There comes a time when, if your small-business client is successful, they outgrow their accounting system, but it's not always easy to tell when a client is approaching the limits of their software. The indicators are sometimes obvious and at other times somewhat subtle, but there are a number of clear warning signs that indicate it might be time for an upgrade.
One sign that it may be time to make the leap from an entry-level accounting package to mid-market software is difficulty getting an accurate, complete and up-to-date view of the business, said Laurie McCabe, co-founder and partner in the technology research and consulting firm SMB Group. "Having information spread across different applications and spreadsheets makes it almost impossible to see the big picture, and makes it difficult to see what levers to adjust when conditions shift," she explained. "For instance, if you don't have good information, it's tough to make good decisions about where to cut costs or increase spending when circumstances change."
She continued, "Adding new applications compounds information sprawl. If you put an addition onto a cracked or sagging building foundation, you'll run into problems. The same holds true here. When a new need arises, adding new applications that don't work with those you already use is likely to just exacerbate the problem."
Brian Bogie, senior director of Sage industry marketing at Sage Intacct, added, "Often, we see some sort of tipping point. It might be that the solution in place is outdated, and that creates risks since older solutions can't be updated to keep up with current accounting standards. With today's pace, it's critical to closely track the financial health of the business in real time to respond to market changes and competitive pressures. If your client's accounting platform can't give them the answers they need or takes too long to get them, it's another sign it's time for a change."
This was echoed by a number of industry experts. Randy Johnston, executive vice president at K2 Enterprises, pointed out, "If your system is running slowly, or you have various supporting spreadsheets, you may have a problem. Systems and processes outside your core applications cost you hard and soft dollars."
Sarah DeAngelis, controller at Ignite Spot Accounting, noted that a critical part of understanding the need for transition is the client understanding what that transition brings to the table. "When clients are making the transition from small to midmarket, their biggest fear is that they're not going to succeed," she explained. "Easy-to-read reports, in-depth forecasting, budgeting, and the ability to customize becomes that much more important to them. During this process, we'll also help them customize — making sure their dashboard, drawers and bookmarks are specifically tailored to them."
Scott Beaver, senior product marketing manager at Oracle NetSuite, pointed out a few other red flags: "One sign it's time to consider another option for your client is when important processes are being managed outside the accounting system. If you're managing revenue or depreciation schedules in spreadsheets, for instance, or manually transferring data from one system to another, then your accounting software is not doing its job. Another indication is when it's taking too long to close their books at the end of the month. Within this economy, it's not fiscally responsible to add headcount when the workload gets too heavy. Therefore, it's important to invest in accounting systems that automate manual tasks and reduce the risk of manual errors to make you more efficient and give you time back to focus on larger strategic priorities."
Buy-in is essential
One thing several experts pointed out is the need for stakeholders to support and, where practical, participate in the transition. And those stakeholders can include the executives as well as staff on the ground.
McCabe mentioned, "Make sure you get input from team members during the solution selection process and seek out and incorporate their suggestions about what's needed to make a smooth transition, from data migration to reporting requirements to training."
Involving as many staff in the client's business as possible should help uncover areas that need to be considered, which a more limited examination of the client's operations and business processes might miss. She added, "The ability to adapt to change has been critical throughout the history of business. Educate your team about why it's critical to modernize and upgrade your systems so the business is prepared to respond to new challenges and opportunities. Be clear about the new capabilities that you need, why you need them, and how they'll benefit the company and your team."
Mark Severance, director of sales at RKL eSolutions, agreed, and added that the move is a partnership between the client and the accountant. "A move from entry-level software to a midmarket solution is a big deal. Companies can prepare by gathering input and buy-in from the core team who will be part of the implementation. Executive leadership should cast the vision behind the 'why' for this initiative and connect it to the company strategic plan. At a more granular level, companies should plan for their accounting team to devote the necessary time and effort to make the implementation project a success. Getting a jump on scrubbing historical data is helpful as well. Together, the company and the accountant need to work on a new charts of account structure that reflects the needs of the organization going forward. The sooner that the chart of accounts and dimension structure is finalized, the sooner that the implementation can proceed in earnest."
Making the move
Once the need for a move is recognized, and the client is in agreement that a new solution is required, it's time to help them actually make the transition. One area to give careful consideration to are the reports. Do you duplicate the ones that the client is used to? Add to them? Replace them?
"Typically, it would be best to look at the new system's default reports first," Johnston told us. "If critical reports in the existing system don't exist in the new system, this may require creating a report to duplicate the existing reports. A discussion of dashboards, KPIs, online reporting and other alerts should be included so the capabilities of a new system can be leveraged."
Sage Intacct's Bogie agreed that reporting is a critical point in the transition. "It is important to start with the end goal in mind, which is reporting," he said. "Additionally, it is important to understand the components of what companies are incorporating or wanting to incorporate within their reports. Historic systems run into upgrade issues, integration issues and performance issues to name a few, all resulting in unreliable reports. Deploying a native cloud financial management solution that is configurable, flexible and customizable and built on an open application program interface reduces the concerns regarding upgrade issues, integrations and performance issues. This is critical when it comes to evaluating a new solution."
Oracle NetSuite's Beaver pointed out, "The most important element for clients is the planning process, including setting objectives, assigning responsibilities, and defining deliverables and deadlines. They need to stay on track to meet those deadlines and make sure everyone involved in the process, even tangentially, receives regular status updates. Lastly, the project leader must have the bandwidth to focus on the implementation and not get bogged down with day-to-day accounting tasks."
"For the accountant's practice, helping document the client's internal policies, processes and approval hierarchies is key," he continued. "These aren't always written down, or they may have been documented, but haven't been kept up to date. The new system needs to support the policies and procedures, and so supporting them with this task and providing counsel on best practices will be very helpful."
Val Steed, director for accountants at Zoho, added, "Before relying on migrated data, it must be footed, ticked and tied, so to speak. You must verify you have it all and it is in the proper buckets before you can proceed. This is a monumental task even for a small business."
"Backup, backup, backup!" he added. "You cannot have too many backups of data in transition. You must be able to put Humpty Dumpty back together if something goes wrong — and it always does in data migration."
Careful there, rough times ahead
Making the move is something that has to be carefully considered. The benefits of moving up to a more capable accounting system don't come without some risks and pitfalls.
Beaver points out one of those pitfalls: "So much effort goes into these kinds of initiatives that it begins to feel like the objective is simply to get the software up and running. But it isn't. The point of all this effort is to improve the business, whether that means saving money, increasing productivity, reducing errors, etc. When companies don't achieve these objectives, they tend to blame the software, but it could be that they did a poor job upfront of defining what they wanted to accomplish. To avoid this, objectives need to be quantified and there needs to be a way to measure and communicate progress. That way, if something isn't working, it gets identified early and is addressed before people become disillusioned with the new system."
Severance warned against "trying to achieve every priority all at once. It's great to have goals and to dream big, but it's difficult to automate everything in one fell swoop. Using a baseball analogy, rather than trying to hit a grand slam with the implementation, it's wise to shoot for a double in the gap. Once the dust settles, have a list of items that will extend automation, improve efficiency, and make the accounting and finance team more strategic."
DeAngelis of Ignite Spot brought up another pitfall that some transitioning clients run into: "Some of them will try to save money by moving to quarterly or biannual book reviews. What they don't realize, however, is with the added complexity of their books and their business, they actually would save money by working with an accountant continuously. For example, a business owner may try to estimate profitability based on historical numbers, not realizing that as they move to this next phase of growth that the benchmarks and projections they used previously aren't going to be particularly helpful. By working with an accounting partner on an ongoing basis, businesses can ensure that they're using their new tool correctly and their books are always up to date. It also gives the accountants the ability to provide strategic counsel and advisory in real time, which is crucial when a business is growing and is in a volatile financial state."
Accountant-focused editor and consultant Seth Fineberg underscored one of the more important potential problems: "One of the clear pitfalls I see, and have seen, is simply lack of communication. No disrespect to the accountant, but if you have the kind of relationship with your client whereby you don't really speak to them more than a few times a year, things are going to get missed and they may not be aware that it's time for any kind of system upgrade to fit their growth," he said. "So while it may seem basic, communication matters. As an accounting professional, you are in the financials, you are (hopefully) in a collaborative system where you can indeed go over key data with them in real time. You just need to make it part of your engagement and relationship, really, that you can have the transition conversation with them, show them why, and (hopefully, again) be able to make recommendations for them to upgrade."
Bogie agreed that communication is essential: "If there are issues, responsiveness and transparency go a long way. Immediately acknowledge a concern, even if you don't know the answer. Few things are worse than a prolonged silence when someone is looking for some resolution. Don't point fingers or assign blame. Work diligently to resolve the issue — your client's issue is your No. 1 priority."
Finally, K2's Johnston added, "Budget and time frame overruns are common in midmarket deployments. Help clients understand how to do project management, or provide the project management as a service for the client."
