Small Business’ Outgrowing their Accounting System

Small business owners are constantly presented with decisions of whether or not to make investments in property and equipment in order to maintain growth within their businesses. Often decisions are easy as the investment is minimal and will quickly contribute to additional revenue. However, there is one asset that every Company has but virtually no Company wants to invest in: an accounting system.

Start-up and small developing businesses often use an off the shelf accounting system (i.e. QuickBooks, Peachtree, etc). As their business grows, sometimes so do the demands of the accounting department. At some point in the Company’s growth, the chief decision maker often has to consider whether to stick with the status quo, or invest in a new Enterprise Resource Planning system, commonly referred to as an "ERP" system. However, implementing an ERP system isn’t just about cost, it’s also about time and timing. So the real question is, should a Company implement an ERP system in the preparation of additional growth, or after growth has been achieved and the old accounting system has reached its limits?

While there is no one size fits all answer, here are a few questions that can assist in the decision of whether or not to upgrade your accounting system:

  • Are cash flows from operations substantial enough to support the cost of implementation?
  • Will forecasted growth in the coming years substantiate the need for a more advanced system?
  • Will an integrated system provide for better customer service?
  • Is the business in an industry that generally requires a more advanced system?
  • Are there frequent errors in financial reporting, and if so, are those errors arising from the current accounting system not being able to meet the needs of the Company?
  • Are there any contracts or large projects that will create a need for a better run accounting department or more advanced reporting features (i.e. government contracting)?
  • Would integration of different departments (accounting, customer services, warehouse, etc.) benefit from a more integrated system? Would that drive additional growth?
  • Is the Company centralized or decentralized and would a new ERP system best support that characteristic.

In deciding what’s best for your Company, consider contacting your CPA for advice. CPA’s generally work with many companies across various industries and can inform you about both positive and negative results from Companies that are similar to your own. Sometimes, they can even put you in contact with a client who has recently gone through an ERP transition. There is no better decision than an informed decision.

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