Is Your Accounting Software Obsolete?
Projector PSA’s CEO, Denis Whelan, presented the latest entry in its ongoing webinar series in October, focused on identifying warning signs that a professional services organization’s back-office accounting software is no longer meeting operational needs.
This webinar explores:
- How do services organizations get into a situation like this?
- The common watch points that you are outgrowing your system
- How to properly evaluate the current viability of accounting software
- Options to consider
Why would organizations outgrow their accounting systems in the first place? Here are five common watch points:
As services organizations grow, compliance starts to become more apart of everyday life. As we think about outgrowing your accounting technology three areas come to mind. First, accrual accounting becomes required once an organization exceeds $5M in revenue and the organization is structured as a corporation. This creates a change in the way you need to recognize revenue on your projects. Second, the recent changes to ASC 606 revenue recognition over the past years has create more work maintaining and managing revenue schedules. Finally, sales tax and economic nexus on a state by state basis have made this more and more difficult. All serve as symptoms that you may need help with your accounting technology.
2. Operational Complexity:
Delivering great work begets more work. This can create peaks and troughs which requires an understanding of resources before a project starts, when a project is underway and after its complete. Resources are connected directly to the financials of a project so multi currency management, revenue recognition based on contract type and multiple costs centers are things that an accounting solution struggles to automate.
3. Lack of Visibility:
According to SPI Research, PSO’s say that as their organization grows from 30 to 100 resources their visibility decreases roughly 10%. It makes sense, the larger you get the harder to operationalize. One of the causes of this impact to visibility is the accounting system’s inability to predict project overruns, understanding the difference in rate types (billable, chargeable or productive) and accurately forecast the future.
4. System Limitations:
As organizations grow, so do their users of the core accounting technology. While performance, storage and usability all can create a viable need to find a replacement the biggest symptom we have observed is the number of spreadsheets that get created around fix priced project revenue recognition.
5. Silos: Project, Accounting and Resource:
The final watch point is around data silos. A legacy accounting system treats project management, project accounting and resource planning as separate operations. In reality those things are interlinked, creating the balance that lets great services organizations stop focusing on their accounting system and start focusing on delivering great work.
Jump to the recording of the webinar to understand how to address these watch points.