If it isn’t broken don’t fix it. Change is constant and every SME leader must continuously manage change. For most businesses, it makes good sense to get started with basic accounting software to save time, get better organized and have a better overview, then as the business expands you may need to change your accounting software to more sophisticated business systems. The challenge for an SME owner lies in recognizing the right time to make this switch. When you are bogged down in day to day operations, it’s easy to ignore the warning signs of trouble ahead. Resistance to change is commonplace, so why don’t companies change their accounting software? Or do they?
Signs that accounting software is hurting your SME business:
Manufacturing in Taiwan
Inaccurate cost calculations can affect your bottom-line. Preparing to negotiate a new contract with a large retailer, a cat food manufacturer in Taiwan had to spend a huge amount of time trying to calculate the actual costs of production. Many process manufactures make do with accounting software that was designed for discrete manufacturers. There’s a world of difference between costing in process and discrete manufacturing; density, physical property changes, and other variations cause changes to yields during production which aren’t supported in entry level accounting and discrete manufacturing systems. Inaccurate costing leads to; lost contracts due to pricing, high raw material costs due to poor inventory tracking and time consuming manual reporting. Accounting software for this SME resolved these challenges by automated standard costing delivering valuable insights into individual product profitability. The SME could then concentrate on selling their more profitable products, shifting the product mix over time in response to current and projected demand.
Healthcare in Malaysia
Document delays slow month-end closing. A fast growing healthcare SME in Malaysia started off using an entry level accounting system but struggling to close the books within two weeks of month end. Without timely information, managers did not know where they stood on budgets or KPIs. Everyone on the accounting team was familiar with the original accounting application and reluctant to move to a better system as the business evolved. Managers, frustrated by lack of insights, were using spreadsheets to track their own results. The SME has multiple locations and processes were breaking down leading to increases in processing times due to higher transaction volumes, long lead time to route, approve, and retrieve documents such as invoices and financial statements that were outdated the day they were released. By implementing a more sophisticated accounting software with automated workflows and centralized document management, the healthcare SME was able to close the month out in hours instead of weeks. Managers now have company-wide insight with which to make decisions based on real-time information, improving the quality and accuracy of their management.
Retail in Thailand
Inaccurate inventory levels make it difficult to see where your business really is. A multi-location retail store in Thailand used different systems to track financials and inventory, leading to major discrepancies in stock levels. Only one computer at each location had the ability to search for inventory at other locations and didn’t provide specifics about the items. Multiple problems existed such as common stock outs caused high freight-in costs and overstocking with mistakes during month-end closing forced employees to monitor the process resulting in unnecessary overtime. There was no way to track bulk weighted items like nuts and bolts that were sold by the pound and no insight into store to store inventory transfers. The store implemented a Radio-frequency Identification system (RFID) to scan items and lots as they were delivered and track exact location, whether that be in-warehouse or in-store. As items are purchased the information is shared across the organization, allowing employees to see real-time information on their sales and inventory levels. Hand-held scanners allow employees to locate items available in other stores and arrange for direct shipment or pickup.
Financial Services in Singapore
Growing stacks of paper is start-up problem for most SMEs. An independent financial SME in Singapore experienced initial rapid growth, expanding to support thousands of clients across Asia. Purchasing supplies and reimbursing expenses through paper invoices and expense sheets for the company was becoming a huge logistical challenge. With an accounting system that didn’t support electronic accounts payable (AP) management, the time spent shuffling paper around increased with each new office opening. The company was spending far too much time on manually entering invoice data in the system, tracking down and matching up invoices and searching for previous orders and payments. By changing to an automated AP system integrated with their existing accounting software the SME eliminated paper from their offices. The AP team no longer spends hours entering data from invoices and searching for documents that have gone missing. Invoices are now coded for easy retrieval. Accurate coding saves even more time, reducing adjusting entries needed to apply expenditures to the correct cost centre within the SME.
For SMEs the question is not if, but when to move to more sophisticated accounting software solutions that will help achieve your business goals. As more and more accounting software solutions are developed, more affordable and easier to implement solutions are coming on the market. For an SME owner this will help you and your staff to gain real-time insight into business performance, keep up with increasing demand without having to hire more staff, automate and secure processes to reduce data entry and risk, manage multiple lines of business in multiple locations and scale operations to support business expansion.