Sign 1: You’re on an old legacy accounting system
It’s not uncommon to see companies haven’t updated their accounting system or ERP system for many years. Outdated and unsupported software can be unreliable and lead to vulnerabilities in security and excessive downtime, and because of that, the risks of using and the costs of maintaining outdated system increases.
Companies with outdated systems usually find upgrading too costly and difficult because they don’t have the IT resources needed to upgrade other related software systems, databases, and operating systems required for upgrading the accounting and ERP system. The result of this is many companies suck it up and make do with outdated financial management systems.
Often companies that take the plunge and upgrade aging legacy systems find the newer version of the old system still lacks many key features, forcing the accounting and finance teams to continue working around antiquated functionality.
Sign 2: You’re being held back by disconnected systems and processes
Finance and accounting works better when collaborating well with other departments, systems and functions. However, older accounting systems usually aren’t well-integrated with other tools and enterprise systems such as commercial applications and custom developed software. This causes slower workflows and unnecessary manual processes, requiring the need to re-enter the same data in multiple systems.
Sign 3: You’re unable to keep up with business expansion
The burden on finance and accounting can become quite overwhelming when expanding to new markets or adding business units and new lines of business. You’ll have to handle new subsidiaries with more currencies, tax jurisdictions, sales channels, production costs, etc. On top of that, the added complexity is immediate if you’re growing through acquisition.
Older accounting systems aren’t really equipped to handle quick expansions of high growth companies. Usually those systems aren’t able to add entities quickly and require what I call chart of account gymnastics to properly account for operations. When acquiring business units, you might be forced to create a consolidated view across entities that use different accounting systems. Because of this you won’t be able to track the costs of different lines of business or services projects without spreadsheets and hours of preparation.
Sign 4: New business requirements and regulatory compliance are difficult obstacles
Nowadays many businesses are experimenting with new business structures and revenue models to keep up with customer demands and expectations. One of the increasingly popular new developments for many industries such as software and services is the subscription business model. However, since the billing and revenue-recognition requirements for subscription businesses are more complex, it’s placing new demands on finance.
With older accounting systems, these demands and requirements didn’t exist. Accounting for these requirements can be expensive and difficult, since the old accounting systems weren’t intended to do so. This forces excessive manual processes and spreadsheets, which could lead to increased audit risks and billing errors.
Sign 5: You’re unable to fully track your business
Successfully operating a business means needing to see what’s going on in all areas of the business, especially when market conditions and operations are rapidly changing. You need a clear view of every aspect, and it becomes nearly impossible to make informed and timely decisions when it takes weeks and months to put together and analyze important data. Today, more people in any given organization need better reports, and they want those reports faster than ever in real-time with dashboards that show key metrics that enable drill down for a deeper dive into the underlying details.