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Software investments continue to be featured in the budgets of small- and medium-sized practices (SMPs). For 2019, 28% of SMPs that responded to the IFAC Global SMP Survey are committed to invest 10% or more of their firm’s practice revenue on technology. Out of the 28%, 6% will commit more than 20% of their revenue to updating their firm’s technology. This highlights the importance of updated and optimized technology solutions to enable the global SMP community to stay ahead of the curve.

While investing in technology is important to SMPs, the exploration process can be daunting. SMPs face extensive choice when considering new technology platforms and finding the right platform that aligns with their firm’s business strategy is hard to do on a budget.

The initial step SMPs can take in their evaluation process is understanding their current user requirements and future needs of the practice. Once the needs of the practice are understood, the firm can ask vendors for quotes and proposals.  Upfront knowledge of the financial commitments required to purchase and upgrade software allows SMPs to efficiently evaluate their vendor options.

The SMP Committee, through one of its task forces, has compiled a five-step software investment evaluation process for SMPs:

 1. Evaluate the suppliers’ business history and reputation. Consider:

  • Ownership and senior management team consistency, if such information is available. Evaluate the experience and expertise of its current senior executives.
  • How the software meets expectations and whether the supplier’s vision is consistent rather than reactive and everchanging.
  • The supplier’s notable success and profitability, including whether it is an established provider in its marketplace.
  • The supplier’s investment in research and development as a percentage of revenue over the past few years to assess if it is in an increasing or downward trend.
  • Asking the supplier for its future product development plan.
  • The supplier’s readiness and response plan for issues like cybersecurity and data protection.

2. Evaluate the under-lying technologies that comes with the software. Consider:

  • Compatibility with industry standard technology like Microsoft’s operating systems and databases. What is the dominant platform in the local jurisdiction?
  • Additional software installation to run the selected software. Additional installation could mean additional costs.
  • Product scalability and industry specific requirements where applicable.
  • If software customization is available without expert assistance; the upgrade process can affect configurations in the future.
  • Evaluating the issue of compatibility of the software and hardware with other users from the various departments within the firm as well as with other key stakeholders external of the firm.

3. Evaluate the training and support options. Consider:

  • The supplier’s recommended training program (is it through classroom, web-based, online self-paced training etc.).
  • The language of the support team.
  • If technical support is available outside normal hours or holidays and if support is handled electronically or on the phone.
  • The supplier’s average response time. Find out the number of people who provide the support and their experience with the software.
  • Consider the onboarding period and scope of initial technical support.
  • The supplier’s recommended implementation plan for new customers.

4. Review the budget and evaluate costs and contract conditions. This will need to be in alignment with the firm’s middle and longer-term strategies. Consider:

  • Budget adequacy, including allocation for a cyber risk assessment and the necessary training to operate the IT system.
  • Upfront software installation costs.
  • Ongoing software maintenance and insurance costs.
  • Future enhancement cost, if not in the maintenance contract.
  • Hardware and related infrastructure costs.
  • The cost of internal resources that will need to be dedicated to implementation, training and on-going internal support.
  • The supplier’s track record for maintenance price increases.
  • Purchase justification through a cost-benefits analysis; Consider the probable cost per user over the first few years.
  • Whether upgrades will be available at a minimum cost, and on a timely basis.

5. Evaluate testimonials and references. Consider:

  • Asking for at least three customer references to learn about their experience with the supplier.
  • Asking the references about proposed implementation consultants, if necessary.
  • Asking a network of peers for stories about their experience with the supplier.
  • Having an open discussion with a recent customer of the supplier with similar technology implementation.
  • Experience of other users with respect to compatibility and flexibility using the supplier’s product.

Member Organization Support

Recently, the South African Institute of Chartered Accountants (SAICA) published a software guide for SMPs that mainly deals with accounts production and accounting software. SMPs may find the sections on “How to choose a software programme” and “Risks” a useful reference when contemplating any form of technology investment, as well as how software (accounting or otherwise) could be evaluated. Having preliminary discussions within the firm is critical when narrowing the selection of the software solutions relevant to the practice. It is also important to ensure that staff are open to embrace these new technologies –especially for those making the initial transition from a manual environment rather than a system or platform up-grade.

Audit Software Selection

When looking into off-the-shelf auditing software, additional features should be considered:

  • Integration with other practice management software, staffing allocation, time-sheets, bank confirmations etc. (if it is not integrated).
  • When and how the software is updated following changes to international standards or local standards applicable in the jurisdiction?
  • Whether the software is accredited by the local Professional Accountancy Organization.
  • Ability to run some basic sampling methodology (for example, the ability to use a random number table or monetary unit for sampling purposes).
  • Availability of certain industry benchmarks for ratio analysis (usually, these will have to be purchased separately as a complementary module. The proliferation of XBRL can makes such comparison more cost efficient).
  • Whether the audit program in the software can be tailored, based on industries and level of entity’s complexity.
  • For group audit/ multi-site audit, the ability to generate inter-firm (or inter-office) reporting questionnaires, and the ability to allow for amalgamation/ consolidation.
  • The ability of the program to “lock up” the current audit file two months after the sign off as suggested by para A54 under International Standard of Quality Control (ISQC) 1 (this is to avoid tampering of files).
  • The ability of the program to print out the lead schedule for each of the balance sheet items and major profit and loss (P&L) components, if required (with possible cross-referencing function).
  • The ability of the program to populate the carried forward amount of the same client from the previous year’s audit to the current year assignment. The same should apply to any matters to be brought forward for the attention of the current audit engagement team.

Articles and Videos on Knowledge Gateway

Recent Global Knowledge Gateway articles and videos includes “Developing A Technology Strategy” and “Implementing New Technology Requires Strategic Thinking”, have highlighted the importance of technology as a new strategic advantage. Chapter 5 of the 4th Edition of the Practice Management Guide (pages 260-263) also covers practical insights on software evaluation.

Other Gateway articles and videos that could be helpful includes:

How Secure Is Your Client’s Data?
Technology: A Tale of Two Practices
How SMPs Can Invest in Technology
Small Practices: Embrace Technology, Secure Your Future
Technologies SMPs Need to Implement Today
The What, Why, and How of Cloud Computing for SMPs
SMPs Are Using Technology to Shape Their Growth

George Willie

George Willie became a member of the Small and Medium Practices Committee in January 2015. He was nominated by the American Institute of Certified Public Accountants (AICPA).

Mr. Willie is the managing partner of Bert Smith & Co. He has over 40 years of experience specializing in the audits of healthcare, government, and not-for-profit entities.

Mr. Willie has served in numerous leadership positions within the AICPA, including chair of the Private Companies Practice Section Executive Committee, member of the Board of Directors, member of the Board of Examiners, secretary of the Political Action Committee, and chair of the Minority Initiatives Committee.

Mr. Willie earned an MBA from American University and a BBA in accounting from Howard University. He is a licensed CPA in the District of Columbia and US Virgin Islands, a Chartered Global Management Accountant (CGMA), and a Certified Government Financial Manager (CGFM).

Michael Mbaya

Michael Mbaya is a partner at the firm Mbaya & Associates, a firm in Kenya that serves the Africa region with audit, taxation and financial advisory services.  Mr. Mbaya is also a committee member of  the IFAC SMPC and is passionate about getting young minds to join and excel in the accounting profession.