Selecting a new accounting system

When selecting a new accounting system, a Clever Company will use a structured process to ensure the new software will work in its business. If you fail to do this, the result may be an association with a software vendor that is not only time consuming and frustrating – but also potentially very costly.

You’ll need to be able to identify any one of a number of 'indicator' signs that your system may need to be replaced.
These include:

  • The length of time your current system has been used. As a general rule (assuming you’ve had no upgrades), software needs to be replaced about every seven years. Because computer technology advances rapidly, systems older than seven years are often built to an old design that may prevent your business operating efficiently in today’s market.
  • The use of spreadsheets or databases to produce information. Many companies overcome software deficiencies by using other packages to format or produce the information they require to manage their business.
  • Linked to the point above, the inability to produce timely information.
  • Frequent requests, from users, for additional information.
  • A large number of customisations in the software.
  • Changes to the size, structure or operations of the business since the current system was implemented.

A key decision when considering replacement software is to weigh up the functionality, you’d like to see in the software, with your budget and sophistication of your organisation.

When preparing to select an accounting system you should follow five main steps:
1. Project Mobilisation
2. Requirements Definition and Request for Proposal (“RFP”)
3. Software Evaluation
4. Business Case Preparation
5. Contract Finalisation

We’ll now look at each of these steps, in turn.

1. Project Mobilisation
In all successful projects planning is of vital importance and this step is all about laying the foundations for successfully selecting a new accounting system. Tasks to be completed in the project mobilisation step include:
  • Setting the objectives for your system selection project
  • Selecting your project team
  • Establishing a budget range
  • Designing a change management plan
  • Shortlisting vendors
  • Agreeing upon your scoring matrix weightings.
Your scoring matrix should weigh the elements you will use in your decision making criteria.

Common scoring elements include:
  • Cost
  • Functional fit
  • Vendor presentation scoring
  • Vendor organisation assessment
  • Support availability
  • Reference checking scoring
  • Industry knowledge/experience
  • Implementation plan assessment.

2. Requirements Definition and Request for Proposal (“RFP”)
The most common way to select software is to issue an RFP to short-listed vendors. The objective of the RFP is to invite software vendors to provide you with a proposal.

The RFP has two main purposes being:
  • To provide sufficient information about your company and your need from new software. This is clearly the key for allowing the vendors to accurately respond to your request.
  • To outline the terms on which proposals will be accepted. The RFP should specify to the vendor the format of their proposal. It should also include legal matters such as confidentiality conditions, validity of quoted prices, ownership of software customisations, and other important legal aspects.
It will be necessary to document in detail what the system is required to support within your business. This is called the 'Requirement Definition' and vendors’ need this to effectively respond to your RFP. The traditional method was to prepare a list of key functionality in each area of your business (like debtors, manufacturing, etc). The approach used by clever companies is to document key business processes that highlight what the new software is required to support. By using the business process approach, clever companies seize the opportunity to improve the way they work before implementing new software.

3. Software Evaluation
Once you receive all of your vendor proposals, it’s standard to shortlist the ones that really stand out. A more in-depth evaluation of the short-listed vendors is then conducted – involving techniques determined by the scoring matrix decided upon in step one.

Click to see a list of commonly used evaluation methods.

The objective of the software evaluation process is to provide a consistent and robust evaluation of all proposals. At the end of the evaluation process, a preferred vendor should be identified.

4. Business Case Preparation
Some software implementations can require considerable investment, not just in software and consultant costs but also internal time. To ensure your investment is sound, it's advisable to prepare a business case.

The business case needs to consider benefits you expect from the new software and money you are spending. While it is not necessary to calculate a return on investment in every situation, the business case paper should be prepared on the basis that an independent director would agree with the recommendation.

5. Contract Finalisation
Once expenditure has been approved, the final stage of the system selection is contract agreement. This will include negotiations regarding price and clauses in the contract. The contract should include the functional specifications presented by the vendor and the implementation plan so the vendor can be held responsible.

Once the system selection process is complete, the system replacement project is only just starting. To ensure the project meets budget and agreed timeframes, you’re probably best engaging an expert to assist with system implementation assurance. These services are provided by experienced consultants who can oversee the implementation and identify potential problems at an early stage to avoid the risk of expensive corrective action later.

To help ensure a successful implementation, focus on project planning, risk management and change management.

For more information please contact:

Sharon Cresswell, Partner, Private Client Services.