In this series of articles, we are going to offer some practical advice for how to build a best-in-class accounting and finance function. The first few articles will cover accounting system selection. This article will specifically touch on implementation issues as it relates to selecting an accounting system.
Three key considerations when thinking about accounting system implementation are cost, complexity, and timing. We have discussed cost and pricing in a previous article. As mentioned, it is important to factor in the cost of implementation into a total-cost evaluation when choosing an accounting system. The following will discuss the other two key considerations:
The complexity of an accounting system implementation and transition can vary significantly based on the choice of accounting system, the level of customization desired in the new system, and the experience of your accounting team and any external parties involved in implementation. An implementation of QuickBooks with minimal customization and few add-on features would require limited resources. When you move to more robust systems such as Oracle and NetSuite, the implementation will require a much more sophisticated team and there will be a long list of considerations that will need to be made. Your team, and any external parties, will need to decide on the level of customization of the software, which optional modules will be used, and how each module will integrate with your accounting processes. The more customization and the more modules that are used, the more complex the implementation will be. This may require significant outside help, and the associated costs of that outside help, and will likely require more time for both the implementation and training with the new system.
One key consideration related to the complexity of the implementation will be what outside parties your team uses to assist with the implementation. Assuming outside expertise is needed, your team will likely face the decision of using consultants from the software company or using outside consultants. In some cases, we have found that using an implementation and integration team from the software company itself may not be the best choice. While that team of course knows the software extremely well and understands how things work behind the scenes, they may have more of a cookie-cutter approach to implementation. Sometimes third-party consultants have more experience in different operating environments because they have worked with so many different companies. They may have a better idea of what modifications to the software work best for a given company and what areas may cause issues.
If you are making your decision about accounting system selection at the inception of the company, timing is not a key consideration. You will want to have your accounting system live by the time the company begins its operations, or as close to that time as possible. If the company has been in existence and you are evaluating new accounting systems, timing is a much more important factor. For the best possible transition, you will likely want a cut-off date that is the same as your new fiscal year. If you follow a calendar year, then best practices would be to begin on the new accounting system January 1st. This ensures that for any given year, you have your full accounting records and reports in one system. If you choose October 31st as a transition date to the new accounting system, then for that transition year you will always need to pull reports from different systems to have full financial and accounting records for a given year. That is not to say that a mid-year transition date is not feasible, it just adds a little more complexity and may not be as clean. If there are important business reasons for switching mid-year, it is certainly a viable option.
Another important consideration regarding timing is to provide ample time for implementation, training, and side-by-side processing in both accounting systems. If you choose January 1st as your transition date to the new accounting system, that doesn’t mean that implementation should be physically done on or near January 1st. You should do the implementation a few months before so that you:
- Have enough time to set up the new system, transfer data, build your new chart of accounts, etc.
- Provide time for employees and other parties to learn the new accounting system, build new processes, customize the software, and create reporting functions in the new system.
- Run the old and new accounting systems side by side to ensure accuracy and identify any issues with the new software and related processes.
The worst thing that could happen is to for your company to reach a go-live date in the new accounting system and have either the software, personnel, or processes not ready and fine-tuned. Then you will find yourself struggling with delays in the month-close process that will frustrate both the accounting and finance teams, as well as the management team that is relying on timely financial information. By building out an appropriate timeline for implementation, training, and other key dates, your team can be prepared when the final switch to the new accounting system is made. One final note on this topic is to make sure you consider how long you will have access to the old accounting system and records. You will likely make backups of the old accounting records, but if you need to be able to physically go in to the old accounting system for audit purposes, researching vendor records, or a variety of other reasons, your team should consider how long you want to have access to the actual accounting system as opposed to just backup records which may be harder to use and to research items you may need.
We hope this information can help serve as a starting point in your evaluation for potential accounting systems. It is a critical decision that impacts almost all areas of your accounting and financial reporting function. Make sure you speak to as many people as possible as you start to evaluate your options. We recommend talking to people both inside and outside of your industry, to personnel inside and outside of your internal accounting department, and to unbiased service providers. Read reviews, take demos, and take plenty of time before you make a decision so that you have the best possible foundation for building your accounting and function.