Skody Scot & Company, CPAs
The heart of every organization’s accounting
system is its accounting software. Unfortunately,
all-too-often not enough time or energy goes into
the planning or design stage before purchasing and
installing an accounting package. The result is
usually a system with a limited ability to capture
and report information in a meaningful way. The
reasons for this rush is many-fold. Sometimes it is
a lack of time. Other times it is a lack of technical
knowledge or skills or just plain incompetence.
Regardless of the reason, this short-sightedness
creates a series of never-ending frustrations with
the accounting department’s inability to track and
report financial activity in a necessary and
meaningful way and the additional work that must
be performed to get the information required.

To avoid this unfortunate situation the following
steps should be taken to have a productive and
useful accounting system.
  • First, and most important, evaluate and list all of
    the tracking and reporting needs of the
    organization. Consideration should be given to
    the need to track data by division, department,
    location, program, project, group, sub-group,
    activity, grant and even employee.
  • Evaluate at least two software programs. Don’t
    just pick the most popular or most powerful or
    expensive one because it might not be the right
    one for your needs.
  • Price is always a factor in any decision but as
    the saying goes, don’t be penny-wise and pound
    foolish. Yes a $500 program is a lot cheaper than
    a $5,000 program, but when you consider your
    needs and the benefits this program provides,
    the difference is not much in the long run.
  • Using a “boot-legged” copy of someone else’s
    software is foolish, not- to-mention illegal. The
    copy is usually out-dated or obsolete and will not
    be supported by the manufacturer.  Invariably
    problems will arise, such as a system crash, and
    the result will be crisis and chaos.  
  • Put a good deal of thought into the structure of
    your Chart of Accounts. This is the foundation of
    your system and is not easily modifiable in the
    future. Use a 5 to 12 digit alpha-numeric code
    account structure:
      XX      -        XX          -   XXXX    -          XX
       or                or             Account              or              
 Location   Program                          Project/Grant
  • The order of creating and listing your core
    accounts should be - assets, liabilities,
    revenue/support and expenses. Assets should
    be listed in the order of liquidity (e.g. cash,
    receivables, property and equipment), Liabilities
    in the order of maturity (e.g. accounts payable,
    loans payable), Revenue in the order of
    prominence (e.g. sales, contributions) and
    Expenses, for simplicity, in alphabetical order
    with the exception of salaries and related costs
    first.
  • Next, setup all your customers and vendors files.
  • If practical, enter opening balances from the
    beginning of your operating year (e.g. January
    1st or July 1st)
  • After installing, configuring and setting up your
    new accounting software, get comfortable using
    the basic features first before attempting to use
    its more powerful features.
  • If possible, “run parallel” for a few months. That
    is, enter the same data in both the old and new
    systems and compare output. This procedure
    usually highlights deficiencies in the new system
    and allow for the correcting of small problems
    before they become big problems.
Choosing and Configuring Accounting Software