Accounting software

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Accounting software is computer software that records and processes accounting

transactions within functional modules such as accounts payable, accounts receivable, payroll,
and trial balance. It functions as an accounting information system. It may be developed in-
house by the company or organization using it, may be purchased from a third party, or may
be a combination of a third-party application software package with local modifications. It
varies greatly in its complexity and cost.

The market has been undergoing considerable consolidation since the mid 1990s, with many
suppliers ceasing to trade or being bought by larger groups.

Modules

Accounting software is typically composed of various modules, different sections dealing with
particular areas of accounting. Among the most common are:

Core Modules

 Accounts receivable—where the company enters money received

 Accounts payable—where the company enters its bills and pays money it owes
 General ledger—the company's "books"
 Billing—where the company produces invoices to clients/customers
 Stock/Inventory—where the company keeps control of its inventory
 Purchase Order—where the company orders inventory
 Sales Order—where the company records customer order for the supply of inventory

Non Core Modules

 Debt Collection—where the company tracks attempts to collect overdue bills

(sometimes part of accounts receivable)
 Expense—where employee business-related expenses are entered
 Inquiries—where the company looks up information on screen without any edits or
additions
 Payroll—where the company tracks salary, wages, and related taxes
 Reports—where the company prints out data
 Timesheet—where professionals (such as attorneys and consultants) record time
worked so that it can be billed to clients
 Purchase Requisition—where requests for purchase orders are made, approved and
tracked
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(Different vendors will use different names for these modules)

Implementations

See the article Comparison of accounting software.

Categories

Personal Accounting

Mainly for home users that use accounts payable type accounting transactions, managing
budgets and simple account reconciliation at the inexpensive end of the market suppliers
include:

Low End

At the low end of the business markets, inexpensive applications software allows most general
business accounting functions to be performed. Suppliers frequently serve a single national
market, while larger suppliers offer separate solutions in each national market.

Many of the low end products are characterized by being "single-entry" products, as opposed
to double-entry systems seen in many businesses. Some products have considerable
functionality but are not considered GAAP or FASB compliant. Some low-end systems do not
have adequate security nor audit trails.

Mid Market

The mid-market covers a wide range of business software that may be capable of serving the
needs of multiple national accountancy standards and allow accounting in multiple currencies.

In addition to general accounting functions, the software may include integrated or add-on
management information systems, and may be oriented towards one or more markets, for
example with integrated or add-on project accounting modules.

Software applications in this market typically include the following features:

 Industry-standard robust databases (eg Microsoft SQL, Oracle, Pervasive)

 Industry-standard reporting tools (eg Cognos, Crystal)
 Tools for configuring or extending the application (eg an SDK, access to program code,
the ability to be controlled via Visual Basic for Applications (VBA)) ] High End

The most complex and expensive business accounting software is frequently part of an
extensive suite of software often known as Enterprise resource planning or ERP software.

These applications typically have a very long implementation period, often greater than six
months. In many cases, these applications are simply a set of functions which require
significant integration, configuration and customisation to even begin to resemble an
accounting system.

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The advantage of a high-end solution is that these systems are designed to support individual
company specific processes, as they are highly customisable and can be tailored to exact
business requirements. This usually comes at a significant cost in terms of money and
implementation time.

Vertical Market

Some business accounting software is designed for specific business types. It will include
features that are specific to that industry.

The choice of whether to purchase an industry-specific application or a general-purpose

application is often very difficult. Concerns over a custom-build application or one designed for
a specific industry include:

 Smaller development team

 Increased risk of vendor business failing
 Reduced availability of support

This can be weighed up against:

 Less requirement for customisation

 Reduced implementation costs
 Reduced end-user training time and costs

Some important types of vertical accounting software are:

 Banking
 Construction
 Medical
 Point of Sale (Retail)

Use by Non-Accountants

With the increasing dominance of having financial accounts prepared with Accounting
Software, as well as some suppliers claims that anyone can prepare their own books,
accounting software can be considered at risk of not providing appropriate information as non-
accountants prepare accounting information. As recording and interpretation is left to software
and expert systems, the necessity to have a Systems Accountant overseeing the accountancy
system becomes ever more important. The set up of the processes and the end result must be
vigorously checked and maintained on a regular basis in order to develop and maintain the
integrity of the data and the processes that manage these data.

History

Bob Frankston, has noted that his VisiCalc wasn't an early accounting program and that
software that "overly tuned for such function (Javelin, Lotus Improv, etc.) completely failed."

Online Resources

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The World Wide Web provides accountants with valuable resources for researching, selecting,
and implementing accounting software. With the vast array of software products available,
accountants can be overwhelmed by all the choices and options offered. Consequently, they
have been turning to the web to search for solutions, to connect with each other, and to share
best practices techniques for selecting software. This trend is likely to continue as the software
market becomes more saturated and as accountants further embrace online resources.

Product Testing

Over the years I have come to appreciate those publishers who have implemented extensive
product testing procedures. Without well-planned product testing, the software code could “go
south” at any moment, and take the customers and publisher down with it. Here are a couple
of stories which help explain this concept.

The Macola Product Testing Lab

For the past fifteen years, Macola Progression has offered perhaps the finest low cost
manufacturing accounting software solutions in the industry. However, the product suffered
from serious bug issues – too many to ignore. I can remember in 1996 receiving almost two
dozen Macola CDs in the mail during the year, as the company relentlessly released new
versions every other week in an effort to combat bugs. At following Spring, I had the
opportunity to have dinner with the company’s President – Bruce Hollinger where I callously
remarked “I’ve invented a device that catapults my Macola CDs across the Chattahoochee
River so that I can shoot them with my shotgun – “Pull”, “Boom”, “Pull”, “Boom”. I thought that I
was being funny, but my comment didn’t raise a single smile, much less a laugh.

Two years later, I visited Bruce Hollinger again in Marion, Ohio. Bruce invited me to take a ride
with him where he took me on a tour of a new office location where Macola had set up a
product testing laboratory. Along the walls were fifty computers busy running 1.5 million lines
of test code against the Macola product. In the offices were twenty personnel whose sole job it
was to read the testing reports, identify problems and bugs, and communicate those problems
back to the programmers. Bruce told me that they had visited the Microsoft Excel team
specifically to ask them how they tested their product. Then Macola modeled their testing lab
after the Microsoft Excel testing lab. Bruce told me that the testing lab had been one of the
most difficult and expensive things he has ever done, but also one of the most beneficial things
as well. He said, “I used to think that we were shipping pretty clean code, but I was only fooling
myself. With this new testing lab, I now know that we are shipping good clean code and I can
look customers in the eye with a good conscious. My reply to Bruce was, Great Plains has
known this for years, they have 700 computers running 3,600 test macros around the clock
producing 193,400+ electronic reports that are checked electronically each night.

Since that time, I can verify that the Macola Progression product has been much cleaner code.
I’ve talked to dozens of Macola consultants, resellers, and customers who have confirmed that
the testing lab has made a world of difference for Macola. Except for one minor and
unconfirmed complaint I receive in May 2001 concerning Macola’s Warranty Repair module, I
have not heard a single other bug complaint since 1998. My hats off to Macola.

Solomon Software Fights Bug Issues

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I should note that Solomon has always been a favorite product of mine, it was the very first
product I worked with back in 1985.I like the people and the product.

In 1997, I visited Solomon Software in Findlay, Ohio. During my visit, the Solomon folks were
excited that they had just implemented procedures to start compiling their product code on a
nightly basis, rather than on a monthly basis as they had done in the past. I did not say so at
the time, but I was rather appalled that they had not been doing this all along. I had just
traveled from Fargo, North Dakota the previous day where I toured the Great Plains Dynamics
testing lab. As I mentioned above, Great Plains had 700 computers running 3,600 test macros
around the clock producing 193,400+ electronic reports that are checked electronically each
night. Therefore, the fact that Solomon was just now taking steps to compile code nightly was
not very impressive, compared to Great Plains’ efforts.

The following year, Solomon released new product code which unfortunately, was buggy. Over
the course of the year, I encountered seven separate instances in which an attendee in my
audience stood up and complained bitterly about Solomon bugs. I can vividly recall once such
episode as I was lecturing in Puerto Rico at an AICPA conference. I had just demonstrated the
Solomon product to several hundred participants when the CFO of a California-based timber
company stood up in front of everybody and proceeded to slam Solomon without mercy. He
explained that his company had spent more than $300,000 on the product, and it never
worked. They eventually got their money back. I too had problems. Working with my colleague
at the time - Randy Johnston, we worked for days in an effort to get Solomon up and running
on our laptop computers – but to no avail. Finally, Randy shipped his laptop off to Solomon
and after several weeks, he was told that they could not get it to work either. The Grande
Finale came in September as I attended a Texas Rangers games as a guest of ePartners
(great seats by the way). During the third inning ePartner’s management announced to me that
they had stopped recommending Solomon IV. At first I was a little shocked, but then it really
sank in as to just what they were telling me. You see, at the time ePartners was the number
one Solomon reseller in the world. I asked them why and the reply was “Solomon’s idea of
testing their product is to throw it out there to their customers and let them suffer”. [Please
keep in mind that this was not an official comment from ePartners, it was merely idol
conversation over a hotdogs and beer at the ballpark. EPartners had a huge vested interested
in the Solomon product and I don’t blame them for being frustrated. EPartners is a fine
organization.] [Also - from the rumor department, some internal programmers at Solomon have
suggested to me that the root of the Solomon bug issues are a direct result of changes that
Microsoft made within their database design – and that the fix for these problems laid in
Microsoft’s hands – not Solomon’s. I have no idea whether this is true, but because we are
talking ancient history here, it is interesting to ponder.]

As you can see, there was a fairly decent amount of evidence that Solomon’s lack of formal
testing had finally caught up to them. Prior to this episode, Solomon had produced some of the
most rock solid code in the marketplace – as if they were immune to bug issues. I am sure that
their decade long success to date help lull them in to a false sense of security. Solomon
Software has since been purchased by Great Plains, who has since been purchased by
Microsoft. He folks at Great Plains made it their first priority to repair the Solomon code, which
was done fairly easily using the Great Plains testing lab model. Unfortunately the image takes
a little longer to repair, especially with accounting software pundits like me who spout off these
old stories. I am pleased to report that for the past several years, Solomon IV has enjoyed
good, clean, dependable code. I have been recommending Solomon with complete confidence
and continue to do so.

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Conclusion

I think that these stories speak for themselves. Product testing is very important. Each
accounting software publisher should maintain a separate group dedicated to solely product
testing. Don’t be fooled by publishers who claim that “our programmers test their work”. Of
course they should review their own work – who doesn’t proof read or review their own work?
However it is a different story to have independent personnel dedicated specifically to this
function. Ask about it. Ask for names. Ask the publisher to describe their product testing
procedures. If the company doesn’t have such procedures, you will be able to tell.

Final Note - I am not sure how the folks at Macola, ePartners, or Solomon will feel about me
mentioning their names in these stories above. In the end, this should be a good story for all.
Macola and Solomon both implemented superior testing and now have better code than ever
before. Also, my hat goes off to ePartners for doing the right thing by not recommending a
buggy product to their customers. My purpose in recanting these stories is to help us all learn
from past mistakes.

How Important is an Accounting System to My Business?

by: SBC Staff

An accounting system is not important at all. IF . . .

 You don’t want to know how your business is doing
 You don’t want to have professional looking financial statements for your bank, potential
vendors or other interested parties
 You want to process sales orders, purchase orders, invoices, payroll and other business
functions manually
If you want to run an efficient business you need to automate your business functions. This is
true no matter how large or small your business is. Consider the sales order processing
function:
A call comes in from a potential customer. After talking for few minutes the prospect is
interested enough to ask you for a quote. You prepare the quote on your computer system
and fax it to your prospect from your computer. The call ends, you save the quote and go
about your business. A day or so later, the prospect calls back to place the order. You
retrieve the quote prepared previously and confirm that he wants the items you quoted. You
convert the quote to a sales order and fax it to your customer from your computer. You print
the shipping copy of the order and route it to your shipping department or fax it to your drop
shipper. Once you have confirmation that the order has been delivered, you retrieve the sales
order and convert it to an invoice, which you then fax, or mail, to your customer. The system
updates your accounts receivable showing the customer owes you the amount of the invoice.
When the customer pays, you apply the cash receipt to the invoice and your accounts
receivable balances are updated to reflect the payment.
Notice in the previous example you did nothing more than prepare documents you would
normally have had to prepare manually. The system made preparing these documents much
easier than doing them manually. You also didn’t have to worry about misplacing any

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documents since they were always stored on your computer and could be retrieved at will.
The same types of processes are repeated with purchase order processing and other routine
daily tasks.
So the system made your everyday work easier to perform. But it actually did more than that.
While you were preparing your documents the system was recording accounting entries in the
background. The amount of time you save using an accounting system is too significant to
ignore. The use of an accounting system in your business is an absolute must!
Even if you are a very small business, there are accounting systems available that are very
inexpensive and quite capable of saving you loads of time. Get one and use it!
You probably already know that you frequently have to provide financial statements to your
bank, to vendors or other third parties. Once your accounting system is set up and running, it
will be easy for you to provide these at any time. If you’re tired of having to call an accountant
every time you need something, your accounting system will relieve some of that pressure. I’m
not saying you will never need an accountant, but you won’t need him or her quite as often.
In order for the system to properly record accounting transactions in the background, the
system will have to be set up properly. You’ll need a chart of accounts that fits your business
and modules like accounts payable, accounts receivable, payroll, inventory, purchasing and
sales order processing will need to be configured to post to the proper accounts. If you have
no accounting experience, you’ll need to find someone to help you with this, but it should take
no more than a couple of hours at most, so that won’t be expensive either. If you don’t have
someone locally who can help you, call us and we’ll be happy to help.

Accounting Software

Within the software industry, one can expect to find a great many different software packages.
Choosing the one that is right for you as an individual or business depends on your needs.

1. Accounting Software Overview

2. Conduct Market Research
3. Product Comparison
4. Compare the Accounting Software to Your Needs
5. Choosing the Best Accounting Software for Your Needs
6. Functionality
7. Accounting Software for Home Use
8. Combining Home and Business Use
9. The Need for Accounting Software

1. Accounting Software Overview

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With so many different types of account software available in today’s market, it’s difficult for
individuals and businesses to decide which one will best suit their purposes. It comes down to
weighing each and every little aspect of the process to know what type of software you need.
You want to have the best product that you can purchase for your needs, but you don’t want to
buy more than what you need. The most cost effective way to buy accounting software is to
buy a product that does what you need it to do and nothing more. This will differ from company
to company, though most individuals can rely on a simple home product such as Quicken to
handle their bookkeeping software needs.

The easiest way to figure out what you need in accounting computer software is to evaluate
your own needs as an individual or business in order to determine the purpose for which you
will use the software. An individual who also runs an at-home business will have different
needs than someone who is only looking to keep track of the family finances. Likewise, a
product-oriented business will have different needs than a service-oriented business. In order
to obtain the product that is the most beneficial to your needs, you will need to take the time to
evaluate your own needs.

2. Conduct Market Research

Before you do purchase any kind of accounting computer software or bookkeeping software,
you want to take some time to evaluate the market. You can do this on the Internet or by
visiting a local store where you can browse the products and talk to the sales staff about the
products that are for sale. While you are browsing, make some notes for yourself in a notebook
indicating the capabilities of each product, the requirements for running it (memory needed, for
example), and the price for the product. You may also want to indicate any other important
information about the product such as whether it is capable of integrating with your bank
account for example or can be imported into your income tax returns.

While you are working on your product research, this gives you an opportunity to eliminate any
products that you know won’t work for you or have more than you need for the price. Quick
books, for example, is more useful for a business that maintains inventory, so if you are
looking for personal accounting computer software, this product has more features than you
will ever need to keep track of the family budget and assets. Always think in terms of
purchasing a product that is going to come closest to doing only the functions that you need it
to do.

3. Product Comparison

After you have researched all of the available accounting software and eliminated those
products that you know are not suited to your needs, take the remaining products on your list
and compare the products against one another. Look at the features each one has,
capabilities, price, compatibility with an existing program you may be running (this is important
if you want to avoid having to re-enter key information), how much memory it will take to run
the program, and the stability of the program. When you do a price comparison, don’t do it just
on the initial cost of the product but rather on the features it has that contribute to that price – a
product that costs less is not worth the price if it doesn’t perform the functions that you need it
to perform.

One of the key issues you want to discover in regards to stability of the product is whether it
has a tendency to change often, thus requiring extra expense for updates. You don’t want a
product that changes so dramatically that you are required to purchase a newer version in
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order to keep up to date. On the other hand, if the product provides updates with the purchase,
you are safe to purchase that product. That brings into perspective the new Windows Vista
operating system that is not compatible with all software that users installed on the Windows
2000 or Windows XP systems.

4. Compare the Accounting Software to Your Needs

After you compare the products against each other, compare each one to what you need in
accounting computer software. In order to do that, you will need to sit down and make a list of
what you need even if you are looking for personal bookkeeping software because you still
need to evaluate your needs. The best way to do that is to make a list of what you expect from
the software or what you would like it to do for you such as tracking household expenses,
tracking assets, maintaining inventory of important records, balancing a checkbook, check
writing capability, and anything else that you may desire. If you have an at-home business, you
will require more features than for a personal accounting.

On the other hand, if you own a business, you will need to evaluate the needs of your
company, and those will vary depending on whether your business is product-based or
service-based. For a product-based business, you will need software for tracking sales and
inventory such as Quick books, Peachtree, or Solomon. With a service-based business, you
may not have a large inventory, depending on the kind of service you perform, and some
service business may have no inventory at all such as tutors, freelance writers, specialty
teachers (driving, musical instructors) and other types of business that do not require any kind
of equipment to perform the service. Repair personnel, on the other hand, have a certain
amount of inventory on hand at all times.

5. Choosing the Best Accounting Software for Your Needs

So many different accounting software packages are on the market today that it makes it a real
challenge for someone who is new to accounting computer software to make a choice. The
importance of pre-evaluation cannot be stressed enough, and it will save you a great deal of
time and money if you evaluate your needs against available products before you make the
choice. In fact, if you conduct Internet research as well as in-store research, you will find some
web-based products such as People Soft and Oracle that you may also want to evaluate. Each
product on the market has different capabilities, so you want to choose the one that matches
closest to your needs.

Should you choose a product that has inventory tracking for a service-based business? That
depends on the kind of service you provide. If you’re a plumber or other type of repairman, you
will likely maintain a certain amount of inventory so that you don’t have to run to the supply
house every time you have a job. In order to keep track of what you have on hand and know
when to reorder, you will want to have a program that can track inventory. Quick books is good
for that, but it’s a little more complicated to use than Solomon in the opinion of this writer who
has used both.

6. Functionality

It’s important to figure out just what you need your accounting computer software to do. Some
of the products are integrated like Peachtree and Solomon which means that entries into one
program will affect certain accounts into other programs. For example, in Solomon, you enter
an order into the Purchasing module, and it automatically sets it up for payment through the
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accounts payable module as well. When you receive merchandise into the Purchasing module,
it adds it to inventory and prepares it for payment. Likewise, within the customer service
module, orders from a customer deduct the product from inventory and prepare the customer’s
account in the Accounts Receivable system for billing.

If your business does not require the maintaining of inventory or is for home use only, you may
want to look at a different product. You will pay a higher price for integrated accounting
software, and yet you will not need to make use of all of the functions of the software. This is
why it is so important to weigh your needs before you purchase any accounting computer
software or bookkeeping software in order to be certain just what you require. Buying a product
with more functions than you need does not make good financial sense.

7. Accounting Software for Home Use

If you are looking for simple accounting or bookkeeping software to track your bank account
balance, debt, and assets, make certain that you look for products that can perform those
functions without much difficulty. One of the best home based-based system is Quicken,
however, you may also find that a simple spreadsheet on Excel or table on Word will suit your
needs just as well. The key is finding a product that performs the functions that you need
without overburdening you with many functions that you will not use. This is the reason many
people make use of simple products for their home, ones that are inexpensive (under $100)
and can track bank balances, loan balances, amortize your mortgage, keep track of home
inventory, and import information into your tax returns. Qucken can perform all of these
functions and integrate with your online banking website in order to keep your bank balance up
to date. Even if you run a small business from your home, the software will still perform quite
well with the Home and Small Business version instead of just the Home version.

Another home product that is quite popular and is usually pre-installed on many home
computers is Microsoft Money. This program is quite similar to Quicken with some of the same
functionality but is a Microsoft product instead of Intuit like Quicken and Quick books are.

8. Combining Home and Business Use

You’ve seen some of the accounting computer software products for both home and business,
but if you are a sole proprietor with a small product and inventory-based business, is there a
product that will work for both your home and business needs? The truth is that any of the
products on the market will work for home use, but unless you have a business as well, it
doesn’t make financial sense to pay the extra money for a product with so many features that
you do not need. On the other hand, if you use the features for your business, you certainly do
not have to buy a separate product to keep track of your personal finances. Again, that would
not be a sound financial move. The key to purchasing financial accounting software is to buy
the product that is going to meet your needs the best. Thus if you only need it for personal use,
you want something that is directed toward the home budget and record keeping, but on the
other hand, if you have a business as well, you want a business-directed product that you can
adapt to tracking your personal finances as well. In the end, you must weigh what works best
for you at a cost that is not prohibitive for either your home budget or your business
expenditures.

9. The Need for Accounting Software

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Whether you have a home or a business, you need to choose accounting computer software
that is going to suit your needs the best. Both Quicken and Microsoft Money will work well for
those who need only a home accounting program, but integrated programs such as Peachtree,
Solomon, and Quick books work well for both inventory and service businesses as well as
tracking personal expenses for the sole proprietor. There are also web-based programs such
as People Soft and Oracle that are simple and functional business tools. You have to conduct
the research and use the product that is going to work the best for you. Sometimes the
products have a free trial period, so if you are unsure, take advantage of that in order to test
the product and see if it provides you with what you need. Even if you have a business, try it
along with products you already have in place on a test system before you invest the money
and find out that it is not what you want. By taking the time to conduct complete research on
the accounting software programs on the market, you will save a great deal of time and money
when you choose the product you will use for your home, business, or both. Don’t be in a
hurry, but rather take the time you need to make the right decision.

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