Investor Confidence

So, I have been writing about the importance of accounting software that can ensure compliance with accepted practices and regulations. Then, along comes Bernard Madoff, who’s allegedly able to circumvent compliance controls and implement a $50 billion Ponzi scheme.

It certainly validates the question of how effective any accounting software can be in ensuring accurate and above-board practices. Of course, it also adds fuel to the regulation fire that inevitably will heighten levels of control and reporting—and consequently the need for secure and sophisticated accounting solutions.

A Dec. 23 article in the Wall Street Journal frames the debate: “Questions about compliance practices at Bernard L. Madoff Investment Securities LLC are troubling many securities industry observers, as losses related to an alleged $50-billion Ponzi scheme associated with the firm’s investment advisor arm continue to impact a widening international circle of investors. ‘How could you have this massive scandal going on in a firm that’s adopted adequate procedures? That’s what compliance is all about,’ says James A. Fanto, a professor at Brooklyn Law School in New York and author of Broker-Dealer Law and Regulation.”

So, what are some lessons to be learned from all of this in the world of accounting solutions?

One, hire honest people. No accounting software, no matter how robust or well-configured, can function flawlessly if the people operating it—or their bosses—have crooked intentions. Just because you have excellent accounting system software doesn’t mean you’re totally protected. People still matter—a lot.

Two, the importance of adequate accounting software cannot be overstated. Notes the Wall Street Journal article, “…investigators issued a subpoena to David Friehling, a New City, N.Y., accountant who audited the Madoff firm’s financial statements, and are seeking documents related to the Madoff firm going back to Jan.1, 2000. Friehling has until Dec. 29 to fulfill the request.” Do you think for a moment that this accountant wants to be caught with his figurative “accounting software pants” down? Obviously, sophisticated, up-to-date accounting system software would aid his cause.

Three, when accounting practices and reports are challenged, how many people want to spend inordinate amounts of time trying to comply? The right accounting software can be a huge time-saver in many types of situations. In some cases, it can be a potential “livelihood-saver” as well.

In today’s cash-challenged business environment, many companies consider their current accounting software sufficient. No matter what accounting solutions are presently employed, “They’ll just have to do” is the frequent retort of company executives and managers. Let me cite three primary reasons why this may be a bad idea:

1. Companies need to score “style” as well as “substance” accounting software points. Essentially, this means being able to instill confidence in anyone examining the books as well as providing comprehensive, up-to-date data. Think about the IRS auditor conducting a tax audit. If the accounting software is robust and current, the auditor is more likely to gain confidence in the respondent’s accuracy (very important style points). Conversely, outmoded accounting software or sloppy hand entries may convey an attitude of being unwilling or unable to offer accurate records (even when this isn’t true).

2. The right accounting software can save you money from the get-go, paying for itself rapidly and becoming a virtual profit center. For example, accounting solutions that optimize handling of accounts payable can pinpoint timely payments that maximize use of that money as long as possible. If a company pays some vendors too soon to maximize interest capture, and/or pays tardily and accrues late fees and penalties, it’s easy to see where accounting software can either be costly or cost-saving.

3. Accounting software/CRM linkage can make or break the sale. Having a seamless conduit between accounting services and a customer relationship management program can help make the sale, both in terms of quality of information provided and making a good first impression (again, style points). Conversely, faulty or failed connections inevitably will lead to loss of existing customers as well as hamper acquiring new ones—particularly when a competitor has robust accounting software in place.

Get protected. Get proactive. Get new accounting software now, if you need it.

A recent Wall Street blog post pooh-poohing Microsoft’s 0% financing for Dynamics accounting software left out one key point: Those not qualifying for 0% may still find themselves a sweet deal.

The post notes, “If free money in the middle of a credit crisis sounds too good to be true, that’s because it probably is. Only qualified customers will get 0% financing and, as a Microsoft spokeswoman tells us, ‘the guidelines are pretty stringent.’”

Even if sweet interest rates aren’t in the offing, there are still the Economic Stimulus Act incentives that effectively can reduce the purchase price by double digits.

But, here’s the most important point of all: While we all want to save money in a down economy, it’s important to get the accounting software that will serve your needs—deal or no deal.

If your buying decision for any accounting system software ultimately hinges on the type of deal you can negotiate, you’re buying it for the wrong reasons. Accounting software is too important to a company’s continued operation to be evaluated on the “sweetness of low price.”

That said, there are deals to be found on Microsoft Dynamics® GP and SL accounting software. Just like everyone else, Microsoft is trying to move product. As the WSJ blog added, “…this is just a hook to get people to consider buying software at a time when they might otherwise delay purchases.”

Before comparing prices, incentives and perks, first vet accounting software to qualify potential accounting solutions for your company’s immediate and future needs. Once you’ve identified one or more accounting solutions that can meet your needs, then—and only then—see what kind of deal you can negotiate.

Making the wrong accounting software decision inevitably will cost your company much more than any savings effected by sweet financing or other inducements. Those costs, ultimately, will make that sweet price turn sour.

Score a win-win: First and foremost, decide to buy software that will best serve your needs. Then, and only then, negotiate your best deal.

As a rule, company decision-makers aim to do business with those they like and trust. The issue of trust encompasses a sense of honesty, ability to deliver on commitments, and security.

A bad economy tends to exacerbate problems in trust areas. Normally reliable companies may react fearfully, and unpredictably, in turn driving dishonesty to cover up both actual and perceived weaknesses.

Also, faltering financial strength can render companies incapable of following through on their commitments.

Companies concerned about cash flow may settle for more elementary online security protection—potentially exposing confidential client data to intruders.

How can you help create and maintain trust in these challenging times? One “bedrock” showpiece that establishes trustworthiness can be your accounting system software. Here’s why:

1. Accounting software that meets—or optimally exceeds—established norms helps reassure a prospective client that you mean business, and mean to stay in business. The fact that you’ve invested in top-drawer accounting system software makes a statement about your company being first class and committed to first-class infrastructure.

You may be wise to consider buying software more advanced than currently needed—a system to “grow into” as your company expands. So, instead of QuickBooks® or QuickBooks upgrade, de facto choices of many small businesses (and therefore not particularly noteworthy), consider such mid-market accounting solutions as Microsoft Dynamics GP or SL.

In addition to providing a highly competent infrastructure, such mid-market accounting solutions also offer multi-level security versus the more entry-level measures offered by such programs as QuickBooks.

2. Accounting software that interacts seamlessly with other applications, such as Customer Relationship Management, further makes a case for competence and accuracy. Apprising a prospect of supply chain continuity helps address many common questions from prospective clients.

3. Accounting software choice makes a strong statement to would-be clients about your overall business philosophy. If your company doesn’t cut corners in its choice of this most important of company systems, it establishes a sense that you will perform at a high level in other business dealings.

While initial investment in highly robust and scalable accounting software may be higher than that for entry-level applications its use as a business development tool—in addition to a financial tool—can make up the difference in no time at all.

As Dorothy discovered in the Wizard of Oz, who’s behind the curtain doesn’t necessarily match up with all the grand displays and promises.

This is particularly poignant as we watch such behemoths as CitiGroup trim 50,000-plus jobs from the roster.

When vetting new and improved accounting solutions, make sure the company you’re looking at can sustain itself and its products for the long-haul. Otherwise, you could wind up buying the world’s best accounting software—only to discover later that ongoing support, upgrades and advances have stopped dead in their tracks.

Given current economic volatility, who can you trust long-term to provide both the best accounting solutions and sustainability? Following are some ways to help answer “here today, here tomorrow” questions:

1. Look at company presence as a future predictor. Bluntly put, Microsoft is unlikely to go out of business—even under the worst of circumstances. It’s ubiquitous and has myriad resources to shore up problem areas. Not to put too fine a point on it, but Bill Gates alone has financial wherewithal to solve many of Microsoft’s future financial challenges. Even though he’s stepped away from a day-to-day role, don’t for a minute believe he would let the company he built get torn down.

Microsoft’s staying power is unusual. Look at any company’s accounting software in a similar light, and determine just how much of an economic storm they can withstand—before your accounting software starts suffering.

And don’t figure that past power is necessarily an indicator of the future. As proof, I need say no more than the words, “Big 3 automakers.”

2. See how “bad” bad is. Ask for at least three “negative” recent accounting software references and follow up on them. No, that’s not a typo. All accounting solutions have their detractors and vulnerabilities. By requesting three sources who aren’t happy, you can get a baseline of present drawbacks to view in light of potential future problems. If the accounting system software is fundamentally failing now, don’t expect a magical positive change in the near-term—especially with a faltering economy.

As part of this process, also research blogposts and other online articles/reviews—remembering to view comments with a grain of salt until/unless you can establish their veracity.

3. Look harder at core competencies. For example, accounting software that has “made its bones” in the manufacturing industry before branching out may decide to go back to its roots if the economic going gets too tough. If its roots are in manufacturing, and you’re a manufacturer, this can be a big plus. If you’re a retailer, you may want to locate accounting software rooted strongly in your industry.

Do your homework to help make sure your accounting software wizard can deliver on promises for tomorrow, as well as today.

How will President-elect Obama impact small business accounting services? Let me count some of the ways that the next Administration will both heighten accounting-related requirements and offer rewards that, likewise, will increase needed tracking of finances:

1. Taxation. As the new President grapples with myriad economic woes, you can bet that one priority will be greater oversight of tax bills by the IRS. Given that current revenues fall short of what’s actually owed, look for more government involvement in your accounting services to put more money in the US Treasury. Make sure your accounting software is up-to-date, properly customized to your needs, accurate, and readily accessible.

2. Regulation. Greater government involvement means more rules for small business. Being able to stay on top of them (which the proper accounting software can help do) and comply with them (also a function of the right accounting services), will result in much stress relief going forward. Start asking questions of your present or prospective accounting software companies about how they plan to address regulatory issues and requirements going forward.

3. Incentives/Lending. Look for small business stimulus incentives with the new Administration. These may pose both an opportunity and a challenge: A new/extended Stimulus Package could make buying/upgrading accounting software and other hardware/software much more affordable. Keep your eyes open for expanded lending through the Small Business Administration, micro-lenders, and peer-to-peer lenders—all fueled with government backing. Stay aware of accounting software that will be needed to efficiently capture data and develop financial reporting enabling your company to take advantage of these opportunities.

4. Jobs. Both in the public and private sectors, look for new jobs and incentives for hiring. Accounting solutions that can reliably capture data and create salient reporting around hiring opportunities will help ensure full compliance to keep the incentives coming.

And this is just the cursory overview. Fundamentally, small businesses that make their accounting services a top priority are much more likely to generate top-notch revenues

You may have heard increasing discussion of international versus US accounting standards. Given proliferation of international trade, now coupled with an international financial crisis, it’s only logical that domestic and international accounting standards would invite side-by-side comparison.

The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) are holding round-table discussions to address “financial reporting issues highlighted by the global financial crisis…” (source: IASB Nov. 3 press release).

The release elaborates, “The round tables are intended to help the board identify any accounting issues that may require the urgent and immediate attention of the boards to improve financial reporting and help enhance investor confidence in financial markets.”

Even if you own a US company with no direct international ties, these discussions ultimately may impact your accounting software’s reporting requirements and standards.

I know. Many of you are asking, “I have plenty of time before this affects me, so why concern myself with it?”

Here’s why. There’s a perfect regulatory storm brewing in the accounting services sector. First, there’s the domestic quagmire created by the current financial crisis. Second, the ongoing comparison and contrasting of US and international accounting services standards will produce changes regardless of the present economy. Third, a new Administration and Congress will want to appear gung-ho about undoing harm created, in part, by the sub-prime mortgage mess.

And, you don’t think your accounting system software will be scrutinized? As the pendulum swings quickly toward more government oversight and regulation, no one is immune. By way of analogy, think airline security. No matter who you are or what you do, you can’t carry that unsealed bottle of water aboard.

Given these circumstances, make sure your accounting software is heavyweight enough to address any or all of these accounting services issues. And do it now, not when new regulations are being implemented—and you’re already behind the proverbial eight ball.

So, how do you know if your accounting system software—present or prospective—
is safe and sound? Start by asking the manufacturer for specifics of present and planned accounting software features to address today’s regulations and tomorrow’s changing accounting services landscape. Look for more than reassurance—look for substantive answers that demonstrate knowledge of, and ability to deal with, what’s coming regulation-wise.

And, if that lower-priced accounting software doesn’t quite seem to measure up, move up to more robust and scalable accounting solutions that can take care of your needs now and as you move forward.