How can I tell if I have outgrown my current accounting system?

The evolution of cloud applications over the last decade has meant that the way we work is unrecognisable from our old world. Where we once worked on desktop mainframe applications with a limited number of user licences and clunky complex interfaces, we are now able to access innovative technology with a wide-ranging functionality at a fraction of the cost.  This new ecosystem of interconnected cloud-based applications has changed the speed and accuracy for many businesses.

This way of working provides access to optical character recognition and AI to automate bookkeeping transactions, phone apps for staff to record expenses with clear approval matrices and audit trails, apps to record and manage stock transactions, software to extract data from the source accounting records and present in meaningful management reporting dashboards…the list goes on.

In this way, businesses can tailor processes to their specific requirements without a long onerous software contract and a relatively short implementation timeline.

The benefits of this situation are clear. However, as a business grows and develops complexity the limitations of this blended software approach become more evident. So how do you know when you need a Cloud ERP system?

The following pain points may indicate that now is the time to investigate a more sophisticated Cloud ERP package:

Management reporting information

If the last few years have taught us anything, it is that successful businesses need to innovate and adapt to the changing environment to remain relevant. Management will need access to real-time reporting to evaluate the results of their business decisions and pivot where required.

If this information is sourced from various software the collation process can be time consuming to produce and could result in opaque information which is not easy to interrogate. A Cloud ERP system with information on many facets of the business – finance, inventory, customer behaviour etc - can allow for detailed specific reporting to be extracted on a real-time basis. This accurate and timely reporting allows management to make informed decisions to execute their strategy. These data-driven organisations benefit from real-time visibility anytime, anywhere across geographies and subsidiaries with one version of “the truth” about customers, financials and compliance.

Consolidation

As the number of entities within a group grows so does the complexity of the consolidation process. Consolidation is a task which is not easily dealt with using simple accounting platforms. Complex Excel templates may be an effective workaround in gathering the numbers, but they are not efficient to produce nor are they scalable. The result is often expensive finance team resources tied up preparing manual consolidation schedules which by their nature are at risk of errors or involve key person dependency.

Foreign currency transactions

International growth will give rise to foreign currency translation issues. More simplistic accounting packages may be able to record currency on a limited number of transaction types. For example, Xero can record invoices and bank movements in currency, however all other transactions including journals and intercompany balances are to be recorded in the base currency of the software. This leads to manual processes for FX revaluations outside of the core accounting package exposing the company to the risk of errors and additional manual processes.

Multiple software licences

What starts as an advantage when engaging multiple software providers; lower initial fees and minimal onboarding effort, these can result in additional administration time to align multiple software.

This tipping point between the curation of a cost-effective eco-system and increasing administrative burden is not always instantly recognised. Some software is licenced on a per entity or transaction basis therefore as the business grows so do the monthly fees. If these are recorded in separate cost centres they may not be recognised as the total cost associated with the creation of this virtual enterprise platform.  For groups of companies, Cloud ERP systems can be more cost-effective than some simpler platforms.

The time cost associated with ensuring integration is maintained between the differing platforms is likely to grow as the complexity and size of the business grows. Again, this is often not a metric which is measured and instead could fall within the scope of the general IT support team or the accounts team.

A Cloud ERP system will benefit from removing these integration and admin elements.

In conclusion, the last decade has delivered explosive growth in functionality and availability of accounting and reporting software. Many smaller and mid-sized businesses have embraced these advanced technologies which were previously out of reach and have subsequently unlocked efficiency and functionality to enhance the deliverables of the finance team.

Management needs to keep an eye on the evolving needs of their businesses to identify when they are outgrowing these accounting ecosystems. A Cloud ERP system will support the business in the next stage of its growth and can provide clear insightful management reporting. It is these data driven businesses which will have the facility to scale and respond to the next decades uncertainties and opportunities.

If you would like to know how we can support you, please contact us today for a free 30-minute consultation.

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