The financial software sector seems to be finally emerging from the hangover it suffered after the splurge in spending coming up to the double whammy of year 2000 and the Euro. Financial systems are never upgraded lightly and users tend to favour tried and tested technology rather than be at the cutting edge. With so many older systems happily humming away in the background, the immutable deadlines of the millennium changeover and the Euro introduction were the catalyst for widespread investment in new accounting packages.
The result was that 2002 and 2003 saw a significant fall off in sales, but companies providing the software are now seeing a significant upswing in sales, particularly amongst small to medium sized companies. Charles Alken (pictured), director of Quantum Business Solutions which distributes the Pegasus Opera package, expects the market to grow significantly over the next three years – primarily due to the increased sophistication of the software available.
He cites the ability to handle electronic payments both for purchases and sales as a main driver of this expected growth, as is the ability to harness email for sending and receiving invoices and other financial statements. “It’s on a lot of people’s minds now, particularly after the postal strike, the price increase in the last twelve months and the 14pc proposed increase that’s on the cards,” explains Alken. “If you’re sending out 500 statements a month – that amounts to a cost of €30,000 over five years. If over 50pc of your customer base are on email, why not send it out electronically?”
Alken is also noticing an increased interest in automated business alerts, which is where the software automatically notifies management if any pre-defined rules are broken. “It’s about having your system working for you 24/7,” he explains. “You define the business rules and then you are automatically alerted when you need to be. So if someone sells a product at less than 5pc margin you can choose how you will be alerted and with what information.”
A large proportion of SMEs are also fast growth companies, typically export driven, whose financial accounting needs are going to get more complex in a relatively short space of time. For that reason it’s essential to choose a product that can add functionality as your business grows. Software companies have a number of approaches to fulfilling this need.
Exchequer Enterprise – which covers from the mid range right up to the large enterprise (one of its largest customers is Eircom) – has the same look and feel as the system grows, according to Commercial Director Alan Connor, which ensures re-training costs are kept to a minimum. Sage, which now owns and operates the Tas Books, Take Five and Coretime brands, as well as its own Sage branded products, is Ireland’s market leading supplier of accounts packages. Glynis Elrington, Sales Director with Sage Ireland, says that its SME range – from Sage Instant to Sage Line 50 – uses the same source code, meaning that businesses simply have to get a new activation code to unlock additional features as their business grows.
Elrington believes that one of the biggest challenges for adoption of accounting software by small firms is that many of them are not familiar with basic accounting principles. “They are not familiar with them because their accountant has probably done it for them,” she says. “We offer an accounting fundamentals course to give them a good grounding so they are not offsetting the benefits of the software by having to bring in their accountants all the time.”
While all financial accounting systems can handle your general ledger and other core accounting processes, the real differentiator these days is how they integrate with other computer systems in your organisation and make information available to key decision makers. The days of solo financial applications that are only accessed by the company accountants are a thing of the past and the information has to be available to decision makers in the format that is most useful to them.
Integration with customer relationship management (CRM) software is being driven by the promise of having a single view of the customer – including their recent financial dealings with your organisation. At a more basic level, integration with general office tools such as Microsoft Word enhances the usability of financial software by providing features such as mail merges.
Mindful that Microsoft Excel has replaced the desk calculator as the tool of choice for accountants and other financial decision makers integration with Excel is becoming a must-have rather than a ‘nice’ feature. “Anyone can send an ASCII or CSV file from the accounts system and pull it into Excel,” says Alan Connor, Commercial Director of Exchequer Software. “The problem with that approach is that it weakens security and the data is taken out of the accounting software. Exchequer uses OLE tools so that it is reading the data live – there’s no import or export and you can drill down into the figures in Exchequer directly from Excel.”
Looking down the line, Connor expects XML, which is a universal language for describing data, to have a massive impact on this space, calling it the greatest innovation since accounting standards were developed. “There are lots of proprietary EDI formats in the industry but EBXML (e-business XML) is a universal specification that the accountancy software companies are supporting. Sage will be able to talk to Exchequer, which will be able to talk to Tas Books and Pegasus – it’s unheard of and the industry will have to swallow its pride and not lock in customers.”
By John Collins
Next time: Accounting for the enterprise