ERP and Accounting Software – Two Ways to Think About It

I’ve observed in working with businesses in the past few years that there seem to be two (and only two) ways to think about the software they use to run (and account for) their businesses.

ERP is a Cost Center

The first group of businesses treats software like a cost center. They want to lower (as one would) software expense. They tend to upgrade more slowly, often only when they Businessman in a data center selecting label with cost written on windoware forced to by incompatibility. They are less satisfied with their software, because as it ages they have more difficulty with it.

They also tend to look at support as a necessary evil: “We shouldn’t be having this problem, so why do we have to pay for support?” “You mean I have to pay an annual fee to the software vendor even if I don’t use the upgrade?” “Really? I have to upgrade my whole system to get the payroll that works with ACA reporting? It seems like a system should last more than 10 years!”

I’ve changed these quotes a bit, but these are real sentiments expressed by business people. Companies that take this approach don’t benefit from improvements in software because they generally don’t look for ways to use them. In some cases, we work with clients that have features in their software that could solve recurring business problems, but they won’t use them. They develop cumbersome work-arounds that avoid implementing new features. The logic is sound: “Software is a cost center. We don’t want to spend time or money on software because it isn’t going to help.”

ERP is a Foundation for Business

The other group of businesses look at ERP as a business. They believe that software should change constantly, and that the changes should improve their lives and make work easier. When they see a feature for electronic billing or paperless accounts payable mentioned in their software, they want to know if it will work for them.

The most progressive businesses in this category actually look to the software for business ideas. They see ability to promote or send newsletters in their e-commerce software and they want to know how it could benefit their business. When new versions come out, they want the new features list and want to have a conversation about whether any of the features will benefit their operation.

Which are You?

First, let me say that neither of these is either right or wrong. If you only use software for accounting, there may be little that the software has to offer in terms of operational efficiency.

Second, sometimes the perspective on software depends on where you sit within the organization. Accounting department staff may have one perspective; marketing may have another; operations may have yet a third view. Most businesses use software to control operations; this software can create or destroy efficiency.

Third, software isn’t always the answer. Some businesses want to add every bell and whistle in software. It is important to evaluate the business effect of implementing technology.

Having said all of that, here are some key indicators that you may be falling behind:

  • Your business or industry has changed substantially in the last five years, but you are still using software the same way you were 10 years ago.
  • Trends seem to be pointing in one direction (like using tablets, phones, or other portable technology) and you are not moving in that direction. Most retail businesses should carefully evaluate an online store.
  • Your software has not been updated in the last 5 years, new developments are likely to improve your ability to use it. There is more emphasis today on the cloud. The ability to use data anywhere and share data has become critical.
  • You are buying computers with Windows 7 because your software isn’t compatible. Although newer versions of Windows and Office irritate many users and offer changes some don’t think they need, these products are carefully researched. Often we see newer employees and new workforce entrants embrace technology much faster because of some of these advances.
  • You are having increasing issues with software in areas you were not having issues a few months or years ago. Software generally doesn’t age, but the hardware and operating systems that run it do. Once a software developer stops testing with current updates, it’s just a matter of time until problems arise.

If you think your software may need refreshing, give me a call. I’d be glad to discuss the business impact of a change with you.