Begin with the end (date) in mind…

At some point (date) you’re going to switch off your old system(s) and hopefully you’ve got a date in mind for going ‘live’ with your new system. For the purposes of clarity and logic I’m going to refer to the ‘live’ date as the start date. As well as explaining to you how to decide these dates, I’m going to share with you some thoughts you will need to have about the vast amount of historical data you’ve accumulated, it’s usefulness and the pros and cons of leaving it where it is. So don’t skim read this, as all of the decisions I walk you through here are inextricably linked.

1. The end date decision

Let’s do the hard bit first, I will get to Customer, Supplier and Product records etc in a moment. Accounting is seen by many of us as a dark art. You’ve probably heard the line “An accountant is someone who solves a problem you never knew you had in a way you will never understand!” Accounting is fundamentally about dates and numbers. Numbers come from transactions and dates are driven by events, such as month, quarter, year end, the needs of the shareholders and demands of the regulators.

To simplify your end date decision you just need to choose the end of a month. Deciding which month depends upon your circumstances…

If you’re approaching the end of your financial year, then this is arguably the best time to move, as your previous year accounts are going to be closed, so you probably wont be entering any new transactions into your old system, your accountant will have helped you* decide which transactions carry over or stay behind in the ‘books’ and you will have Opening Balances to ‘Open’ your accounts in your new financial year. *Basically you are deciding what profits, revenue, etc you’re going to state in your accounts and what taxes you’re going to pay…

From an accounting perspective, you have a starting point consisting of two types of information, the Opening Balances of your new P&L (Profit and Loss) and Balance Sheet accounts, and a list of posting and non posting transactions to be entered into the Chart of Accounts in your new system. This is exactly what you are aiming for regardless of what end date you choose.

If you decide to do this on a month or quarter end, that doesn’t coincide with the end of a financial year, don’t be put off, the process and the objective are very similar. You just need to work with your accountant to decide the end date and subsequently the transactions that carry over and stay behind. From this exercise you can determine the ‘Opening Balances’. Remember the objective is to determine a list of transactions to be ‘closed down’ or run their natural course, and a list of Opening Balances to be entered into your Chart of Accounts.  At this point, don’t get swayed by the ‘what happens if my financial year is in two systems argument’. This is easily solved by outputting the financial reports you need from both systems and merging then using our dear friend the spreadsheet.

2. The start date decision

From and accounting perspective, it logically follows the start date and the end date should be back to back as you don’t want any ambiguity or transactions falling down the cracks. There you go that was easy wasn’t it.

I’ve heard people say they are going run systems in parallel, this statement is open to (mis)interpretation – do they mean entering the same data into both systems or do they mean they are cognisant of the overlap? Be careful if you get this advice, how you interpret could create you extra work as the former exercise has no value whatsoever.

Whilst you’ve already made the end date decision, you can’t actually carry over or enter the transactions or Opening Balances into your new system until you’ve decided upon the start date and completed the exercise below.

Preceding the start date you’ll want import the following information:

• The Chart of Accounts
• The Items (Products and Services)
• The Customers and Contacts
• The Suppliers and Contacts
• The Workers

These are the fundamentals, but you also might want to import:

• Leads
• Prospects
• Base Price List (If you are using Customer specific pricing or price levels)

The above exercise is explained in the order it should be undertaken, in great detail, in the these really useful and short videos. Skip these at your peril…..

3. The historical information decision

I’ll keep it very simple….

Except for the purposes of period performance comparisons, answer truthfully how often you have referred back to historical accounting data. I mean who bought or sold what, when did they buy or sell, how much money did they spend? If you do this on a regular basis then you’ll probably be familiar with the terms, RFM (Recency, Frequency, Monetary value) or CLV (Customer Lifetime Value) and you might be working in the mail order business or a similar industry, where you are dealing with large volumes of sales and probably spend a sizeable amount on direct marketing.

Or it could be that you are just looking for upgrade, upsell or cross sell opportunities. If you are doing any of this then you need to carefully consider how much these opportunities might be worth. I mean exporting all of your old data from your current system, cleaning it up and reformatting it for import into your new system, not to mention having to customise your new system to be able to absorb and display the data i.e adding new fields etc, is going to cost money and the amount you will need to spend will increase exponentially with the volume of historical data you want to ‘reuse’.

Don’t worry it can be done using scripts and import templates, it just takes time and cash. Like I said – “What’s it worth?”.

If you do decide you need it, then you are of course talking about accounting transactions, and you’ll want to be extra careful how you handle these once you have them imported into the new system. You’ll need to design into your working practices that no-one can alter these. Don’t worry the closed accounts function will act as an impediment to the careless user, but that’s all it is.

Getting historical transaction data imported is going to require some help from us, as you need automation to cope with large volumes of data and because of customisation every situation can be different. We are working on tools and resources to do more of this, from any type of system. Just get in touch if you want to know more.

4. The Plan

You can now see you need a plan. Good plan’s have checks throughout their lifespan, this is particularly true of any system migration project. When migrating data you need to check you are getting the right level of detail out – I mean not too much and not too little, and of course you need to start your import activities by just importing a couple of records, just to make sure, what you get is what you expected.

Sequence is important, that is you need your Chart of Accounts imported and checked before you, import your Items and of course you need to set up your Currencies before you import your Chart of Accounts. Of course Currencies also precede Customer and Suppliers, and Tax Codes precede Items. Why am I wandering here? The point is it’s really easy to avoid thinking through a plan, what I should have written was, do your set ups and imports in this order.

1. Currencies
2. Chart of Accounts
3. Tax Codes
4. Items
5. Workers
6. Customers
7. Suppliers
8. Contacts

See what I mean?

It came as no suprise that SAP Business ByDesign is expensive. The year one costs including implementation (Go-Live Services) for a ten user (ten employee) business added up to a tear jerking $55,400 (£35,750) which makes it some 13.5 times the cost of our system.

The cost per user of the SAP Business Bydesign system is $149 per month which makes it roughly 5 times as expensive as salesorder.com. So in year 2 you can expect a bill of around $17,880 (£11.920) for ten users. This is roughly 4.5 times the cost of our system.

It’s impossible to make a comparison betweeen SAP Business ByDesign and our system because as you would expect SAP have included hundreds of features and tens of modules. So here is my first note of caution, the higher the number of features (and modules), the higher the consultancy bill of weeks as opposed to days configuring the system to fit your needs. So you should treat the ‘Go-Live’ services fee with appropriate caution.

Which leads me neatly on to the training costs. Any uniquely tailored system of the breadth and complexity of SAP Business ByDesign is going to need customised training which of course will increase your costs.

The much awaited release of SAP Business ByDesign heralds not only the beginning of a new era of enterprise software history, but also endorses the fact that web applications are in the long term going to replace on premise software. Or are they? I’m continually seeing the early software as a service players release ‘on premise’ versions of their software. Am I missing something here? I don’t think so as it’s entirely rational and commercially sensible to avoid disrupting or destroying the ecosystem of partners that software vendors like SAP have invested in so heavily to build, and rely so much upon for revenues and of course marketing.

The interruption of the SaaS direct model has given birth to a climate of mistrust and fear in the vendor centric value added reseller communities. These VAR’s have heavily invested in their hard won customers.  VARs can sit and wait for the software vendors like Sage to ‘come clean’ about their cloud strategies – which may never happen or reduce their long term risk by exploring the cloud for ‘the next big thing’. I sense the hunt is on.

No doubt the SaaS vendors are here to stay but just like the other ‘volume’ commercial technology vendors they are going to have to learn and adapt to survive alongside the deeply entrenched solution vendors we all know and love. Given SAP’s intelligence and muscle the Business ByDesign experiment should be watched closely by SaaS vendors regardless of size or ambition.

People – lets be careful out there…

We designed a Quickbooks alternative…

From day one in the seven year development of our saas ERP we were cognizant we had to design an accounting system that allowed small business owners and their teams to get the job done without being exposed to, or intimidated by the complexities of accounting. To a great extent I think we what we have in salesorder.com today has brought us very close to this goal. Just like Quickbooks, under the hood of our small business ERP is a powerful accounting system that affords business owners and accountants access to the nuances, numbers, reports and controls they need when they have to resort to fundamental accounting tasks.

Making a better Quickbooks alternative…

As we have learned from regular interactions with small business owners it’s not helpful to provide more features than the competition. It isn’t about which system has the most features, it’s about having the right features for specific type of business. Small businesses want the standard features found in most solutions. They also want features and functionality specific to their industry and their business processes,  but they don’t have the deep pockets to pay for it.

This weekend we made a breakthrough on how to provide an affordable solution.

This is an extremely stimulating design challenge for our architects and engineers as the de facto standard in our market is to relentlessly increase functionality and add new features that not every small business needs. The classic solution to suppressing the exposure of too many features to end users is to design the system to be highly configurable. This added layer of complexity most often works in opposition of sustaining an economic model that is attractive to small businesses.

Many of our contemporary’s solutions such as NetSuite are now seriously afflicted with ‘feature bloat’ and whilst highly configurable, the result  imposes higher cost burdens and steeper learning curves upon the end user. The resulting economics Netsuite to abandon the small business market and in turn their small business customers to seek alternatives or even return to Quickbooks.

By comparison to the first version of Quickbooks, the latest version is crowded with features and is arguably quite configurable. We want to our solution to keep up with Quickbooks and indeed maintain the ‘no formal accounting experience required’ focus.

What we are not going to do…

We are not going to bloat salesorder.com with features and neither are we going to make configuration of the system any more complex so as to increase the cost of implementation or the trajectory of the learning curve or indeed the cost of the system. As I said earlier this weekend we made an important breakthrough on how to keep the platform simple yet give business owners a solution to their specific needs so as they can have a Quickbooks alternative, a NetSuite alternative or whatever ‘specific solution’ they require at a cost they can afford.

Stay tuned, I’m going to be sharing this with you right here in the next few weeks….

‘Annoying but obvious’ questions about B2B ecommerce

“We don’t really want a shopping cart, can’t we just use your Customer Portal for B2B commerce?” Surely your software can be configured to do this? I heard this question so many times during the launch of our ecommerce integration solution, I couldn’t resist heading over to Engineering to ask a few searching questions…

Ahah moment

After just ten minutes of outlining the ‘ideal B2B ecommerce software solution’, followed by a very short debate, we were scratching our heads as to why we hadn’t thought of this before – takes a woman to point out the obvious . Reflecting on the conversations I’ve had with prospects and customers, the key requirements are:

• Customer Login
• Ability to view items and availability
• Customer specific prices lists
• Ability for the customer to place and track the status of their Orders.
• Ability to view and pay Invoices

The benefits would be:

• No need to select and integrate a shopping cart
• Significant reduction in administration and costs
• A better customer experience
• More frequent sales

Do you need this?

So is there a strong case for B2B ecommerce?  I’d love to hear your thoughts, whether or not your want it, what you think it should do and what would be the benefit of a B2B ecommerce extension to our Customer Portal. The thing is I reckon Engineering could have this done in a week (but don’t tell them I said it).

You can tell me what your thinking right here….

Dozens of folk have been kind enough to take the time to walk me through their ecommerce accounting problems and ‘ideal’ solution and in the ocean of opinions one of the recurring questions has been “exactly what are the top three problems?”

Having participated in some of the debates I thought it might be a good idea to get the whole debate out in the open on this blog so as everyone can read the opinions and participate.

Join the debate and learn how to get more traffic

Ecommerce accounting aside for a moment, we all want more visitors and buyers to our shopping carts and web sites and no doubt you’ve searched the Internet for the ‘best’ methods. There is a lot of misleading and indeed false information out there. I’ve got a 256Gb hardrive full of stuff I have collected over the past five years about SEO and Internet Marketing and I’ve discovered just a handful of methods that work really, really well.

The Bonus – the best ways to get more visitors to your site

So I’m going to share this with the folks who leave the best comments. All you have to do is join the debate and give your view of the top three ecommerce accounting issues and if your comment shines then I will send you the link to the tried and tested content that’s taught us how to get a steady stream of buyers to our site.

So tell me your top three issues with ecommerce accounting, ask a question or just leave us a comment here…

Depending on the source of the item you may incur different types of costs in different currencies at different times from each of the different third parties involved in manufacturing, moving and handling the item on its passage from the source to your warehouse.

These costs are typically but not limited to:

• The purchase price of the item
• The cost of shipping the item from the source to your local port
• The cost of insuring the product whilst on route
• Customs & Excise costs for Bonds, inspection and clearance
• Customs duty and import tax
• The costs of shipping from your local port to your warehouse
• Import agents fees.

Calculating the Landed Cost

Each one of these costs will be charged to you on separate Bills or Purchase Invoices. To derive the Landed Cost of each Item you will want to total all of these costs (with the exception of any recoverable tax) and divide the total by the number of Items to arrive at a Landed cost per item. You will then want to update the value of the items in stock to reflect the Landed cost of the items, so as your Balance Sheet reflects the true value of your assets and you state the correct amount of profit when you sell each of the Items.

The need for accuracy of Landed Costs

Regardless of where the costs come from, it’s prudent to acquire as thorough an understanding as is possible of the final costs you will incur and when you can expect to incur them. So regardless of when all of the costs have to be paid you are always in a position to be able calculate and state the Landed cost of an item. The reason being if the new Item(s) have been pre-ordered or even pre-sold, some of the related Purchase Invoices or Bills have not arrived, then you need to have derived an accurate as is possible cost and updated the underlying Item cost in your accounting system.

Caution - If you have a situation where the items have been pre-ordered or pre-sold then you may want to update your item costs to reflect the new average cost – more on how in a moment

Tracking and reporting Landed Costs

It’s inevitable that the documents containing details of the costs associated with the acquisition of the items will arrive from different third parties at different times. Each document might contain the charges associated with a specific or multiple shipments. It’s also possible that a shipment may contain multiple types of items. So the question is how do you handle this?

Begin with the end in mind

• Unique references – You need to begin with the end in mind, that is from the start of the life-cycle of the transaction you need to assign each shipment of a specific item a unique reference which you can then use to ‘tag’ each of the types of costs related to the shipment so they can be grouped together in a report to allow you to sum the costs and derive the total cost which can then be used in the equation to determine the individual Landed Cost of each item.

• Budget for the costs - Your small business ERP system contains an assortment of Purchase Documents to enable you to manage the entire Purchase process. So it’s good practise to put these to work for you if you want to accurately assess and budget for the costs of the acquisition of a shipment of items.  In the case of anticipating Landed Costs you should use the Purchase Quotes to record the costs you anticipate from each of the third parties involved in manufacturing, shipping and handling the shipment. In a few moments I will explain how using Classifications and the Reports you can derive the anticipated Landed costs of the Items and indeed use these documents to generate the respective Purchase Orders authorising and instructing the third parties to act on your behalf.

• Item Supplier Pre-payments - Chances are the supplier from which you are purchasing the Items will want payment either in part or in full for the Items before they ship them to you. So it’s really, really important you understand and know how to use a pre-payment correctly to prevent your accounts showing the items your stockroom before they have arrived. (More on pre-payments in a later post, just sign up now to my RSS feed, top left hand corner of this page and I will send you the post when I’ve written it up).

• Set up a Cost of Goods Account called Landed Costs Adjustments - Just head on over to the Chart of Accounts and create a new COGS account called ‘Landed Costs Adjustments’ – You might want to consult with your accountant in context with this whole exercise, before doing this.

• Set up the Items to record Tax and Duty Payments made on your behalf – It’s often the case where the shipping/import agent makes payments on your behalf to the Customs and Excise and the Tax Authority. To make sure your accounts reflect this you need to set up items (in Products and Services) to reflect this, here’s how…

1. Setting up an Item to record a Payment of Tax on your behalf

Ok this is easy, remember a Purchase Invoice (Bill) increases (Credits) your Accounts Payable (a.k.a Purchase Ledger) and to make sure the accounts balance you need to decrease (Debit) in this case your Tax Liability account. To do this you will need to create a Non Stock Item, Call it ‘Import Tax’, give it an obvious Item Code, no cost and no price and point it’s ‘Expense’ setting (on the Accounting Tab) to the Tax Liability account. Just to be safe set the ‘Sales’ setting to the same. Ignore any warnings you get. Save it and use it on the Bill to record the amount of Tax the agent has paid on your behalf. Ok important point to remember here – you need to enter the amount of Tax in the Tax Amount Column and not in the Unit Cost column. so as the Bill’s tax component is entered correctly in the Tax liability account and swept up by the VAT 100 report or the Sales Tax liability report.

2. Setting up an Item to record a Payment of Import Duty on your behalf

Similar to the above, give it a relevant name and this time point the Expense and Sales settings to an Other Expense account, called Customs Duty. (You’ll probably need to set one up).

Using Classifications to assign a unique reference to report Landed Cost

The optimal way to do this in your system is to use Classifications. You can assign Classifications to Items and Purchase and Sales Documents in your system. In the case of Item you can assign a single Classification and on Purchase and Sales Documents you can assign up to three. You can therefore use a Classification to ‘tag’ each document with a unique reference to help you include all of the documents in the report from which you will derive the total Landed Costs.

Setting up a Classification

To set up a Classification simply navigate to Setup>Configuration on the Explorer. Almost at the foot of the Configuration page in the section titled ‘General’ you will see a Link called Configuration types. Simply click this and create a new Classification reflecting the unique reference you have decided upon together with a related description. For consistency it’s often a good idea to make the unique reference the same as the number you assigned the original Purchase Order. However the unique reference you choose is entirely your choice. Just use what works best for you.

Applying the Classification related Purchase Documents (Critical)

Ok, this is really, really important, get this step wrong and it’s highly likely you will make less profit. As I said earlier you need to apply the unique reference Classification to each document you use in the Purchase process. Simply create the document you need and navigate to the Classification tab on the document and select the unique reference Classification.

What to do when the Items arrive in your warehouse

Now I’m hoping you’ve put the Purchasing Documents to work and used the Classifications. If you have used a Purchase Order to instruct the supplier of the Items.

Caution - If you have already received the Bill (Purchase Invoice) and you have paid it (highly likely) then it might be that according to your accounts the items will already be in stock. Of course they are not, so you should tread carefully here. But you are reading this before you recorded anything about your shipment aren’t you? So this isn’t the case is it? Because you made a Pre-Payment to the supplier before you they shipped the goods right?

Critical – applying the Landed Costs – Read this twice!

When the Items arrive in your warehouse you will want to check the shipment contains what you ordered and create an Item Receipt from the Purchase Order to ‘move’ the stock into your stockroom and update your stock levels. Before you do this you need to work out your Landed Costs and make sure your balance sheet’s, current assets account reflects the correct balances. Here’s how…

Using the ‘Purchase by Item Detail’ Report  to calculate Landed Costs

OK this is slightly tricky, you’ll need to have your wits about you to set this up. You need to locate and customise the ‘Purchase by Item Detail’ report. Remember, your mission here is to identify and gather together all of the right costs associated with item whose Purchase Cost you want to adjust.

Caution - Why am I stressing out about the word right? Well remember you may have one or more documents that reflect the same cost. For example if you have used a Purchase Quote (to create the budget), a Purchase Order (to authorise the supplier), an Item Receipt (to receive the items) and a Bill (do I have to explain this!!) then because the default behavior of this report is to scoop up all of the Documents by Classification then you will end up with multiple types of documents reporting identical balances and if you include a specific balance more than once then your total will be wrong and so will your profit.

Setting up the Report Filters

So you need to pay attention here when you set up the report – Only include the types of Documents (preferably the last one’s in the paper trail) in the Report. Use Report Filters to include only the Documents you want. Set the Classification Filter to reflect the unique reference, omit any columns you don’t need in the report and run the report. If you began with the end in mind you should have a rough idea of the value of the sum of the numbers in the report you are looking for. Remember you can drill down and check each transaction and ‘hang’ or bookmark them on the Explorer to revisit them as you make your final checks on the total cost.

Calculating the Landed Cost (aggregate) (Critical)

To calculate the total aggregate cost, use a calculator – The detail report wont give you the number (it doesn’t ‘Grand Total’ the balances). You should now have an aggregate Landed Cost And one final thing, don’t include any recoverable Tax in your calculations and don’t include the actual Item costs – the latter will be updated by the Item Receipt.  Write this aggregate value down, you’ll need it in a moment.

Calculating the Landed Cost (per item)

To calculate the Landed Cost per item, simply divide the aggregate Landed Cost by the number of Items. Write this down.

Updating the stock values to incorporate the Landed costs

OK stay with me we are on the final leg of the journey. Unfortunately we have to do some more accounting and it might be a good idea at this point to ask your accountant for some advice as I am only going to tell you what to do here and not go into too much detail as to the why.

About Average Cost

Now at the time of writing our small business ERP uses ‘Average Cost’ to calculate the cost of a Stock Item. Simply put, under the hood we calculate the cost of the Item based upon the Stock on hand. This method is called Perpetual Average Costing. This means the calculation only takes into account the sourcing costs attributed the stock you physically have on hand. Just keep his in mind as you read on.

What happened to input costs you have already incurred and entered?

OK another important point, remember as you posted the balances of the Purchase Invoices you  received from the third parties associated with this shipment, the related expenses were already posted to the Profit and Loss (P&L). What we are about to do is balance these out with a stock adjustment. I mean we are about to make a Stock adjustment which affects the balance sheet i.e it increases (Debits) the Inventory Asset account. Just to to be clear here this is sometimes known as the ‘Stock Asset Account’ and is a Current Asset account.

Posting the Item Receipt to update the Stock Levels

OK, now you should create an Item Receipt from the corresponding Purchase Order you sent to the Supplier, to instruct them to ship the Items. This will update your stock levels with the average cost of the Item.

Balancing out – using a Stock Adjustment to update the Stock Value

Now remember the Item cost still isn’t reflecting the true Landed cost so there is one more thing to do (I promise). To perform this exercise go to the Stock Item and click on ‘Actions’ the only action you will see is ‘New Stock Adjustment’.  Fill in the A/C Memo with a memorable and coherent statement as to why you are doing this. Actually you can just enter the unique reference and a short sentence on what this adjustment is for. Now check the box, ‘Edit Stock Values’. Now what we are going to do is increase (Debit) the value of the Stock by the total amount of the aggregate Landed costs that can be apportioned to the Stock Valuation.

Record the value shown in the ‘New Value’ box and add the total cost  derived from your calculation in here. Set the Account Mapping to the COGS account we set up earlier in the ‘Begin with the end in mind section’, in this case Landed Costs Adjustment account and save the Stock Adjustment. Now your stock value will incorporate the adjustment and reflect the true input costs.

Landed costs method summary

1.    Begin with the end in mind.
2.    Set up a unique Classification for each shipment
3.    Classify each document used in the transaction
4.    Use the ‘Purchase Item by Item Detail’ report to pull out all the costs.
5.    Make sure you don’t duplicate cost balances in the Report.
6.    Sum the costs minus the recoverable Tax and the actual Item cost.
7.    Submit the Items to Stock
8.    Adjust the Stock Value using a Stock Adjustment.

OK I’m done here, the normal rules apply – I want to make this article as useful and as accurate as is possible. So if you have any questions or comments please enter them below as I will see then and respond, adjust as is appropriate.

Thanks for reading

Nick

Clouded thinking

Small businesses are arguably as complex as their larger counterparts and the necessary storage and organisation of information is a significant overhead in terms of complexity and effort. This burden is further compounded by misguided software developers who relentlessly and unrepentantly focus on exploiting three broad solution categories with ‘point solutions’ to address:

1. Customer relationship management – the ‘front office’
2. Product and Service information – the ‘mid office’
3. Accounting – the ‘back office’

Just like small businesses have to figure out how to make their business processes work effectively, misguided vendors expect business managers to have sufficient expertise to figure out which system(s) they need and how to make their choices work together. The complexity of these point solutions is overwhelming, as ‘feature bloat’ and overlaps with other categories of products create uncertainty, confusion and cloud the selection decision process.

A mess of three parts

1. Customer relationship management systems

These provide the people that face the market with tools to capture and recall information about their leads, prospects and customers, such as details about companies, individuals and their needs and activities related to making the sale. Records of initial conversations, what actions need to be undertaken to follow up and the value and timescales of the sale all need to be stored for immediate and future analysis. In many cases these ‘CRM’ systems allow the user to create sales forecasts which are used in turn to help predict the fortunes of the business.

Overlaps – Designers of ‘mainstream’ CRM systems have thoughtlessly strayed into adding Sales Quotes and Orders to their bloated feature lists clouding the boundaries between CRM and accounting with overlaps, complicating the problem of aligning sales processes with accounting.

2. Product and Service information systems

Depending upon the type of business and what it sells are a very broad category. But can be roughly divided into three categories related to the processes of fulfillment.

• Inventory management
• Manufacturing systems
• Time and Expense capture

Regardless of the type of business one or all the above mid office systems are needed to track the availability, creation and fulfillment. To compliment these systems there is most always the need for an information system to manage and track the purchase of goods and services from suppliers.

More overlaps – Again vendors of these types of systems have added pseudo-accounting features which again overlap with accounting and CRM features.

3. Accounting systems

Normally the domain of the accounting and bookkeeping professionals, track the financial activity and health of the business. These systems enable the managers running the business to track and measure the income, expenditure, assets, liabilities and cash flow.

And more overlaps – Arguably the most complex of systems to design and no wonder the aforementioned vendors have not attempted to make a successful crossing into the land of the Accounting General Ledger and all of it’s mystifying subtleties. However Accounting system vendors in a desperate attempt to stave off competition have grafted on CRM features to their architectures which never designed to accounting as opposed to customer centric transactions.

Shallow thinking

Until the mid ‘noughties’ small businesses with small budgets have had to ‘make do’ with cheap CRM, mid office and accounting systems that either didn’t work together or required ‘stitching’ together to create temperamental and inflexible bed fellows.

Small businesses have been ‘force fed’ a mixed prescription of inappropriate cures by marketers with shallow empathy and understanding of the challenges facing small companies.

These misguided software developers and shallow marketers have grown to become ‘market leaders’ – Faceless corporates who are still today paying lip service to the information system needs of small businesses as evidenced by newer and bloated versions of their ‘point solutions’.

Not one of the ‘big names’ has announced let alone delivered an affordable, comprehensive ERP solution for small businesses. Enough said…

Joined up thinking

ERP software ties all of these ‘front, mid and back’ office systems together in a single system and with the addition of a reporting framework gives managers a complete view of the business which can be arranged and dissected to allow them focus on, analyse, track and monitor any aspect(s) of the whole process from lead to cash.

Until the almost universal adoption of the Internet by businesses, ERP software was only affordable by large businesses with pockets sufficiently deep enough to afford the very high software license and implementation costs.

Conclusion: Cloud computing lowers costs and complexity

Web based ERP software harnesses and leverages the low cost technologies to which the web has given birth and is simply an evolution of the traditional ERP system both in terms of a significant reduction in costs and complexity plus the added bonus of being accessible from any web browser.

Just like it’s more expensive counterparts, web based ERP software gives small business owners and their managers better control and a real opportunity to change the performance and fortunes of their companies. Web based ERP software offers the smallest of businesses what was once the privilege of large businesses – an opportunity to enjoy and leverage the power of a single information system at a tiny fraction of the cost of it’s monolithic predecessors.