Tuesday, April 22, 2008

Small Business Accounting Software - how to choose?

This is one of my favorite subjects and one I am frequently asked about by other small business owners.

About once a year I get the urge to replace my accounting system, looking for a "better solution". Choosing accounting software is sort of like choosing a spouse - you are going to need to compromise on something. So about once a year I get frustrated with the compromises I made (with the software) and research the other solutions that are out there and there are many. It's almost a hobby for me. I think I have taken a look at more than 200 packages over the years, some serious evaluations and some glances at their web sites. There are probably another 2,000 or so out there. With so many choices how does a small business decide? I have a few theories:

  1. They choose Quickbooks because it is the Charmin of the industry. Everyone has heard of it but noone is really happy using it.
  2. They ask a trusted friend who recommends whatever they are using (which is likely Quickbooks)
  3. They look for the cheapest solution out there
  4. They respond to one of Sage's direct mailings and choose one of their solutions

Some small businesses end up with a software package that does the job for them. Others end up using something that is a poor fit and build lots of other systems to do what their package can't do, which ends up burning lots of time and money.

I had the good fortune to work for a large accounting software vendor in my prior career and so had years of training on what to look for in an accounting package when starting my current business. I knew a few things:
  1. I had to live with the choice I made for many years
  2. I needed a package that could pay for itself in efficiencies
  3. I did not want Quickbooks
  4. I needed a package that fit my requirements reasonably well.

I ended up going with Netsuite. I'll cover all the whys in a separate post. As I mentioned I re-evaluate this choice about once a year. And I find there is little out there that approaches the functionality I get out of Netsuite at the price range this software goes for.

What, you ask, are requirements? This is something that every small business owner should invest the time to understand before making their decision. Requirements are simply what my company must do regularly (pay bills, invoice customers, keep track of inventory, pay employees, etc.) and what I expect my accounting system to do efficiently and more cost effectively than doing it manually. Where these two things intersect you have a good potential fit. This is not a simple exercise but it is crucial. For a fortune 500 company this exercise could take several years. for a small business owner this exercise can take a day or 2. It may be a good idea to hire someone who can help put together your requirements (and it should not be your accountant as they may be resellers of packages that may or may not be good fits for you).

Hello World

Somehow I got inspired today to start a blog. I think I am partly motivated by curiosity - to see if any strangers in the world are interested in what I have to say. Part of my motivation is to see if anyone I know can find this blog without any hints. And part of my motivation is a desire to see if I have any expertise on any subjects.

Not sure what I will write about in the coming days, weeks and months. I suppose it will be mostly on small business stuff from the viewpoint of a small business owner as well as the viewpoint of a dad. Hopefully I will find an audience who will have questions I can answer. So here we go I am going to hit publish and start my 15 minutes of fame.