Common Mistakes Businesses Make When Choosing Accounting Tools
One of the most critical decisions a business will make is in relation to purchasing its accounting software. The right package will make it easier to track cash flow, comply with tax regulations, remove manual tasks, and scale the business. Many companies will rush this important process and invest in systems that simply aren’t adequate for their operations.
A modern accounting system is far more than just a tool for recording transactions. It needs to make processes more efficient, integrate with your other business applications, and supply real-time financial data to enable you to make informed decisions.
Below is a list of the most common mistakes businesses make in buying their accounting tools and how to avoid them.
Choosing accounting software on price alone
Arguably, the biggest mistake businesses make in buying accounting software is simply buying the cheapest available. Whilst price is important, only consider the financial investment, and you are more likely to have bigger issues at a later date.
Cheap packages will not necessarily include the features that businesses will need in the future; this includes the following:
Automation features
Ability to grow with your business
Security functions
Compliance requirements
Integration capability
As opposed to selecting a package on price, a business needs to understand the total value a package can offer the business over time.
Choosing accounting software that is not scalable
In many cases, a business will purchase accounting software that does not consider its long-term growth potential. The greater the business grows, the more complex your accounting needs become.
When looking for an accounting package that will grow with your business, consider that it will need:
Multi-user capability
Multi-branch operation capability
Advanced reporting features
Payroll integration
Inventory management capability
Tax and compliance capability
Choosing a scalable package first means you will save having to switch at a later date, with the associated cost.
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Choosing accounting software that doesn’t integrate well with other software
Few businesses operate solely using accounting software; you will likely be using CRM, Payroll, e-commerce, banking, and other applications. If your accounting package does not integrate well with the other software that you use, then you will likely have issues with:
Data accuracy (human error)
Duplication of work
Reporting inconsistencies
Delays in processing
Before purchasing software, check that the vendor can integrate it with your existing applications.
Choosing accounting software that is not user-friendly
Whilst it is tempting to invest in complex accounting software, you need to ask yourself how you expect your team to use it. Software that is too complicated will only hinder performance. It will require more training and result in more errors being made; to this end, ask your accounting software provider whether their package includes:
User-friendly dashboards
Simple navigation
Automated workflows
Clear reporting structure
Mobile compatibility
Ignoring the security of accounting software
It is important to ensure that all sensitive information is secured correctly. If you invest in a poorly protected accounting system, then you risk the exposure of your financial data to criminals and compliance failures.
When purchasing accounting software, consider whether the following security features are present:
Data encryption
Multi-factor authentication
Role-based access control
Automatic backups
Audit trails
Cloud accounting software must comply with relevant industry security standards and accreditations.
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Choosing accounting software that does not consider the industry that the business is in
Different industries have specific needs for their accounting systems. For example:
Retail businesses need inventory management software
Construction businesses will need project accounting capability
Healthcare will need compliance reporting for the industry
SaaS businesses will require subscription-based billing features
Generic accounting software will not adequately cover the requirements for a specific business in any one industry.
Not checking out customer support
Technical issues with your accounting system can seriously impact your business operations; slow or inefficient customer support can cause delays to financial reports or even your payroll.
When investigating accounting software, ask about the following:
Customer support availability
Average time to answer calls/emails
Availability of training documentation
Quality of their training
Level of help during the onboarding process
Customer support can prove to be especially important in times of peak work, or over the Christmas tax period.
Not trying out the software
The best way to determine if an accounting package is right for you is to test it out yourself; this could be a free trial or an online demonstration of the system. Rushing in and buying software without trying it first only means that there is a greater chance of it not meeting your expectations; in a free trial, you can:
Assess how user-friendly the package is
Test any integration functions
Experiment with different reports
See what automation processes the package has
Identify what workflows are not present
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Overlooking accounting software compliance requirements
Tax regulations and accounting standards change on a regular basis. You must ensure your accounting software will stay up to date.
Your accounting package should always reflect the following:
GST and VAT compliance
Automated tax calculation
e-invoicing
Financial reporting standards
Audit preparedness
Noncompliance could lead to significant fines and/or legal proceedings.
Focusing only on present needs
A business is always developing; it is essential that its accounting software can support its growth not only over the next year, but over the next 3 to 5 years. It is important to future-proof your accounting package.
Consider when purchasing any accounting package:
Future increases in personnel
Development into an international business
Expansion in terms of services offered
Need for more advanced analytics reporting
Future automation possibilities
Final Thoughts
Choosing accounting software is not merely a technical decision, but a strategic one for a business. Using the wrong accounting software could lead to inefficient processes, security risks, and operational problems, while a well-chosen system could drastically improve productivity and enhance the financial performance and vision of your business.
The right accounting package has the capacity to automate numerous tasks, improve accuracy in reporting, support tax and regulatory compliance, and ultimately, support the ongoing development and expansion of a business. By not falling into the trap of the 10 common mistakes above, a business can secure a valuable long-term investment.
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