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Posts Tagged ‘Moving up from Quickbooks’

Continuing our series of posts based upon a recent white paper by Geni Whithouse, entitled Charting a Better Course for Your Business: Eight rules for investing in a new accounting system, which can be accessed (after free signup) here(This is the final post of a six part series.)

Business face new challenges when they moved into international waters (to steal from Geni’s sailing based metaphor).  These include:

  • Features that work together to create a multi-national system for global business management.
  • Support for concurrent multiple currencies
  • Support for multiple languages for screens, reports, documents
  • Real-time financial visibility into global, local and consolidated reports
  • Full-time system access from anywhere with an internet connection

At the same time, clear access to information across the network is necessary for employees to have information at their fingertips.  This requires features like clean cut-off periods within general and sub-ledgers, and the ability to quickly begin work in a new accounting period, often before the prior one has been closed.

Staying informed about progress toward incentives and goals, and being aware of quickly changing trends means that today’s better systems feature things like dashboards, alerts and user-definable reports.

Summary

In this series of six posts, we’ve enumerated 8 key elements to consider when selecting a new or upgraded financial system, which we’ll quickly summarize here.

1. Select a multi-ledger (not single ledger) system.

2. Select a system with a flexible, multi-dimensional account structure.

3. Select a system with multi-scenario capabilities to track and compare KPIs, ratios and metrics.

4. Be sure your system supports clear communication, like personalized dashboards or user-based (frequently termed ‘role-tailored’) clients

5. Be sure your system supports multi-user access secured by strong permissions

6. Be sure your system supports ‘the rules’ – not just GAAP, but for transaction integrity, workflow processes and system security.

7. Select a system that supports multiple entities within one parent business entity

8. Look for a system with multi-currency and foreign language capabilities if you think such needs will ever apply to you.

Following the above tips — but only after a thorough initial workflow and process analysis before you begin your search — will go a long way towards ensuring that the system you choose today will be the one you can still live with – ten years from now.

 * * * * *

We hope you have enjoyed this series on how to select an accounting system.  We think Geni Whitehouse’s comments are right on the money, and so we took time to present them over several posts.  Once again, you can access her original document here.

 Your comments and input are always welcome.

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Continuing our series of posts based upon a recent white paper by Geni Whithouse, entitled Charting a Better Course for Your Business: Eight rules for investing in a new accounting system, which can be accessed (after free signup) here.  (This is part five of a six part series.) 

Two more factors are important when investigating a new financial reporting system.  One is controls and access to the accounting information, and the other involves reporting when a company grows (as many do) into a multi-entity organization.  First, controls…

While employees are vital to a business, and their access to important data and KPIs is equally vital, a good system will have the necessary security controls to prevent unauthorized users from accessing certain areas of the system.  It’s a delicate balancing act, but as Whitehouse points out, you may not want your A/P clerk entering and reviewing invoices – for obvious reasons.  Thus, a good system will enable user rights through a “granular segregation of duties.” 

In short, you want a system that provides adequate controls so that users can access the areas where they are authorized, but explicitly not be afforded access to those areas where they are not.  Today’s more sophisticated systems employ complex system and security architectures that allow for this.  Your typical entry-level, single ledger accounting system, say QuickBooks, will not.

When a system sets permissions and passwords at the module level, providing all or nothing level access to the company’s data, it’s time to evaluate whether that is appropriate to the point your company has evolved.  For some, it works; for others, it doesn’t.

One more point: a good system allows for repeating and reversing journal entries, default accounts for invoices, and other system-wide parameters.  Such controls ensure uniformity of accounting and can aid in the enforcement of good internal controls and ensure that procedures are applied consistently.

Moving on to our other topic today, as a company grows it often evolves into a multi-entity organization.  For example, there may be separate business units for a company that manufactures, and distributes, and implements, and services its own products.  Managers need visibility across entities, and often, it’s not practical to force the same accounting procedures across all of them. 

In larger organizations, each entity needs to operate independently, even though you often want to consolidate portions of their reporting and financials.  It takes a powerful and well thought out accounting system to do this.  In a well thought out system, individual entities can be managed independently, have their own reporting standards, and yet the key financial data can be rolled up globally into a parent entity.  When an accounting system supports only a single business entity, it’s time to consider a move up in order to provide consolidated reporting and management.

Next in this series, we’ll take a look at multi-currency, and clear access to information.  Stay tuned…

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Continuing our series of posts based upon a recent white paper by Geni Whithouse, entitled Charting a Better Course for Your Business: Eight rules for investing in a new accounting system, which can be accessed (after free signup) here. (This is part four of a six part series.)

Business owners need clear insights, driven by underlying data, to guide them safely.  Whitehouse suggests (and we do too) that a business might want to create some Key Performance Indicators (KPIs) as a group of non-consecutive (Chart of Accounts) account numbers to form a special report.  This requires a strong and modern financial reporting system, one that can, as she states “transform data into operational insights” by…

  • Combining statistical and financial information to create ratios and KPIs
  • Creating rollups and groups of accounts throughout the system, ensuring that all users have the same insights into key metrics
  • Creating budgets, plans and forecasts for both financial and operating metrics and comparing them with actual results

She notes once again that it’s “time to bail” on your old single-ledger system “when an accounting system relies on external tools to capture operational information and has no ability to create Key Performance Indicators or custom metrics.  You shouldn’t have to buy expensive data warehousing tools, load external add-ons, or resort to spreadsheets to get the timely analytics you need.”

In a similar vein, Whitehouse points out the importance of adhering to accounting standards or, as she puts it, “abiding by the rules.”  This is known as following GAAP (Generally Accepted Accounting Principles) designed to ensure that information and reporting is consistent across industries.  It’s difficult to run a business well when the information is not recorded properly.

Here again, she notes the weaknesses of single-ledger systems, like QuickBooks, which “rely on hard-coded accounts, and reporting gyrations to facilitate different reporting requirements, if they even support them.  These systems are difficult to audit, require complex reporting and constant maintenance.”

Next up, we’ll look at the importance of internal controls and the challenges of multi-entity organizations when choosing an accounting system.

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In this third in a series of posts (which began here) on selecting an accounting system, based on a white paper by Geni Whitehouse found here (and cutely subtitled “Even A Nerd Can Be Heard”), we take a look at still a few more reasons companies make the choice to move up from entry-level accounting systems, like QuickBooks, to the more robust solutions offered by many of today’s top publishers.

As Whitehouse notes in her paper, it’s “time to bail” when…

An accounting system either has no structure for organizing accounts, or relies on hard-coded account segments, [and] you end up with the following recipes for disaster:

  • An unwieldy chart of accounts
  • One dimensional data with limited analysis and planning
  • Rigid financial statements that depend on the order of accounts in your general ledger

A typical hard-coded structure might look like this:

Account      Dept   Loc
6000           100     100
6100           100     100
6200           100     100
6000           200     100
6100           200     100
6200           200     100

 Such a rigid methodology is not conducive to flexible reporting, and if not “dimensionalized” to enable slice and dice reporting of selected, key departments and categories, leads to a system that simply cannot provide the necessary departmental and corporate financial reporting that is necessary to run a fast-growing, expanding business.  In fact, it’s not even sufficient to run a slow-growing steady business, if what you desire is the ability to truly view, understand and share new business insights.

To ensure good business visibility and to deliver key insights, you need a system capable of providing you with, and measuring against, key performance indicators and significant accounting ratios.

And we’ll take a look at how that figures into the equation in our next post.

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In our previous post here we noted that the purpose of a good accounting system is to move your business forward.  We looked at how white paper author Geni Whitehouse explained the distinction between a “beginning” accounting system, such as QuickBooks, with its more full-fledged brethren, the multi-ledger accounting systems.  In today’s post, we’ll look at some of the signs that it’s time to make the step up from QuickBooks into a more robust solution.  (This is part two of a six part series.)

As Whitehouse points out, with a single-ledger system, you slow yourself down and limit your opportunities for growth by:

  • Causing sluggish performance as you add transactions
  • Providing limited reporting options
  • Making the month-end close a slow and painful chore
  • Limiting security
  • Creating a cumbersome reporting structure
  • Requiring everyone to stop what they’re doing when it’s time to close the month.

Based on our own experience of 25 years, to Geni’s list we would add:

  • Severely limiting your ability to modify or change your system in any way
  • Sometimes limiting the number of transactions the system can handle
  • Limiting the extent you can grow, in terms of system limitations on functionality

The solution involves stepping up to a more sophisticated system.  But unlike what you probably did when you implemented QuickBooks or any other entry-level package, this time, you need to spend some time in planning and design.  Serious time.  Starting with the Chart of Accounts, the fundamental framework upon which any good business financial reporting system is based.

The Chart of Accounts provides the structural basis by which you can report and perform comparisons – between periods, entities or budgets.  A good system will allow you to segment information so you can extract the information you need, leading to the true purpose of any good accounting system: business insights!

How do you get there?  By selecting a system that offers:

  • A user defined chart of accounts
  • User defined reporting “dimensions” for slice & dice reporting
  • User defined statistical accounts to incorporate operational data into your budgeting, financial reporting and management metrics

We’ll look at more of Ms. Whitehouse’s tips for selecting an accounting system in our next post.  Please stay tuned…

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Geni Whitehouse is a long-time veteran of the accounting software industry.  I first got to know her personally when she was with the new fledgling American division of a Danish accounting software company then known as Navision.  That was over a decade ago, and today Navision is Microsoft Dynamics NAV, one of the premier products in the ERP and accounting software industry.

Recently, Geni (pictured at left) penned a great little white paper available here (after free sign-up) “Charting a Better Course for Your Business: Eight rules for investing in a new accounting system.”  It carries the ever so cute subtitle “Even a Nerd Can Be Heard.”

Geni’s opening premise is that any good accounting system should propel a company forward.  Simple enough, but as she notes, not all of them do.  A good system, she notes, “will turn information into insights, and give employees the access they need to make informed decisions.”  Many accounting systems do just the opposite.

Geni reprises the comment we so often proclaim: that an accounting (or ERP) system is a strategic investment.  As such, companies need to start with the proper foundation: a strong and accurate system design.  Mixing frequent sailing metaphors with her key strategies for implementing an effective system, she concludes her initial premise by noting… “By taking the time to carefully select the right solution, you can confidently set sail on a grand business adventure.”

Her article is well thought out, and well-written, and we agree with her conclusions wholeheartedly, so we thought we’d devote our next several posts to reprising Geni’s thoughts on how to select the right solution for your firm.

A great many businesses will start out with a simple single-ledger system, like QuickBooks, probably the best-selling small business product on the market today.  QuickBooks stores all your business information in one place, which is simple and appropriate, she points out, for many small businesses.  More sophisticated systems will use a series of inter-connected ledgers.  This just means that accounts receivable information, with its detailed information on customer data, terms and credit limits, is kept in a separate ledger from, say, accounts payable data, or general ledger.  This multi-ledger approach helps optimize the better systems for reporting, analysis and data mining.

Under these types of systems, only summary posted information is often held in the general ledger, with base transaction details stored in their own respective ledgers.  Reporting needs can often be handled from these subsidiary ledgers, and the overall system architecture promotes speed, efficiency and scalability.  As Whitehouse notes, multiple ledgers also provide faster closing, better auditing, and rich planning and reporting  opportunities. 

So… when is it time to make the move up from a simple single-ledger system to a “real” accounting system?  We’ll take a look at a few telltale signs beginning with our next post.  Stay tuned…

 

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