What is the #1 indicator that you need a new accounting system?

I teach an upper division Accounting Systems class at a local college. We spend a lot of time discussing the various levels of accounting systems, what type of technical infrastructure is required to support accounting systems, and, of course, security. One classic question addressed in the textbook is “How do you know your company needs a new accounting system?”

The answer is simple: If you use spreadsheets to support your accounting function or to report financial results, you have the wrong accounting system.

If you have the right accounting system, the system will perform nearly all of your bookkeeping, reporting, and data management without the need for spreadsheets. The Journal of Accountancy by the American Institute of Certified Public Accountants published a nice article by Ralph P. Johnston titled “A Strategy for Finding the Right Accounting Software.” In the article, Johnston says:

"Be aware, too, that if you select a product with too little capability, you usually have to recruit other applications, such as Excel and Access, to perform tasks the accounting software can’t handle. Such fill-in resources are called “renegade” systems, and in the long run, they cost more to operate than systems built into the accounting software. That’s because data usually have to be reentered into them, and that can cause errors and duplications. It’s estimated the annual cost of running renegade applications rises exponentially as the complexity of the accounting software they support increases.”

Using the wrong accounting system is expensive

I have on occasion seen companies that have the right accounting software but don’t use it properly. Rather than pay for a knowledgeable accounting systems consultant to assist them in proper use of the system, the users of the system decide to make up their own solutions. This is a “renegade” use of the system, and the users are not saving the organization any money. I once took over the accounting for a company where a “renegade” accountant used literally dozens of linked spreadsheets to support Microsoft Dynamics GP. We were able to eliminate nearly all of the spreadsheets, and reduce total accounting hours by 60%.

Want to find out how many accounting hours can be reduced in your system? We offer a free System Review session to go over your accounting process and find out how you can save time and money.