)

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Dennis Howlett
By dahowlett
17th Oct 2006 16:54

Frustrating
I find it frustrating that these articles continue to punt the idea that the accountant is the best person to advise.

An *informed* accountant is the best to advise and sadly there are few of those about. By informed, I mean one who knows how to think like an SMB.

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By User deleted
18th Oct 2006 16:06

Disappointing
No real shock that accountants are once again recommended as the best people to buy from. However this overlooks the fact that accountants often sell the software themselves and as such may well recommend what is simply the package they sell. Furthermore the article seems to forget to mention the software solution centres who have equally good knowledge of the products and sell a range of packages meaning they can recommend the optimum solution for the type of business as well as support when using the product!

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By EMichaelJakins
18th Oct 2006 17:17

The problem with Accountants
Hi

The real problem with using a system recommended by "your accountant" is that most of them are very good at preparing Final Accounts and Tax returns, but havn't a clue when it comes to running a business.

The small start up business needs an accounting system to run your business first and foremost so it needs to be set-up and geared to that objective. Sadly, particularly small buiness packages, mostly do not do that very well. Especially when set-up by an accountant "in practice".

Wizards are a particular danger area, as they tend to assume that all businesses run in the same way. They don't, particularly when it comes to getting information for the management of a busines, especially if it has diverse product lines.

To set up an accounting package, you really need a "Systems Accountant". One who has previously had experiance of producing Mangement Accounts for the operational staff of a company. And preferably one who has a mix of industries in their experiance. Also one who has experiance of non accounting operational aspects, such as procurement, stock control or even manufacturing. OK, I may be quoting from my own CV but having set up quite a few systems for both major PLCs and much smaller companies, and had to start again when the "accountant" had set up the system. I have as they say been there and done that.

It is worth getting a Systems Accountant in who can specify what is required from the system and any associated products such as CRM, Stock Control before any purchase is made. The System Accountant will also be able to Project Manage the introduction of such the packages and prepare procedure manuals relevant to your company. The cost of change in the future will far outway any fees we might charge.

As for "on line" packages - having just experianced over a month of system failures with my ISP - I have one comment - NEVER!

Michael

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By User deleted
19th Oct 2006 13:18

Most accountants are relatively IT illiterate
So long as the majority of accountants continue to recommend Sage for the preparation of accounts, accountants in general are not the best persons to ask for a recommendation for an accounts package.

I have made a lot of money for myself, while saving even more for my clients, by slashing the amount of time it takes to prepare accounts by advising new clients to abandon Sage. Often I persuade the client to this by buying an alternate package and giving it free to the client. The cost to me is more than made up because I acquire the client's goodwill and confidence when the client sees the huge increase in efficiency and speed with which the accounts are prepared using the new systems. The client also notices much improvement in the quality and timeliness of the accounts and other reports because the time saved by not using the inefficient Sage package is spent more productively reviewing the numbers and not ignoring accruals, prepayments, etc which it would be tempting to ignore on spurious "materiality" grounds (but really because it is too time consuming to put these through or revise in Sage). And by abandoning the straight jacket imposed by Sage's reporting system, I am able to provide each client with reports designed for the client's particular business and information requirements.

(I have no prejudice against Sage - I was one of the first accountants to use Sage when it was a DOS based package and continued with it into Windows but had no hesitation in abandoning it when better tools became available. And I will have no hesitation in starting to use Sage again in the unlikely event that their package becomes competitive again.)

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Nigel Harris
By Nigel Harris
20th Oct 2006 13:56

Why ask your accountant?
Afzal seems to have grasped my point. If you check above (Dennis!) I didn't say "buy" from your accountant, simply get some advice. I know some firms do resell software. (We used to but there's no margin for us and we didn't want stock sitting on the shelf that would quickly go out of date so we gave up.)

My point is that accounts are prepared for two purposes - management information and compliance. The small business owner probably needs help on the former, if only to understand the data, and he has to work with his accountant on the latter. At the very least it makes sense to either use software that the accountant is competent with - or find an accountant who is!

I agree that a "one package fits all " approach won't work. We're Sage resellers (at least nominally), but we get referrals because we also know MYOB for Mac and have QuickBooks-trained staff too. But if it works for them we're happy for clients to stick with what they've got.

The important thing is that they use the software properly - reconcile the bank, VAT, etc. - and get valuable management information out of it during the year. I imagined that was what all accountants do, but maybe I'm out of touch!

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By ahdossani
19th Oct 2006 20:09

Accountant in the end
I agree that some accountants are unable to think like the small business managers (SBM). Further, ease of date entry into the software is very important, otherwise the SBM may get frustated and not use the software.

If the SBM wishes to utilise the reports generated, he should seek the assistance of a professional accountant. Ultimately, the major reason most small businesses maintain accounts is for tax returns. Again an accountant is useful here.

Maybe I am prejudiced as I am apracticing accountant. The SBM is competent in his field and the accountant in his. Both working as a team would produce excellent results.

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By dialm4accounts
16th Oct 2006 14:40

VAT flat rate - not just one
More software will also do VAT flat rate scheme, with a bit of tweaking by the accountant during the set-up stage.

M

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