How much does your practice spend on software? More importantly, how much has this increased over the last three years?
In a previous article, I outlined how small-to-medium-sized practices can avoid rising costs. Here, I want to zoom in on accounting software and share practical advice on making your tech work harder.
From accountant to software producer
When I studied accounting in the late 1980s, textbooks were king and home computing was nascent. I never imagined that I would someday drive a multi-million dollar software development project.
This is exactly what happened thirty years later. As I expanded my practice, I was frustrated by the cost and limitations of off-the-shelf accounting packages. Was yet another yearly price increase justified?
So, in 2022, SKS developed in-house software for practice management and accounting workflow and improved efficiency.
I am not sharing this to sell software (it is only available to our in-house teams and accounting clients) but to demonstrate a deep passion for the topic before sharing some advice.
How to make your software setup work harder
How many unused software subscriptions are you paying for? A recent study gathering data from six million devices showed that 50% of all installed software and licensed SaaS (Software as a Service) applications went unused by employees. That is a tremendous amount of waste!
While developing in-house software is not an option for most small to medium-sized accounting firms, there are steps every practice can take to keep a check on costs.
Evaluate your needs
Many practices make the mistake of starting with the solution (buying a software package) before considering the need (the job to be done).
The first step in reducing your software expenditure is to identify your requirements. These will be different for every practice, but the following areas are a helpful start:
- Data gathering and job workflow.
- Tracking customer meetings and sales calls.
- Practice management, including HR, invoicing, and billing.
- Communication and productivity
It is helpful to organize your needs according to the MoSCoW framework, an acronym that stands for Must-have, Should-have, Could-have, and Won’t-have (Google for more information).
If you aren’t sure whether something is important, evaluate the cost of the software against the cost of undertaking the function without it.
Evaluate how your needs meet your setup
A MoSCoW analysis equips you with an impartial checklist to evaluate different software options. Here are some tips to help you assess your current subscriptions and evaluate potential new software:
- Be aware of pricing options for licenses. What is included in the core product, and what functionality is charged separately?
- Thoroughly evaluate free versions of software packages against your MoSCoW criteria to see if they add enough value. Remember, they are free for a reason, and there will be scant support if they go wrong.
- Beware of Jack of All Trades solutions: Many accounting software vendors have added non-core functions to their accounting packages yet end up Master of None. For example, at SKS, we divide the year-end compliance preparation among subtask specialists – one expert prepares bank reconciliation, while another works on payroll costs reconciliation. Yet most third-party accounting packages do not allow the creation of subtasks.
- Look out for duplication: several years ago, you may have subscribed to a tool that imports and digitizes documentation. However, this functionality is now available in most major accounting packages. Are you still paying for both?
- You may need to customize your software choice. This could get expensive, so make sure it is worth it and financially sustainable. Can you easily make changes if the customization stops working or needs tweaking?
Budget for the long term (and have an escape plan)
According to Vertice's annual SaaS Inflation Index, almost three-quarters of SaaS Vendors raised prices in 2023. The same report warned of a ‘cost of software crisis’ with SaaS inflation running at more than double consumer inflation! This will not shock the many accounting firms hit with price increases over the last year.
My advice here is twofold. Firstly, budget for unexpected price increases. Secondly, reduce dependency on a single vendor by ensuring that, should costs become prohibitive, it is easy to decouple without significant business disruption or IT overheads.
Design your escape plan from the beginning. Ask yourself, ‘What would happen to my business if I had to remove this software and replace it with something else quickly?’ Would it stop working because the software was so tightly integrated into your company’s operations or other software that you use?
Review, review, review
Technology constantly improves, and your software needs will change as your practice grows. It is essential to review your requirements regularly. If your firm does not have a dedicated IT director, assign ownership of this task to an individual. Once you have processes in place, software will turn from a value drain to a value add.
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