By: Paul Wilkin, CPA
As a new year draws closer, many business owners think about changes they can make to improve the efficiency of their operations. It’s a good time to evaluate the accounting technology that is used for the financial management of your business and make sure it’s aligned with your needs.
Building an effective, customized “tech stack” that drives the financial management of your business could be the first step in the process.
A tech stack is the configuration of technology solutions and integrations that the internal finance department or outsourced accounting provider uses to manage your accounting and financial reporting. The ideal tech stack for your company may be different from that of other companies.
An efficient tech stack enables your finance staff to perform all financial functions within the software and includes components that share data seamlessly to provide the real-time management information needed to run a business.
When is it Time to Make a Change?
There are signs that your business has outgrown its accounting software, but you have to pay attention to see them. For instance:
- Does your finance staff have to perform certain functions outside of the accounting platform?
- Are staff members using spreadsheets for data that should be generated within the accounting software?
- Are you unable to integrate your CRM function with your accounting platform?
These are key indications that it’s time to consider a more robust and integrated accounting platform.
Evaluating Your Needs
Designing the ideal tech stack starts with evaluating the real-time data that is needed for effective decision making based on the business’ volume, complexity and sales pace.
With increasingly more businesses using accounting applications like QuickBooks Online, Intacct and Xero, all of which are available with many integrated apps that provide specialized functions, a customized configuration of accounting technology capabilities is key to getting the most out of your system.
Your business may have gone through this exercise before, evaluating accounting software and finding nothing on the market that truly met your needs. However, in part due to the COVID-19 crisis, which accelerated the movement to cloud-based solutions, the pace of technology development raced forward. The technology platforms and integrations you looked at five years ago are much more powerful today. Most businesses should re-evaluate their tech stacks at least every five years, but if you’re in a fast-growth mode, do it every two to three years.
Volume, Complexity and Dollars
At KRD, our ideal “tech wheel” involves building a set of integrations that are specific to a company’s needs around an accounting software hub. This will look different in every company, so the process starts with a detailed needs assessment.
For instance, an online retailer may not need an inventory module that handles raw materials and assembly, but a manufacturer would. A brick-and-mortar retailer would need a point-of-sale system that’s capable of calculating sales tax, possibly in multiple states. A manufacturer could need that, too, in some circumstances.
Inventory management is a significant differentiating factor for businesses seeking to build an integrated platform that is tailored to their needs. If you’re moving physical goods around it’s important to know how many items you have and where they are.
For restaurants, size matters. If a company owns 10 restaurants, inventory and use rates should be tracked. How much liquor is on hand at each location and is there a location where it is being used faster than normal, indicating a problem?
As a business grows and changes, accounting technology needs will change, too, and should be re-evaluated regularly by your internal finance staff or your outsourced accounting service provider. In some cases, upgrading to cloud-based accounting applications can help leverage the staff or level of outsourced accounting services you already have, making the job of financial reporting more manageable.
For businesses that use QuickBooks Online as their cloud-based accounting platform, typical integrations may include:
- Shopify for e-commerce
- Salesforce for CRM
- Bill.com for A/R
- Expensify for credit card management
- Fathom for consolidated financial reporting, budgeting and forecasting
- Fishbowl for inventory management
If you are using any of these apps without the ability to integrate them to your primary accounting platform, it’s time to switch platforms.
When we work with clients on an outsourced basis, we recommend an ideal tech stack that starts with QuickBooks Online (QBO) and Gusto, a payroll app that integrates with QBO. We have vetted these applications with many clients and find them to be strong solutions for a variety of different types of businesses.
Implications for Internal Controls
Smaller businesses may have concerns about how to maintain segregation of duties when the finance staff uses an integrated accounting platform. Most applications have the capability to build in proper controls. For example, the company’s controller may be the only person authorized – through a password-protected system – to access the company’s bank accounts.
These controls can be customized to every user’s needs.
Contact your KRD advisor to start a conversation about how building a stronger accounting tech stack can help your business become more efficient in the new year.
