Inadequacy of Accounting Software
How many spreadsheets, databases, and frustration do you need before you realize that a General Purpose Accounting Software (doesn't matter which one) is very limiting and unsuitable for your business? It does one thing and one thing only: accounting. Sure you can customize it;... if you call adding a logo here, a column there customization. The fact that there is a QB for contractors or a Timberline or Jonas for builders makes little difference. Even with Great Plains or Yardi, you will still be using multiple spreadsheets or some other parallel system to supplement your accounting software. I have seen it enough times that the opposite would surprise me very much.
And you think you know what an accounting software is...
An accounting software is a first aid kit. Fist aid kits are used for minor injuries; there are first aid kits that are more complete than others, but remain just that; first aid kits.
An accounting software is no different and should be used only in businesses that have simple processes (retail store, 2 men plumbing business, wholesaler, etc…). Does it come to anyone's mind to use a fist aid kit on someone who just collapsed on the floor with convulsions? That's exactly what happens everyday with countless businesses of any shape, complexity, and size. GPAS are used in nearly every type, shape, size of businesses and people find it absolutely the right and natural thing to do. Would you use an accounting software, in businesses like Transport, Contractors, Travel Agencies, Event Management, Engineering, Property Management, etc..., to list just a few? Sure, you would; people do it all the time. Well, how come it has become so common practice and even a very natural thing to use parallel systems (multiple spreadsheets, databases) to support your accounting software? Can't it stand on its own feet? Of course it cannot; it needs a parallel system without which it can't function.
I haven't seen a case yet where a GPAS is used without a parallel system. In many cases these parallel systems have become so crucial, that the accounting software is just unusable without it. To me, it's like someone who needs crutches on both sides of the body, 2 crutches in the front to keep him from falling on his face and 3 in the back to keep him from falling backwards. What a great set up to run a business in today's unstable economy.
A typical and all too common situation:
Some time ago I visited a potential client (electrical contractor with 85 employees). The manager was walking me through his company's business processes. They use QB premier. The 3 engineers in the engineering department had their own spreadsheets and word documents. The payroll person was using 3 different spreadsheets to do the payroll, the person in charge of commercial contracts had her own spreadsheets and word documents, the person in charge of residential contracts had her own set of spreadsheets, the accountant had 4 different spreadsheets. The manager was complaining to me how they have to go back and forth between all this and their filing cabinets and QB to trace a piece of info, that he couldn't get the right info from his QB and on 2 occasions in the last 4 years they had to send the file to Intuit to be rebuilt because it was spitting out the wrong data, and that it took Intuit more than a week to send it back, and this and that and on and on. Talking to the accounting person, she was infatuated with her QB, so easy, so user friendly and she wouldn't trade it for anything else in the world.
Did you notice an important detail in the above situation? No? Let me give you a hint: During the entire week or so the file was being rebuilt and the accountant sitting idle, the company kept doing business nearly as usual. You are still not sure what the moral of the tale is? Well here it is in black on white: accounting as an information system, is secondary, and in many cases tertiary to a company. Surprised? Don't agree? Go back to the above case and pull all these parallel systems under the company's feet, leave the accounting software in there, and watch what would happen. The work flow would stop within a few hours and chaos would set in by the end of the day. That's guaranteed.
Were you thinking of getting an ERP by any chance?
The problem with these beasts is: 1) cost too much, 2) create a new set of issues, 3) add a few more layers of complexity, 4) will do only partially what you were hoping for, 5) come, especially the pricey ones, with a rope long enough to hang yourself, and... chances are that you'll still have to use a parallel system of some sort to supplement your costly ERP.
A few months ago, a company that I know switched to Timberline. Too long to describe their costly mistake. Today, things are fine..., they have learned to live with their pain with even more spreadsheets.
This is 2010; to me companies with more than a simple business process that use accounting software is like using the floppy disk of the 80s that can store only text files. In order to make up for the inadequacy of their system, businesses develop (they have to) workarounds without realizing it. They don't realize it because it's done every day, very slowly, bit by bit, and over many years. Isn't that how the aging process work?
In most cases it doesn't really matter because nearly everybody is the same situation and does the same thing. It's when you use a system that fits your operations that you'll realize how far behind the rest of the pack is.
How to determine if you are using the wrong tool?
You don't need a consultant to borrow your watch to tell you the time; use plain common sense. If you find yourself jumping through hoops to locate a piece of info, be it from operations or accounting, be it a week old or a century old, then you know. If going through hoops doesn't really bother you, then it's a sure sign that your business has developed workarounds to the point that inefficiencies have been camouflaged and walking sideways has become second nature.
Not to worry, life still goes on…