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How would you implement a new accounting system?



Implementing a major accounting system is big undertaking which needs a lot of planning.

Top Tips for System Implementations:

  1. Start by drawing up a specification of your requirements – what do you want to achieve with the new system, what is the scope of the system, where will cost savings be made, how could more information lead to better decision making?
  2. Get Buy In – its really important that the system gets the support of the Senior Management Team and that key staff are given the chance to put forward their ideas and are involved in the project. People are often resistant to change and getting them involved early will breakdown barriers to change.
  3. Rationalise – changing systems is an ideal chance to look at how can you do things differently and stop doing things that don’t add value, this will also reduce potential customisation requirements
  4. Allocate time to the project – If you don’t allocate time to the implementation project you will regret it later but that doesn’t mean you need to do everything yourself, budget to bring in temps and consultants to help
  5. Measure the savings and benefits – make sure you achieve your goals

By using simple project management processes, tools and techniques you can achieve the best results.

Formal methods of project management offer a framework to manage this process, providing a series of elements to manage the project through its life cycle. The key elements consist of:

• Defining the project accurately, systematically clarifying objectives
• Planning the project by splitting it up into manageable tasks and stages
• Executing the project by carrying out actions
• Controlling the project through its stages using project definition as a baseline
• Closing/Handing Over the Project

What do FD’s want their ERP system to do? Finance Transformation



The chart (Figure 8) is an extract from the CIMA report on Improving Decision Making in Organisations, it demonstrates the huge potential to reduce costs by implementing systems and shows how the role of FD’s is changing to become business partners participating in decision making.

So how does ERP reduce cost and improve profitability

Top Tips for your ERP Implementation:

  1. Start by drawing up a specification of your requirements – what do you want to achieve with the new system, what is the scope of the system, where will cost savings be made, how could more information lead to better decision making?
  2. Get Buy In – its really important that the ERP system gets the support of the Senior Management Team and that key staff are given the chance to put forward their ideas and are involved in the project. People are often resistant to change and getting them involved early will breakdown barriers to change.
  3. Rationalise – changing systems is an ideal chance to look at how can you do things differently and stop doing things that don’t add value, this will also reduce potential customisation requirements
  4. Allocate time to the project – If you don’t allocate time to the implementation project you will regret it later but that doesn’t mean you need to do everything yourself, budget to bring in temps and consultants to help
  5. Measure the savings and benefits – make sure you achieve your goals

Why Sage 50 will fall to the information revolution

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.

Head in the cloud …… feet very much on the ground!


I’m a director of a software development business which develops ‘cloud’ based applications. Of course, when we started in 2005, I was quite unaware of this, but then the marketing men seized on the ‘latest idea’, gave it a label so that they could sell it more easily, and hey-presto, ‘the cloud’ was born.

So if we set aside all the marketing hype, what exactly is ‘cloud computing’?

I’m not an ‘IT Professional’ so forgive me if I reduce this to more simplistic terms but actually it is quite straightforward, and in many ways something of a natural progression in a trend that has gained momentum over the last few decades.

If I can go back further for a moment, I can recall managing the new IT department of a large manufacturing operation in the early 1980’s (the directors didn’t really know where it should sit within the organisation so they gave it to the accountant because it had something to do with ‘information’). In those days, data was input by cards or paper tape, and we had a department of ‘punch card operators’, and an air conditioned room in which sat a ‘mainframe computer’ which was the size of a small car, and had various attendant tape drives for storage of data and programmes.

Users had a screen and keyboard and a wired connection to the mainframe to and from which they could send and retrieve data using application programmes which controlled how that data should be input and processed or presented when retrieved. All the processing was done by the mainframe as it was the only computer in this network of users and machines.

The advantages were clear and immediate: instead of having to walk to the other end of the factory to speak with a colleague who kept a written record of the information we were looking for, a user could now sit at his or her desk and look at the data which that colleague had input only moments earlier.

We then saw the explosion in availability of the personal computer (PC), cheaper and more flexible yes, but a backward step in productivity since written records were replaced by computerised records, but now held on desktop machines. And so we were back to walking the corridors to speak with a colleague who kept a computerised record of the information we were looking for, but this time carrying a floppy disk to write that information on rather than a pad and pencil.

Hence the advent in networking these PCs to a central ‘file server’ which, as the name suggests, is designed to store our files. Again this enabled us to work more collaboratively and more productively, by working on the same files and data, and indeed more securely as protection and regular backups of centralised data is far easier to achieve than for a myriad different personal computers.

The only real difference between this model and the early mainframes is that whereas the mainframe computer did all the work – stored the data, retrieved the data, ran the software applications, and so on – now the work was shared between the server which largely stored and retrieved data only, and the PCs which ran the applications to process that data, so overall processing speeds reduced dramatically whilst achieving a significant cost saving over a mainframe investment – a real ‘win-win’.

The development of ‘data warehouses’ where the centralised data storage was taken away from ‘in-house’ networks, and to more secure remote locations with ‘thin client’ access to data and business applications, was essentially a return to the mainframe model, and with much more powerful modern servers, overall processing speeds reduced still further.

However the real driver for this change was again an economic one – why spend money on lots of expensive PCs and a server, and all the attendant network paraphernalia and maintenance, when one very powerful central server could do it all, and all the users would need would be a screen, a keyboard, a mouse, and a telephone line (hence the thin client)!

I would have to say that this latter development probably by-passed most small and medium sized enterprises (SMEs) and still remains the reserve of larger firms who can afford the fees charged by vendors of large ‘enterprise’ (organisation wide) applications.

However, cloud computing is really little different to the thin client arrangement in that it enables access to data stored on a remote centralised server, and the applications to process that data. Our own cloud based applications store data on servers in the North of England, with backups in Docklands, and whilst most of the processing takes place on the server, some is done on the user’s PC, so that we can harness as much processing power as we need to ensure fast response times.

At its best, the cloud can provide access to software applications and services previously available only to larger enterprises, to smaller firms, and at a very economic cost, often on a ‘pay-as-you-go’ or rental basis instead of outright purchase – this is often termed ‘Software as a Service’ (SaaS).

And so to the inevitable questions: is cloud computing safe, and is it reliable enough to use to run my business?

Most small and medium sized enterprises do not have a dedicated IT team at their disposal, and as a result, backups may not be made reliably, firewalls and anti-virus software may not be the best (or as I have seen, not exist at all), and network access may require nothing more than a password written down on countless sticky notes attached to keyboards and monitors around the office.

The level of security employed in a cloud environment is likely to be significantly higher on average then the security of a typical SME, but it really is for prospective users to verify this for themselves: where is the server physically? What do you know about the firm that runs and maintains the server?

And is the application you plan to run secure? I would not claim that any application or network is one hundred percent secure (there have been too many high profile news stories to the contrary) but for example our accounting/ ERP application includes encryption between user and server so that even if the data transmission is intercepted by a hacker, they will have nothing more than a string of gobbledygook – a whole lot better than someone being able to hack into your in-house network and steal files, or even physically break into your office and steal a laptop with confidential data on it, or indeed losing your in-house data in a fire, all of which have happened to clients in the past.

That said, there are draw-backs, and in particular, reliability: do you have a reliable connection to the Internet, and does the cloud service provider give any guarantee of service availability?

I have sometimes advised prospective customers to look at ‘in-house’ software applications rather than our cloud based ERP application where they have poor or unreliable broadband, though this is becoming less of an issue as the infrastructure improves, indeed we even see our clients taking and processing customer orders directly into their system at trade shows using just a tablet computer.

And our experience with the firm who warehouses our servers has been good to date in that in five years we, and therefore our clients, have experienced only twenty minutes loss of service on a Saturday just before Christmas 2010 due to an attack by hackers on one of the other servers located in the same facility (this was dealt with effectively by the server centre staff without any need for our becoming involved), and this compares favourably to all the hours work lost previously when our in-house network has failed because one-or-other component or machine had stopped working (often following a software ‘upgrade’).

So is cloud computing for you?

A first step might be offsite backup and storage of your valuable data either by way of a simple copy and paste routine using Dropbox or Google Drive, or one of many providers that enable you to schedule regular data backups without any intervention from the system user.

You might also consider having your e-mail accounts hosted by an external provider, perhaps the same one that hosts your web site?

And what about your accounts/ ERP, or other business critical applications?

In June 2013 Larry Ellison of Oracle essentially endorsed cloud for such business applications; the article states “Oracle’s Larry Ellison is the epitome of the old guard. He built an empire on traditional enterprise software, purchased by a central IT department that worked through expensive and lengthy implementations to ultimately foist it on workers. But now he admits times have changed. ‘When you move to the cloud, companies don’t expect a multi hundred million dollar project to make their CRM from Salesforce work with ERP from Oracle.’”

Ultimately only you can decide – for me, as an accountant, this is just a normal investment proposition – what are the pros and cons for my particular organisation and what are the relative costs? Having actioned all the above in our accounting practice several years ago we immediately saved c.£3.5k when it came to replace out onsite server, quite apart from time and money on maintenance, servicing, and updates.

Will your experience be as good as ours to date?

I really can’t say. All I would suggest is that you check out the supplier of cloud services in the same way as you would anyone that is offering you any other service: Who are they? Do they have a good reputation, have they been recommended?

All I can hope is that this article has helped you to better understand what the cloud is about, and to therefore make a more informed decision.

Paul Driscoll is a Chartered Management Accountant, a director of Central Accounting Limited, Cura Business Consulting Limited, Hudman Limited, and AJ Tensile Fabrications Limited, and is a board level adviser to a variety of other businesses.

How to account for 50,000 members eating breakfasts 4 times a week

Business woman

For anyone running a large networking or membership organisation coping with thousands of transactions of the same value is a challenge. In the case of 4Networking, Tuesday to Friday thousands of members are booking breakfasts online for £12 each (they all need a VAT receipt) [note in addition to breakfasts its £499 plus VAT to join and there is an annual membership fee after the first year], so what information do they analyse, well they need to know, which member or visitor, which group/venue, which area leader, for visitors they need to know the number of visits (so that they can charge when the maximum is reached), when membership renewals are due. Thats a lot of information and to run an efficient network you need to quickly see the results and take action if attendees drop.

The solution that we used was to have a description made up of numbers separated with a # so that you could quickly extract results for any data group or multiple groups.

The other challenge faced is that Memberships cover a future period and to comply with revenue recognition rules the revenue must be phased over the period to which it relates.

9 steps to a perfect Xero implementation

  1. Discuss the requirements with the client and then document the project plan to deliver in the time-frame and budget. Understand which team members are accountable for what deliverables.
  2. Define the chart of accounts and tracking codes so that the right level of analysis can be obtained for tax, accounting and management control purposes.
  3. Ensure that the final trial balance from the legacy system is accurate and balances before you load into Xero. Get all the invoices that make up the accounts receivable and accounts payable balances and load them into Xero via invoice import.
  4. Get bank feeds working for all bank accounts – don’t import CSV file bank statements – this is where productivity is improved.
  5. Define your record keeping system – how do you find the payable invoice to match that in Xero – you can scan it and attach the image to the Xero transaction or keep a hardcopy or softcopy outside Xero. You want a system that is robust if it is inspected.
  6. Setup up your sales invoicing templates in word for invoices, statements and credit notes and upload into Xero. Use repeating invoices where possible to get the productivity. Set up inventory items for the things you sell and you can analyse volumes and margins by item for goods or services.
  7. Define when you will reconcile the bank statement – continuously, weekly etc. Setup bank rules to improve the speed and consistency of matching and coding. Understand the reconcile and cash coding screens. Understand how the reconciliation report works. Understand accounting transactions and how Xero presents a bank account.
  8. Decide if you need to use Accounts payable or can you code expenses after you have paid them.
  9. Review the report suite and get the reports you want into your favourites list.

What happens when you buy an ERP system?

I am often asked about ERP systems, so I have written this blog from my own experience, I am not saying Dynamics is better than any other system its just that it’s the only one I have worked with.

Enterprise Resource Planning systems such as Microsoft Dynamics NAV can be configured in many ways.

Prior to Order, you will probably have issued an RFP (Request for Proposal) and had a bid process. Typically a Dynamics system might start from £200k with probably half the cost or more being for consultancy.

Once you have selected your supplier, the first stage is Systems Design, I have worked on many of these, basically, you gather information on how the business works now, right down to fine detail such as how control accounts are used and what reports are currently used, then you consider what is possible with the new ERP system, what is the best way to perform tasks, how are results reported, some of the information will be flowcharted and a route map drawn up to get from where the business is now to the new ERP system. It is a highly detailed process, my reports were typically 200 pages long and the supplier and client sign off the report before configuration work starts.

Next the system experts get to work and make a mock up of the system and then workshops are done with senior management and directors to makesure the clients instructions have been correctly intrepreted, this process is then signed off.

The next stage is Training, normally immediately before the system goes live.

I hope this is helpful.

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