Think back to the last time you selected software for your company. If you are similar to many family business owners, you began your search by talking to a few buddies to see what system they use and how they like it. You may have attended a trade show or two to see what else was out there or talked to a few salespeople by phone and bought what you considered the best one at the time. Now it’s a few years later and you’re not sure you made the right choice or perhaps you’ve simply outgrown your present system. Stop! There is a better way to buy!
Before you invest another dime in software, step back and analyze your company’s needs over the next five to ten years. Design specifications for what you will need in a system and then find the system that meets those specific needs. As you develop your software specifications, consider the following:
Terminal Capacity – How many locations will you have in 5 years? More than a few family businesses have found they purchased a computer system that could not handle their growth.
PC Compatibility – Most systems, no matter what the actual hardware, will allow a PC to act as a terminal. The ability to integrate with popular software programs is a plus for internal reports or marketing efforts.
Method of Data Handling – Traditional technology uses “batches” for data handling. As you enter transactions during the day, the general ledger does not get physically updated until a batch is completed and closed out. New state-of-the-art technology allows for “real-time” processing. At any time during the day, your system is completely up-to-date with all customer and vendor information being updated as it is entered.
Data Capacity – By analyzing the number of daily customer transactions your system presently handles and applying a ten-year growth factor, you can reasonably predict the storage capacity your system will require. If anything, overestimate! Too many family businesses get caught with systems that can not store even a year or two of data. Although you can periodically purge data to make more room, it is much easier to be able to keep a few years of data on your system.
Financial Statement Flexibility – How do you need your profit statements broken out? You may want profit statements by geographic location, but you may also want to group a few sites into a region. Or, you may want profit statements by type of business (for instance, your truck and trailer business separately from your tankwagon business). The best systems give you the flexibility to print your statements in a variety of formats.
Gross Profit Margin Screens and Reports – Gross profit is the heart of your business. If you are a wholesaler, you will want to know gross profit in dollars by customer, product, division, or salesman. You may also want data by sites, regions, specific products and product categories. Think through other criteria specific to your business. Also, check to be sure you can easily get this data on screen without having to print out lengthy reports.
Taxes – Because taxes can be so complex, it is likely that you may need industry-specific software. Generic software will not meet your needs. You want a vendor who really knows your industry. If you deal in taxable and untaxable products, be sure the software can handle these intricacies. Also, does the software have automated federal and state excise tax reports? Consider your unique local taxes in all of your existing and future market areas.
Accounts Receivable – If you are a wholesaler, receivables, accurate customer payment information and control are critical to your cash flow. First, your system should allow for credit limits. If you have customers that buy from more than one division or business sector, the credit limit should be fully integrated. Next, determine how you need accounts receivable information — by customer, by product, by date, etc.? Do you collect accounts by EFT? If so, can the system automatically update customer accounts? Carefully think through any other special needs you may have for your accounts receivable processing and reporting.
Inventory – Determine your requirements for inventory handling and reports. Do you or will you use UPC scanning and can the system handle it? What method of inventory valuation do you use (FIFO, LIFO, etc.) and how does the system do with your method? What about shrinkage and control? What types of alerts and reports do you need? If you have a central warehouse that dispatches to several locations, can the system handle all the locations and detail you need? And finally, does the system allow automated monitoring and ordering?
Accounts Payable – How are payables handled at your company? Do you need payables by vendor, by site, by product or all three? Do you use purchase orders? If so, how does the system reconcile purchase orders to actual payment? Do some of your vendors require EFT? Again, how will these transactions be handled by the system?
Fixed Assets – What do you need your system to do when it comes to your assets? Do you need separate tax and financial accounting of assets and a variety of depreciation methods?
Printing Options – Do you need to use several printers simultaneously? Determine the number and types of printers you will need and be sure the system can accommodate them plus more. Have each vendor provide samples of each printed report available in their system.
As you develop your specification list, check with your staff for their wish lists as well. You’ll likely find with staff input that you develop a very lengthy list that will need to be prioritized. A simple A, B, C ranking will work well. Label each item that is an absolute necessity with “A”, the items that everyone really wants to have but are not absolutely essential as “B”, and the stuff it would be great to have but you could definitely live without as “C”. Next, type-up your list as a check sheet, grouping A’s first, then B’s, then C’s. This checklist becomes an objective tool to evaluate each vendor.
Finally, don’t forget technical support and product updates. Some vendors are notorious for great software but expensive or slow customer support. Ideally,you will check online reviews and even speak with a current software client to ask what works and what doesn’t. Also, ask each vendor under consideration the cost of transferring existing data to the new system.
If you carefully assess your company’s unique needs, you will find a system you actually still like years from now!
