Cloud Computing Accounting Software Considerations: Part 2

In my last post I discussed the differences between cloud accounting software and desktop application software. In this, Part 2 of this two part series, I’d like to provide you with some considerations to review before making the change from a desktop application to the cloud; and some tactics to ensure that if you do make the move you won’t end up running your business into the ground.

Evaluate the Out of the Box Functions and Understand 3rd Party “Plug In” Applications

Do you evaluate software based on its native capabilities or what it can do with plug-ins?

Most of the time cloud based accounting software isn’t going to do everything you want it to do. There will be things it just can’t do as well as a traditional desktop application (e.g., inventory, tax, or manufacturing). You may have to add-on or get rid of third party applications.

Cloud based accounting software should be evaluated from two perspectives:

  1. What it can do out of the box?
  2. How connectable is it to third party applications (as an analogy, think of how you download applications to your smartphone)?

If you decide to fly off to the Cloud make sure you don’t fly too close to the sun…

  • Evaluate what your needs are, try to quantify a business impact or ROI and select the right software for your organization.
  • Unless your budget is really constrained, try to avoid the office supply store software applications such as QuickBooks. This is a good product for starter companies or small not-for-profit organizations, but there are so many issues there is not enough room in this post to discuss all of them (I will devote a later blog to why this is not money well spent). The paradigm has shifted and the Tier 1 companies’ software providers are changing their pricing model to a MRC model (monthly recurring cost). Now a million dollar application may be more affordable on a subscription basis. I’ll devote a future blog to the economics, but the point here is small and medium business owners do not have to settle for less.
  • As with many conversions, moving transaction history is tricky/painful/costly and you will likely move balances for prior periods; thus, losing granular comparability at the account level.
  • The cheaper cloud based software can import a chart of accounts, and a contacts list (customers and vendors), but that is about all.
  • There are third party software tools or service providers that can help you convert your data. One such tool is Astera, but there are many others depending upon your chosen accounting software. A tool is a good idea if you are bringing tens to hundreds of thousands of records. Alternatively, your software provider or implementer may have their own tools. The major applications will use a SQL database so the tool technology is pretty well matured to handle most conversions. Still a tedious process, but manageable.
  • Pick a “go live” date that is not at the quarter- or year-end, unless you are highly confident of the new application’s test company results. Otherwise, you may be in a real mess trying to close the books for your stakeholders, banker or CPA.
  • Sales taxes are probably handled differently between the two software applications. Get ready for some fun in implementing this functionality, but don’t gloss over this function as the starved federal government has become more aggressive in their search for revenue.
  • The application’s workflow will likely be different than your current accounting system. In Six Sigma this is what they refer to as “the valley of despair.” If you chose well, then your new accounting application will be an improvement in process so tough it out and hug your new application! If you do not become fond of it, then hopefully you did not pick the wrong application. In our experience at Rand Group, often the Tier 1 software application is great, but poorly implemented. It’s like your brain in that you are only using 20% of its capabilities.

What to export if you decide to make the move to cloud based accounting software

Assuming all your records are reconciled and your data is clean, you should plan to export the following:

  • Trial Balance (a listing of all accounts and balances)
  • Accounts Receivable (sub-ledger that agrees to the balance on your trial balance)
  • Accounts Payable (sub-ledger that agrees to the balance on your trial balance)
  • Inventory (sub-ledger that agrees to the balance on your trial balance)
  • Item Master
  • Customer Master Records
  • Vendor Master Records
  • Bank and Credit Card reconciliation statements
  • Customer (Customer Relationship Management) records

Data conversion caveats when moving to the cloud!

  • Most of the time, you’ll need to reformat the exported data to fit the format required by the new version or different software application.
  • It’s most likely that even if you thought you cleaned up your data before exporting, you will still have plenty of errors that need to be corrected before importing. (For example, when moving from one version to another new fields will be required so you will have to fill in these blank fields).
  • Certain dimensions or accounts are different and you will need to ensure these are complete (division, department, region, etc.).
  • Set a data restore point that you can rollback to if the data conversion blows up. Try to use a professional as this is not the place to save money by doing it yourself.
  • Get your bank reconciliations current! Bank treasury management data may not be available for more than 90 to 120 days. Most professionals recommend starting off by using an automatic bank data feed to gain efficiency in your back office. Most accounting applications will communicate with your bank’s treasury management application.
  • Think about getting proper cut-off for Shipments, Receipts of Goods, Billing, Un-cleared Checks, and Vendor Invoices.
  • Best practice on conversion is to set up a test company, configure the application and have your users test balances, functions and reporting before going live. This is also known as “UAT” or user acceptance testing.

While not inclusive, hopefully I’ve caused you to stop and consider some of the pitfalls in moving to the cloud. The cloud is the future, but the future is not quite here when you consider functionality, data issues and total cost of ownership! If you want to share some comments or have more questions, please contact me.

– Software Delivered as Promised. No Surprises.

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William Wu

Insight written by William Wu

Executive Vice President at Rand Group

William Wu has over 16 years’ experience consulting for and performing ERP software implementations in the energy, technology, telecommunications, and service industries. With a background in both accounting and business and extensive certifications in ERP systems, William possesses both the drive and skill to move a company from where it is, to where it needs to be.

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