Over the past 20 years most UK small to medium sized businesses have moved from manual bookkeeping to accounts’ software packages. Some accounting firms even refuse to audit a company if they are not using a specific brand of accounts’ software. Accounting software has certainly made the external accountant’s job easier. The information can be retrieved in a way that is familiar and it’s easier to complete audit trails and check vat payments.
However, from the business owners’ perspective the outcome has been mixed. Some managers find modern accounts’ packages confusing and complain that the packages complicate financial management. Many business managers find that they are forced to become more reliant on their external accountants for financial management.
It is also difficult for managers who are not from financial backgrounds themselves to check information on accounts’ systems. They simply assume the figures are correct. Unfortunately, in my experience, mistakes are often made when capturing financial data. Over time these errors can produce results that are misleading, which can lead to bankruptcy. In certain cases accounts’ software show large profits when businesses are actually in serious financial trouble.
I’m not advocating that businesses should stop using accounting software and go back to manual bookkeeping. However, it’s important that owners and managers who are struggling to use their accounts’ software for financial management purposes seek professional help. In competitive business environments good financial management is crucial for a business to succeed and this can only be achieved with a solid understanding of financial management information.
The first priority is to ensure that the financial data is captured correctly; this data capturing can be outsourced to bookkeeping firms. Then financial advisors can work together with the owner and managers of the business to ensure that they have a good vision of the company’s financial position at all times. Unfortunately, accounting software can be restrictive and additional financial and job costing solutions are needed to achieve total control.
Custom designed software can be tailored to suit the requirements and skills of the company’s management team. If needed the new software can be integrated with the business’s existing systems. Bespoke financial software does not need to conform to financial accounting requirements and is therefore more flexible and easier to use for daily financial management requirements.
The combination of improving management’s accounting software skills, together with additional custom designed financial and job costing software solutions, improves financial management and increases profitability.
Article by Duncan Stainer