Accounting Software Selection by Small Business Organizations

Article excerpt

A computer-based information system for accounting can help an organization manage its finances and operations efficiently, and provide management with timely and accurate information about the company, its customers, creditors and competitors. While large organizations have become increasingly dependent on computers to meet their information needs, today's fast-paced and competitive business environment has made it necessary for smaller firms to move into the computer era.

In the past, cost was a major disincentive for small firms to use computers, but the advent of affordable microcomputers and user-friendly software has made it possible for many small businesses to make the transition from manual to computer systems. More and more "small business owners are taking advantage of the productivity that can be realized by automating their accounting operations. Many small businesses already use microcomputers for word processing and other applications. In fact, it is hard to imagine a business today without at least one personal computer.(1)"

The selection of appropriate hardware and accounting software represents a major challenge to many small businesses. Large organizations typically have the resources to set up a special task force or hire a consultant to provide advice on hardware and software acquisition. Small business owners, however, generally have to make do with easily available and low cost sources of information. Advice from friends and business associates, computer magazines and computer salespersons are some of the more common sources of such information to the small business owner.

The decision sometimes seems overwhelming because the prices, features and capabilities of these products provide an immense variety of options from which to choose. Additional decisions include:

* How should conversion from a manual accounting system to a computerized accounting system be achieved?

* When should conversion occur?

* Should a stand-alone system be installed or a local area network (LAN)?

* What new accounting and operating procedures will be required and how will they be implemented?

* What new security features will be required?

These issues need to be addressed during the preliminary stages of the process of selecting the computer hardware and accounting software that best meet the needs of the firm.

The authors conducted a study that focused on the accounting software selection practices of a sample of small business organizations with computerized accounting systems. The purpose was to gain an understanding of the accounting software selection processes in these organizations and to see if there is any link between satisfaction with the software in use and the process by which the software is selected.

The Survey

In-depth interviews were conducted with 20 small businesses that had automated their accounting systems. The detailed nature of the interviews allowed the interviewer to collect information on several aspects of computerization and software acquisition and usage and provided opportunities for follow-up questions and responses. The information given by the participating businesses yielded some interesting insights into the practices of these firms.

Each organization was asked to provide information on number of employees and sales revenues. This provided a measure of the size of the organizations being interviewed. Except for one business with 160 employees, the organizations inter viewed had an average of 32 employees. Sales figures were not available for six of the 20 organizations: three were not-for-profit organizations, while the other three declined to disclose sales information. The sales for the remaining organizations averaged $4.5 million, except for one with sales of $60 million.

The organizations interviewed included manufacturing, health services, engineering, consulting, broadcasting, general contractors and insurance companies. …