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Types of Accounting Automation Software Solutions – Based on Target Customers

Monday, May 17th, 2010

CLASSIFYING ACCOUNTING SOFTWARE PRODUCTS BASED ON TARGET CUSTOMER

Although the basic functions of accounting remain mostly the same across different types of industries, the scale at which they are being operated often is quite different depending upon the size of the organization. These can be broadly classified as under:

  1. 1. Enterprise Level:

Large organizations with various business units have very complicated and complex accounting requirements. This calls for evolved enterprise level products like accounting module of ERP packages like SAP, Oracle Peoplesoft, etc.

These organizations have presence in different business verticals, have number of subsidiaries and sister concerns, have business spread across different locations and have transactions happening across the border in different currencies.

Such complexities call for an evolved customized software product which is tightly integrated with the overall automation software product being used at the enterprise level by the organization (i.e. ERP). Implementing these products in organization is a long process and requires a significant investment both in terms of financial and human resources. Proper full-scale IT infrastructure with special training for operating the ERP package is required

  1. 2. Mid-Level:

For organizations which have scaled up to be major players in their own domains/locations have specific needs around their business automation process. These are generally upcoming stars that are entering the big league of business, but haven’t yet arrived at the big screen. Often a part of their different business functions are under process of actual large scale automation, and accounting becomes the foremost candidate for this process.

Such organizations typically choose mid-level enterprise products by companies like Ramco OnDemand ERP, BAAN, Navision, etc. These are not full-scale ERP with all the other modules concerning procurement, sales management, HR management, etc.; but rather are concentrated towards the accounting and related function of the business. Though not exactly customized for the individual business, these products are often made with a particular industry in mind, covering the specific needs of these industries.

For these products, a reasonable IT infrastructure is needed and a dedicated trained resource is needed to maintain the system. These products come at a reasonable cost, making them affordable only for businesses with a particular threshold valuation.

  1. 3. SMB/ Proprietary Business Level:

SMB or proprietary business owners have unique needs. These are often small companies, often doing city/region specific business, and having less than 10 employees on rolls. A lot of their business functions are being handled by the owner/partners themselves. As the volume of business transactions and information is not overwhelming at this level, updating this information and its retrieval is often on ad-hoc basis. Not many in this category have a proper established IT infrastructure within their organization and hence application of enterprise level products is not possible.

For such requirements, small scale accounting products like Tally, Quicken by Intuit, OfficeBOX, E.X. from TCS are a few examples in this category. With the exception of OfficeBOX, these products are mostly desktop based and are operated by either the semi-trained owner/partner or by the accounts guy in the company. Although the specific requirement in terms of IT infrastructure is not needed, it requires maintaining the software product on desktop (data management/backup, virus protection, etc.). Since the product is sold in form of off-the-shelf disk, any upgrades to the product need to be installed manually by the IT maintenance person in the organization. Besides, being desktop based, these software products needs purchase of one-time/periodical license, making it a decent upfront investment for the SMB in contention.

With the growing economy of India, this segment of accounting automation products is witnessing rapid growth in demand, and also evolution in technology. Innovative modes of delivery and constantly dropping prices by the new entrants in the market are making this space very competitive. One such new entrant – OfficeBOX has developed products that are served on software-as-a-service platform, resulting into zero IT investment and maintenance cost for the SMB. While it provides for all the functionalities as provided by other products in this category, it’s SaaS based offering allows product to be offered at a very cheap cost, hence increasing the very reach of the accounting automation products industry. In fact the basic version of OfficeBOX products is available for free.

Customer Need Analysis for Accounting Software Products

Thursday, May 13th, 2010

CUSTOMER-NEED-ANALYSIS FOR ACCOUNTING SOFTWARE PRODUCTS

While the core modules are the basic business functions to be catered by the accounting software products, customers’ needs from the software product of this kind are beyond these functionalities. Emanating from customers’ business, these needs are:

  1. For large players having business spread across countries and different business units, multi-lingual and multi-currency features are of huge advantage
  2. Shorter learning curves, limited training requirement, all types of customers need product to be as close as possible to plug-and-play nature
  3. Faster performance, requires lesser bandwidth and processing resources
  4. Lesser maintenance cost, robust architecture (strong recovery capability from crashes, data security)
  5. Scalable as per business needs, should be able to handle huge transaction volumes
  6. Additional financial analysis options like profitability analysis for region, product, period, etc.
  7. Adequate and appropriate authentication facility for accessing the information in product
  8. Intelligent reporting and data archival facilities, alerts system for important triggers, etc.

An intelligent accounting automation software product needs to cater to these customer requirements to be successful in the market.

Accounting Automation Software Solutions – An Introduction

Monday, May 10th, 2010

BASIC DRIVING PHILOSOPHY

The key purpose of any software product is to automate the process under consideration by application of technology.

A software product for managing the business function of accounting often becomes the first step towards office automation process of the organization.

For this, the function needs to be standardized to an extent where the basic constituent sub-processes have minimum variations across the different sectors and domains of their application. Accounting, in this regards, becomes one of the most suitable candidate for automation as it has minimum variation across different sectors and domains of businesses.

Whichever is the industry, financial accounting is often driven by the statutory rules around the taxation by the governing body of the country. Also accounting being an outward facing interaction by the organization, the rules of interaction have been streamlined and standardized to a great extent, making it a perfect candidate for automation.

Coming from this, a software product for managing the accounting function of an organization often becomes the first step towards office automation process of the organization.

DEFINITION OF ACCOUNTING AUTOMATION SOFTWARE PRODUCTS

Accounting Automation Software Products (Accounting Software) is an application that records and processes accounting transactions within the various functional modules of business like Accounts Payable, Accounts Receivables, Payroll, Trial Balance, etc. As it records and processes these transactions, these are stored in a standard format and made available for systematic retrieval suitable for managerial reporting purposes.

Covering these aspects of the software product, an accounting software product has dimensions of recording, processing, systematic storage and retrieval for the financial accounting information.

CORE MODULES OF ACCOUNTING SOFTWARE

The core modules in the accounting function of any business are:

Accounts Master:

The key purpose of accounting is to manage the financial information of the company. This calls for systematic recording of financial transactions, calling for following functionalities:

  1. Basic Financial Transactions: like Accounts Receivables, Accounts Payable, Invoicing and Billing, Sales Order, Purchase Order, etc.
  2. 2. Sundry Expenses, Accruements: where business records its sundry business-related expenses and accruements before posting them to books

Reporting:

As the information is stored systematically, it will be useful if it can be retrieved and reported in the most useful manner. This results in following functionalities to become the core module of accounting software:

  1. Basic Financial Health Monitoring: tools like General Ledger Balance, Balance Sheet, P&L Statement, Stock/Inventory Report, etc.
  2. 2. Financial Audit Related Documents/Reports: where business tracks and maintains the information and data required for the statutory audit requirements like timesheets, work-orders, taxation, etc.
  3. 3. Reporting: tools which create the managerial reports like Balance Sheet, P&L Statement, Taxation related statements, Bad Debt/Credit/Debt Repayment related statements, etc.

Support Function:

Financial accounting for a company often involves managing the very basic support functions which directly impact the normal functioning of the company. These can be stand-alone software products in themselves, but are often packaged with the basic accounting software product, for e.g.:

  1. Payroll: used to process and track the salaries, wages, related taxes, etc. for the employees
  2. Asset Accounting: is used primarily to keep track of the value of the capital assets in the company with due consideration for factors like depreciation, etc.

Credit Line Control: is an evolved function which monitors the debt situation of the company and its related repayment schedule and similar functions