April 2009
Investment specialist RMT Financial Management has added a pretty cool asset to its portfolio in the shape of 17-year-old ice hockey star Nathan Taylor.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.
By Nigel Harris