Upgrading Accounting Software

SnagAJob.com was bursting at the seams.

After receiving equity financing in late 2006, the job recruitment website ballooned from 22 employees to more than 145. To accommodate its growing staff, the Glen Allen, Virginia, company left a 1,000 square-foot office for 35,000-square foot digs, complete with coffee bar, library and showers for workers who jog during lunch.

The company was outgrowing more than just its office. With revenue projected to jump fivefold to $25 million in 2010 SnagAJob.com also was outgrowing QuickBooks, its small-business accounting software.

“If we had stayed a $5 million-a-year business, we could have stayed on QuickBooks,” says David Bosher, SnagAJob.com’s senior vice president and CFO. “But we knew the company was going to grow dramatically, and we needed to put the infrastructure and systems into place to support a high-growth strategy.”

When it comes to accounting software, Intuit’s QuickBooks program has a lock on 94 percent of the small-business retail market, according to the company. But as SnagAJob.com learned, there comes a point when a growing company may need something more advanced.

Luckily, there’s an abundance of options for mid-size companies, including an ever-growing number of cloud-based accounting software that can be accessed and maintained online. As the ranks of these programs swell, setup and installation fees are dropping, allowing more companies to take advantage of their sophisticated features.

In fact, competition among vendors of accounting software for mid-size companies is starting to resemble Clash of the Titans. Software giants including SAP, Oracle and Microsoft have entered the arena with programs that keep the books, track warehouse stock, automate procurement and coordinate customer contacts. Even QuickBooks and small-business accounting software rival Sage Peachtree have added inventory tracking and other new features to stay relevant for mid-size companies.

Mid-size companies are in a great place right now, says John Van Decker, research vice president of Gartner Inc., the technology researcher. Gartner estimates that hundreds of vendors are vying to sell financial software to mid-size companies in every different geography and industry. “For large companies, your choice is essentially between Oracle or SAP,” Van Decker says. “But smaller companies have a wider array of options.”

Finance Software Options
To decide what they need in finance software and how much they can afford to spend, Van Decker recommends that CFOs look at where their organizations will be one, five or even 10 years down the road. With that figured out, there are three basic groups of solutions:

1. Core financial management software - General-purpose financial management programs include general ledger, accounts payable, budgeting, cash management and other core financial functions. Companies that go this route need to make sure the programs they choose are based on a common technology such as XML or Web services so they can easily integrate with other applications. “If you buy a best-of-class product and want to add a payroll system from ADP, for example, you don’t want it to be a nightmare to link those two products together,” says Steve Pugh, CEO of UNIT 4 CODA, a mid-market finance software vendor. Typical prices for general-purpose programs start around $50,000 for a license to use the software on 10 different computers at once, but can vary based on customization and features.

2. Enterprise resource planning - Until recently, only large companies could afford the hefty price tag and technological complexity of enterprise resource planning, or ERP, software, which covers core financial functions and allows data to be shared between business units. Today, however, Microsoft, Oracle and other vendors are competing to sell ERP systems to mid-size customers at more moderate prices. SAP Business One, for example, sells an accounting program that also includes inventory management, after-sales customer support and procurement automation. Other vendors targeting mid-size companies include Epicor, Lawson and Sage. Prices for mid-level ERP programs range from under $100,000 to into seven figures.

3. Cloud-based programs – Also known as software-as-a-service or SaaS, cloud-based programs from providers such as Intacct, NetSuite and FinancialForce.com include finance and ERP systems hosted over the Internet. Customers who opt for cloud-based services forego the bills for servers and IT staff needed to keep them running, only paying for an annual subscription for the software. More sophisticated functions are available for less, although Van Decker, the Gartner analyst, cautions that “after three years you’re at the break-even point” between the cost of cloud subscriptions and licensed software. While cloud-based services meet stringent security standards, some companies are still wary about trusting their financial data to a third party. Average prices for cloud-based programs start at $20,000 a year for a 10-seat license.

More than Just Accounting
For LTI DataComm, a Sterling, Virginia, company that sells technology and networking systems to the federal government, an ERP system was the way to go. As LTI grew from a startup in 1982 to more than $30 million in annual revenue, executives needed software that could generate financial reports for projects, improve internal controls and stand up to potential government audits. “QuickBooks wasn’t cutting it for us at the time,” says Shelton Brown, the company’s controller.

During 2007 and 2008, LTI upgraded to Microsoft Dynamics SL, a switch that to date has cost $175,000. The new financial programs integrate key functions so time sheets and expenses that workers file from the field are automatically billed to the appropriate projects. The software also tightened rules on who could authorize payments or access inventory and gives executives a real-time look at project costs and the company’s financials. And, Brown says, “We haven’t even fully utilized all the capabilities yet.”

SnagAJob.com went in a different direction. Bosher, the company’s CFO, says the company wanted a better view into its sales pipeline to forecast more accurately and provide better service to customers such as Kohl’s and JCPenney Co. After comparing products, SnagAJob.com opted for a cloud-based service from NetSuite that lets staff access the program from different offices, on the road or from home. NetSuite’s software also provides more sophisticated accounting along with integrated salesforce automation and customer relationship management (CRM) software so that data needs to be entered only once. “There’s a lot less keying, a lot less data entry and a lot fewer mistakes,” Bosher says.