At the heart of small and medium sized businesses up and down the UK lies Sage 50, the UK’s favourite accounting software. Like the Remington typewriter, it’s a great product, well designed and does what its designers intended very well.
Unfortunately, like the Remington typewriter, it is also designed with a 20th century mindset to fix a 20th century problem. And accountants and bookkeepers all over the country are using Sage 50 to make themselves indispensable to business owners in a way that holds their accounting back in the last century, reduces their effectiveness, reduces competitiveness and ultimately destroys value.
Here’s an example. Google “sage 50 year end” and you will see references to support with Year End, training on Year End, problems with Year End, questions about Year End, accountants asking each other for help with Sage year end processes. It is a process that is irreversible and therefore important to get right. A great deal of effort goes into getting it right. You might even need to get your accountant to do it for you.
But it is an utterly unnecessary process.
In the old days, when revenues and expenses were all kept on handwritten ledgers and added up throughout the year, they had to be written back to zero ready for the start of the financial year. The net total of all the year’s revenues and expenses was then added to retained profit. This was an important accounting procedure, and one that Sage 50 faithfully replicates.
Yet all transactions in an accounting system have a date. If you want to see a report for a date range, your accounting software should simply filter transactions outside that range (or, for a balance sheet or trial balance, treat the transaction appropriately according to the date of the report). More importantly, it should allow this to be done for whatever range is important for the business or period under review – regardless of whether it spans a year end – to identify performance, key trends, anomalies, and potential errors.
Precisely because of the Year End process in Sage 50, data for prior years has to be accessed in a very different way. But year ends are relevant only for statutory reporting and tax purposes. Customers, staff, and suppliers do not behave differently in a new financial year. Trends are no less relevant or important just because they span a financial year end.
So not only is it an unnecessary process – it also reduces accessibility and usefulness of information.
Of course, once the accounts are finalised for a year, it is important that the transactions are not changed thereafter. But for some companies that is important on a quarterly basis (so VAT returns are not out of sync) or even on a monthly basis (so that published monthly accounts are not adjusted). A simple restriction on all but the “Admin” user making changes before a certain date is all that is required. Not an irreversible process that permanently eliminates access to data.
That’s not all. Sage 50 costs £700 for two users, and whilst it is a powerful system it is, to all intents and purposes, closed to all outside the finance team or book-keeper. Business owners, managers, and forward-thinking accountants are waking up to the fact that with today’s cloud technology financial information can be accessed anywhere, instantaneously. Owners and managers want information now, not when the book-keeper is next in or when the accountants have examined the files at the end of the year. They are realising that it is possible to access scanned copies of supplier invoices just by clicking on their management reports and wondering why they are still telephoning their accountant and paying them to look up the information on Sage. They are wondering why they are paying over £700 for a 2-user licence to Sage 50 when solutions like Xero will allow access at different levels to many users within the company for less than half the cost.
It won’t be a quick death. Traditional accountants will resist this change. They will focus on the dangers of allowing too many people to change or view information without proper training; on the dangers of looking at information without the benefit of their annual adjustments or their considered interpretation; and on the risk of fraud without a full visible audit trail of any change made to any transaction anywhere in the system. These are all valid concerns. Accounting systems and good financial information are vital to the successful operation of any business.
Ultimately, however, our job as modern accountants – and as management accountants – is to properly evaluate the risks and benefits of precisely these kind of changes, and to help business owners get the benefits of the new technologies whilst at the same time ensuring that the information stored and produced is meaningful and secure. And the benefits of up to date, accurate information, accessible instantly and on the move, are huge.
Typewriter manufacturers may have correctly pointed out that with a word processor you could lose the entire document with an untrained accidental press of the wrong button. But ultimately the benefits far outweighed the risks. Sage 50 will go the same way.