The upgrade from your small business accounting software will be a substantial investment. Mid-market general ledger accounting systems are significantly costlier than QuickBooks and Xero, which is in addition to the time and resources associated with implementing new accounting processes.
As a result, it’s tempting to kick the can down the road on implementing a robust general ledger accounting system. Even if you don’t have the budget to upgrade your entire system immediately, there are some key decisions that need to be made early to ensure you get the information you need and that your accounting processes scale as your company grows. Incorporating technology investments into this decision making process will enable you to build a world class accounting function.
Here are a few examples of areas that can benefit from early investment in technology:
Accounts Payable - Tracking vendor bills at a detailed level may not be as important when you’re small, but ultimately that information will be invaluable as your organization grows. Having insight into how your expenses match up to the budget for each department is critical to effectively managing expenses and maintaining accurate financial projections. This is an area that needs considerable improvement, even at large, established organizations, but if you invest early there’s no reason you can’t establish a world-class accounts payable function. The best part is that the accounts payable software developed in the last several years does an incredible job at automating this process. As long as you have a good integration with your general ledger accounting system, you can have an excellent accounts payable process with a minimal staff.
Financial Reporting - It’s never too early to start thinking about financial reporting. Your ability to review your financial performance in a useful format, on a timely basis, is required in order to make informed strategic decisions. According to a report by FTI Consulting, closing and reporting takes twice as long for an average company vs. a world-class enterprise. Bolt-on reporting packages can help, but they’re entirely reliant on the underlying data and relevant dimensions. It’s important to develop best practices for how locations, cost centers, products, and any other relevant dimensions will be handled as your organization grows. It is considerably more difficult to adjust these later and, if you wait too long, you could even be restricted from changing the structure under GAAP.
Accounts Receivable - Cash flow is the lifeblood of any organization. There are few things that are more important to your business’s daily operations than the timely collection of customer receivables. However, many organizations take their foot off the gas once they close a deal. This should be the first step in the accounts receivable setup process, immediately followed by issuing any invoices due upon execution and ensuring the invoicing and collections follow-up schedule is set up going forward. Any delay between the deal closing and related invoicing reduces your Days Sales Outstanding and therefore negatively impacts your cash flow. With the right accounts receivable solution, this process can begin right away and become automated going forward.
Employee Expenses - If you don’t establish a firm employee expense policy early on, you’ll likely be spending too much on employee expenses for years to come. U.S firms are projected to spend $296.1 billion on travel and entertainment in 2017, a 4.4% increase from last year. If you just take a little time to draft a detailed policy and implement technology to effectively monitor expenses, you can save your company hundreds of thousands or even millions of dollars as your organization grows. The inefficiencies are often small, especially at the beginning, but they add up over time. This is especially true for organizations with large direct sales teams.
These are simply a few examples of reasons to invest in accounting technology as your company grows. There are many more benefits to addressing your accounting processes in the early days. While it’s tempting to delay investment in the back-office, that decision will likely expensive, in more ways than one.