Sunday, October 18, 2020

Choosing an accounting system

The problem with choosing one for your business is that there are so many options available and almost everyone says they are the best. Then, nowadays, you also have to think about whether to use a cloud based solution. :man_facepalming:

So, how to choose? Let’s explore.

Free vs paid

Free software is very tempting, but as the saying goes, there is no such thing as a free lunch.

Free accounting software usually has limitations. Either they restrict the number of users that can access the system, or they restrict the number of transactions that you can key in.

But, at the end of the day, one question that should come to mind is how are they able to offer this for free? For these accounting software providers, there is a cost in terms of developing the solution as well as maintaining the infrastructure to support the solution.

So the concern here is this, will the solution provider be able to provide this over the long term, and also whether you can get support when needed. Of course we are not saying that you should not consider the free options, only that you should take these into account before deciding.

On-premise vs Cloud


On-premise solution will need to be installed on computers at your office. Mostly these are perpetual licence, meaning you pay for the software only once and you have lifetime access to use it.

Although the licence is perpetual, it does not mean that you have lifetime access to technical support or be able to use the latest version of the software.

Most providers have an annual maintenance plan, which is optional. You can choose to pay for the annual maintenance or not. Annual maintenance is for upgrade of software and also support. If you decide not to pay, then you will not be able to use the latest version of the software, and you may not have access to technical support after a period of time.

What are the hidden costs of on-premise solution?

For on-premise solutions the hidden costs include the cost of maintaining the computers, ensuring security of data, including regular backup and having a good anti-virus/internet security solution in place. If you are multi-user, it also means you have to maintain a secure network at your office.

Then there is the cost of upgrading as well as technical support after a certain period of time. Even if you feel you don’t need technical support, there are times when you would need to upgrade. A classic example is when Malaysia switched to GST. Another would be if your computer crashes and you buy a new one. The old version of your software may not run on the latest version of Windows for example.

On cloud

Cloud accounting systems are maintained on the solution provider’s computers or, more correctly, servers. So you do not need to install any software. This frees up your company from the overhead of maintaining IT infrastructure.

The biggest advantage of a cloud based solution is that it is accessible from anywhere as long as you have an internet connection. You are also not tied down to any particular operating system like Windows, and you can even access the solution from smart devices. This would have been especially useful during the recent Covid-19 lockdown from March to June 2020. Many small businesses had to put business on hold because they did not have access to their accounting system, or had to copy the data and try to work from home.

Features and capabilities
Nowadays, technology has advanced so much that cloud based solutions are equally, if not more, capable as on-premise solution. With AI (Artificial Intelligence), it has also become easier and more efficient. Keep in mind that with on-premise solutions, to have these features, you would need to provide higher end computers to cater for the technology needed, whereas with cloud based, that is already provided.

What’s the catch?
Well, all cloud based solutions work on a SaaS (Software as a Subscription) basis. You need to keep paying to continue to use it, which most businesses find a deterrent. But, if you factor in the hidden costs, you might find that it balances off and also makes doing business more efficient.

For instance, with the subscription, you will automatically receive upgrades. During the GST period and the subsequent switch back to SST, your accounting software would have automatically been upgraded to track them.

On the other side, if your computer crashes and you get a new one, it would be a matter of plug and play.

Also, you don’t have to worry about whether your data is backed up or about security, as these are generally assured by the provider. Please do check on each of the respective solution providers on the level and extent of service that is included in the subscription.

What are the hidden costs of cloud solution?
Very little actually. The cost is upfront and includes the maintenance costs, etc. But there is the recurring annual subscription that would impact the decision on whether to go with this or not. Another factor is the thought that your data is not kept with you, and the concern that third parties may be able to access and view it.

Entry level or mid-sized

One other part of the discussion was around whether one type of application is suitable for businesses of all sizes. This is simply not true. There are different levels of accounting software that fit the needs of business needs.

Entry level accounting software

These are generally priced in the RM1,500.00 to around RM5,000.00 range. Entry level accounting software are suitable for start ups and smaller businesses. These have smaller volume of transactions and less number of users accessing the system. If you use an entry level accounting system for a business with large number of transactions and/or a bigger number of users, then you might find the system starting to slow down or crash. This is because entry level accounting systems are designed specifically for small business requirements to keep the cost of development low, and therefore can be priced cheaper.

Entry level accounting systems are easier to implement and use and can mostly support up to around 10 concurrent users.

ABSS (formerly known as MYOB) is one such solution.

Mid level accounting software

Mid level accounting software are priced from RM50,000.00 to over RM500,000.00 depending on your requirements. These would offer more features and higher data transaction processing capabilities than entry level solutions. Number of concurrent users can range from 10 to over 100.

Unlike entry level solutions, where you will need to close fiscal periods and clear historical data often, mid level systems would allow you to retain historical data for longer periods of time. Sage 300 for instance allows you to keep between 7 and 99 years data.

However, you cannot buy mid level systems off the shelf and implement them yourself. This is because they require more technical knowledge to install and also need more detailed configuration before you can start using it.

Which to choose?

Having said all that, are we recommending on-premise or cloud, entry or mid level? The short answer is neither.

Having been in the business of providing solutions for more than 21 years, we understand that each business is unique and have their own constraints and comfort levels. So, it really depends on you, what you are comfortable with and the budget you are working within, the manpower resources you have, etc.

However, taking into account the business challenges of the current pandemic we are experiencing, it would seem wiser to invest in a cloud based system as it would offer the “work anywhere, anytime” option.