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Which web based accounting application?

20th Oct 2011
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How do we evaluate which web based accounts package is best?

The following is a guide to Cloud based accounting systems produced by Vision Q&A Consultancy Limited. 

It is intended to be a guide to help owners of small businesses decide on which system is right for them and provide a number of things to consider.  We also provide a guide to a few of the most popular applications.

Why use a web-based or Cloud accounting system?

  • You, your staff and your accountant can access your accounts from any location, on any computer including a Mac.
  • You don’t have to worry about software updates and back-ups.
  • More reliable and flexible.
  • Easily deployed.
  • No contract period, you simply pay for the period of usage.

PRIMARY CONSIDERATIONS

All modern accounting solutions should have the following key functions:

  • Customer and supplier maintenance
  • Sales invoices and sales orders
  • Purchase invoices and purchase orders
  • Bank account maintenance
  • Expense management and nominal ledger maintenance
  • Reporting tools to produce all reports that are essential for the business including VAT reporting and an export feature. 

In addition the following features may also be available within the accounting system or as a separate module:

  • Integrated payroll
  • Stock and replenishment integration
  • Work In Progress billing and timesheet integration
  • Bill of materials control
  • Asset Register with flexible depreciation functionality
  • Budget and forecasting ability
  • Cash flow forecasting

WHAT IS THE RIGHT SYSTEM FOR MY BUSINESS?

There are several excellent entry-level systems available today, which will provide simple and easy processes to control the key areas of the business.

For a small business, there are a number of factors about the business that are prerequisite considerations, when determining which accounting system is optimum for the needs of the business.

E-Commerce

If we intend to sell merchandise or services on the Internet, we will almost certainly need greater functionality from our accounting system.

The accounting system will need to transfer customer and sales transaction records directly into the accounting system from the e-commerce system.  In addition, if payments are handled in the e-commerce system details of the customers’ payments will need to be transferred too.

Sales on the Internet could be in currencies other than the company’s standard trading currency.

E-commerce sales will probably mean dealing with different EU countries and accounting to HMRC for EU sales and VAT.  We will need the system to be able to report EU sales as part of the standard VAT reporting.

If your EU customer provides you with a VAT number, you will not need to charge VAT but vendors do need to validate the VAT number.  A sophisticated accounting solution will carry out this validation for you.

Stock control and EPOS (electronic point of sale) systems

If we are buying and selling merchandise, then we will need robust mechanisms to control and report stock levels.  If we are also using an EPOS system, then this can manage the stock and replenishment processes, and the accounting system will not need to duplicate these records.  However, the accounting system will need to mirror a summary of the stock movement for each accounting period.

Manufacturing and assembly

If we are handling raw materials and various stages of assembly we will need bill of materials functionality to maintain and control complex build up of components, possibly in multiple currencies with different costs according to supplier and varying costs for the same component.

This level of sophistication may warrant an Enterprise Resource Planning (ERP) system dependent on the scale of the operation.  This is outside of the scope of this document.  We plan to review ERP systems in a forthcoming report.

CRITICAL CONSIDERATIONS

Sales Invoices and credit notes

Customisable sales invoices and credit notes so that the business logo appears and documents can optionally be sent to the customer via e-mail. 

Each sales invoice may need to handle different rates of VAT for each line on the invoice.

If we charge handling and delivery charges, then we need to ensure there is a suitable mechanism to handle these additional charges on the sales invoice and the different VAT rates applicable for the ancillary charges. 

It would be preferable if systems allowed defaults for these to be configured within the invoice structure, but most entry-level systems do not provide this functionality.

Customer statements that can be sent to a customer by e-mail automatically at set periods.

If we are in the practice of supplying quotations or sales orders, the system should allow generation of sales invoices directly from these primary documents.

The ability to create recurring sales transactions, for monthly or quarterly fixed maintenance charges, could be very efficient if we offer maintenance or regular repeat supplies.

There should be a simple mechanism to allow the cancellation or adjustment of a sales invoice.  Most legacy systems were too rigid in this respect, but we are seeing better flexibility in most modern systems. 

Your Accountant, auditor and HMRC will prefer to see audit trails of all accounting transactions, but as long as everything is locked down at the end of each accounting period and before the VAT reports are generated, flexibility can be a boon in terms of saving time when an invoice needs to be corrected.  Of course, we need to ensure a customer does not have two versions of the same invoice.

If we are selling overseas, do we need to send invoices in different languages?  Some systems can automatically translate the invoice headers appropriately.  

Multi currency

Multi-currency functionality is essential if we trade in multiple currencies.  Ideally, the system will receive a live feed from an authoritative source such as xe.com or the ECB at least once a day. 

We should also decide if we need bank accounts to be held in foreign currency.

Exchange rate variations should be handled seamlessly.

Incoming payments

If we are handling a high volume of transactions, which are paid via different credit cards and other incoming payment sources, we will want mechanism to integrate the incoming payments into the accounts system.

If we accept credit card payments over the telephone, we will want to enter payment details directly into the accounting system to validate the payment and maintain optimum control of this key area of the business. 

It is also worth checking that we can record an incoming receipt from a customer and allocate that amount to several invoices.  It will make bank reconciliations much harder if we regularly receive incoming payments from customers that relates to several invoices, and are restricted to recording a separate receipt for each invoice. 

Purchase Orders and Invoices

We should be able to place purchase orders on the system and when a purchase invoice from a supplier is received, we can match the purchase invoice to the order.

If we buy one case containing 24 items but sell those items individually, this will need to be considered in the purchase order and inventory process.

The purchase order system should be linked to our stock or products file.  Some systems allow minimum stock levels and produce purchase orders autonomously when the stock levels reach the minimum stock level designated for each product.

We may need to order the same product from different suppliers, so ideally we will have a preferred supplier for each stock item.

It may be necessary for this module to be multi currency if supplies from other countries are expected.

Settlement discounts

HMRC allow for settlement discounts to be deducted before the calculation of VAT.

If suppliers offer settlement discounts for payment within a number of days, this should be handled within the system.

We may wish to offer a settlement discount and again, would want to see a mechanism to simply handle this in the receipting process.

VAT

We will also want to ensure the system is compatible with any VAT scheme that we intend to use.

Businesses with a turnover below £1.35m can opt for Cash Accounting or the Flat Rate Scheme if your turnover is less than £150,000.  Of course, it may be preferable to use the Standard VAT scheme.  It is worth getting advice on this from your accountant or HMRC.

Online VAT return filing is an essential requirement.

Banking

The banking module should allow for bank statements to be imported or better still, provide a live feed from the bank.

Bank reconciliation should be a simple and robust process, and if large transaction volumes are anticipated, allow for the automatic matching of records.

We may need the facility for multiple bank accounts to be created in multiple currencies. Some accounting systems allow invoices to be created in different currencies, but do not allow bank accounts to be held in anything other than the base currency.

General ledger

We may want a general ledger that can report transactions in multi-currency too.

We will need to be able to record expenses direct to the general ledger that are not going to be paid in the future.  Ideally, your accountant will be able to record accruals and prepayments and have the functionality to create recurring journals periodically.

MULTI USER

If the business is going to grow, we will need multi-user functionality, so that more than one person can be working on the system at any one time.  In this circumstance, we may wish to restrict some areas of the system, so permission rights will be needed.

It is also helpful to have a log automatically maintained, showing who did what and when.  This is now a standard feature on most good accounting systems.

EXCEL or CSV file transfer

This allows for greater flexibility to allow data to be reported externally.

API (Application Program Interface)

This allows the system to integrate with other systems.

Migration from other systems

If we already have another system running the accounts, very careful consideration needs to be taken to how this will be best achieved.

Which software solution is right for my business?

The Cloud software solutions that seem to be the most popular are listed below, with price comparisons (all prices exclude VAT).

KashFlow - UK focused

£15.99 per month (60 day free trial)

Although it is not possible to maintain bank accounts in multi currency, for a small business, this may not be an immediate issue.  The business may prefer to trade only in sterling and not build up reserves of other currencies. However, there will be increased costs from the bank to convert each individual transaction to sterling at the point of receipt and no flexibility to sell the currency at the most opportune times.

KashFlow advise they are going to deliver a multi user system, but no details are available as to planned delivery.

KashFlow undertake not to increase prices for existing users.

KashFlow is an excellent value system with great functionality and ease of use for non-accounting staff.  In addition there are a number of add-ons available through its API that integrate into KashFlow such a CRM systems, time and project management, card processors to mention a few.

The features of a basic stock control are to be commended at this price level. 

There are many UK users and accountants, who are very pleased with the KashFlow system. 

Some people are unhappy with the terms used throughout the system, as they are non-accounting terms. That said, it soon becomes second nature to understand.

Xero - unlimited users

£12 per month (5 invoices a month limit)

£19 per month unlimited

£24 per month unlimited and includes full multi currency

The bank feed integration allows for rules to be created, which ensure, for example, items like bank charges and interest are allocated to the correct nominal ledger code automatically and simply need validating.  Validation can be effected from a mobile device and ensures the dashboard is always up to date.

Payroll is at extra cost and is an external add in provided by MyPay.  It can be integrated to the general ledger.

There are a host of additional add-ons, which integrate with Xero via the API.  These include CRM, job tracking, EPOS integration and stock control.

The management reporting within Xero is outstanding for a system at this price level and offers drill down capability.

Basic stock control features but third party add-ons are available.

The help documentation is comprehensive, well organized and easy to navigate.

ClearBooks – multiple users

Light use (80 transactions pm) unlimited users NO VAT reporting - £5 per month

Medium use 200 transactions per month - £10 per month

Heavy use - unlimited transactions £15 per month

ClearBooks is produced by Fubra Limited.  It is an easy to use, well-designed system and represents good value for money.  It is particularly well designed for the UK market, with good VAT reporting and functionality.

The documentation seems poor compared to other systems.

FreeAgent

Sole Trader £15 per month

Partnership/LLP £20

Limited Company £25

Excellent features but expensive for small limited companies. It has a useful tax time line, showing upcoming tax deadlines. It is fully multi user.  Each user can have separate logins and passwords.

It is well suited to freelancers and contractors.  It allows very good project management and allows remote workers to login and manage their own timesheets.

Saasa

Unlimited users

Free for up to 20 transactions per month but with limited functionality.

Unlimited transactions e-mail support - AUD 25 (£17.50 pm approx.)

Multi Currency  & phone support - AUD 35 (£24.50 pm approx.)

Full advanced Stock control AUD 89 per month (£61.50 per month approx.)

Payroll IS NOT UK and therefore should be considered as unsuitable.

Saasa seems not to focus on the UK market.  VAT schemes are not clearly defined and payroll does not guarantee HMRC compliance.  They do not quote prices in sterling. 

However, Saasa looks to have great expandability in conjunction with their partner’s, particularly stock control.

Other considerations for Cloud Computing

  • Is the system provider sustainable and reliable?
  • Is data available to migrate elsewhere at a future time?
  • Will I be able to access the data after my company ceases, without continuing to pay the subscription?
  • Will you be forced to pay more?
  • Is the system secure and is the data encrypted? 
  • Is there a history of downtime, where the system is not available?
  • Is there a commitment to my local market?

How to further evaluate the right choice for your business

All systems reported here have free downloads for 30-60 day trial periods.

It is recommended you carry out a thorough test of the system you plan to use to ensure the important areas of your business will be adequately catered for.  It would be a good idea to get a knowledgeable professional to help with this.

A thorough testing plan should be devised and documented, to ensure you are buying in to the product that best meets the needs of your business.

The following table in appendix 1 can be used as a guide for each system’s functionality.

Appendix 1

Module

Feature

KashFlow

Xero

ClearBooks

FreeAgent

Saasu

General

MAC and PC use

Online

Currency data feed

Daily

Hourly

Daily

Daily

Yes

User control

Local backup

Project or departmental Accounting

Maintain customer sources

Customisable dashboard

Drill down features

Time tracking

API

Sales Invoices

Customisable

Multi Currency invoicing

Allows amendments

Foreign language support

Repeat invoicing

Sales receipts

Mechanism for client to auto pay by credit card

Credit card validation from invoice on screen

Sales Orders & quotes

Create invoices from orders or quotes

Banking

Multi currency bank accounts

Bank statement feeds

 

Bank statement uploads

Bank Reconciliation

Payroll

External provider with integration

12Pay or

My Pay

My Pay

Integrated

Non UK

VAT

Standard

Cash Accounting

Flat rate scheme

Online VAT filing

Fixed Asset

Fixed asset register and depreciation

Stock Control

Basic

3rd party

Basic

General Ledger

Budget

Multi currency reporting

Cash flow

Cash flow Forecasting

Add-ons

PayPal feeds

Direct card payment options

Via Post

Email integration

Purchase Order

Purchase orders

Support

Email

Email

Email

Email

Email

EPOS

EPOS Integration

API

Author: John Cotter of Vision Q&A Consultancy Ltd

Email: [email protected]

www.visionqanda.co.uk

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By alisonatintuit
10th Nov 2011 13:45

QuickBooks Online

Hello John,

I read this article and was very impressed by your rigour - however I was a bit surprised that Intuit QuickBooks Online was not mentioned.  We have a very robust solution, competitively priced, and have been in the UK market for almost a year now.  (We have had QuickBooks Online in the US for over ten years now, and have local versions in other countries as well.)

You raised the issue of trust in your supplier - although we may not be as well known in the UK as Sage, Intuit is a publicly-traded $4 Billion company worldwide, with 8000 plus employees in (I think) 8 countries. Our stock is traded on the NASDAQ - stock symbol INTU.   I feel very confident working for Intuit, and I have been happily employed there for 7 years this December. I think your readers can trust that track record.

If anyone would like to learn more about QuickBooks Online we have a free 30-day trial available at http://www.intuit.co.uk/quickbooks/accounting-software/online/online-bookkeeping-software.jsp

At a high level:

There are three versions available, starting at just £9 per month. 

Accountants should choose the version with the feature set that best matches their clients needs, but will be happy to know that all versions are full double-entry accounting systems with the ability to create and customise key business reports, and are of course useable on the PC, Mac and some mobile devices.

Additionally, ALL versions come with free technical support by phone or online, and a free seat for the accountant, making it a tremendous value overall. 

VAT, multiple users, multiple currencies, creating and managing estimates, and billing time and expenses to customer jobs are some of the features that are added as you go from the lowest version on up to the top version. (There are many more... too many to list in fact.)

Please let me know if you have any questions - we would be delighted to answer them for either you, or for the readers of this excellent article.

Best,

Alison Ball

Head of Accountant Programmes, Intuit UK

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