Regardless of the industry and size, all businesses have one thing in common: the need for accounting software. Understanding where you stand in terms of profitability is instrumental to achieving growth and improving bottom lines.
Currently, the market offers various ready-made accounting solutions that are easy to install and operate. However, while comparatively cheaper than their custom counterparts, these one-size-fits-all solutions often can’t address the specific goals of an organization. Realizing this after software adoption can be a detrimental mistake that significantly slows down business growth. Therefore, it’s crucial to understand if an off-the-shelf solution will suffice for your particular business or if you should opt for custom accounting software.
What is custom accounting software?
Custom accounting software is a solution that can satisfy the unique bookkeeping needs of a specific organization. Contrary to ready-made solutions, custom accounting software is designed to align with a company’s unique workflows, automate their unconventional strings of actions, and provide tailored financial reporting catered to the business specifics.
For example, many nonprofit organizations often have no choice but to use custom accounting software. Efficiently managing grants and donations, as well as tracking expenses specific to their goals, will likely be cumbersome with a general-purpose, off-the-shelf solution.
Benefits of custom accounting software
Here are the three main benefits of custom accounting software:
Most organizations are already using some sort of accounting software, be it an Excel spreadsheet or a free version of a general-purpose accounting app. When going for custom accounting software, you can ask your software vendor to use similar UX concepts as in the previous software. This will minimize the learning curve for your employees, ensure fast adoption, and mitigate change resistance.
One of the main purposes of custom accounting software is to automate workflows that are specific to your organization. For example, construction businesses often have complex invoicing procedures due to the project-based nature of their operations. By automating these procedures, organizations can increase efficiency and reduce human error.
While every off-the-shelf accounting software on the market provides a decent level of security, custom accounting software can be tuned to address specific security needs of the organization. Essentially, by going for a custom solution, organizations have much tighter control over security measures. They can integrate specialized encryption protocols, access controls, and audit trails that are not always readily available in off-the-shelf software.
Is custom accounting software right for your business?
While well-thought-out custom accounting software will undeniably perform better than off-the-shelf solutions in most cases, it doesn’t always make sense from an ROI standpoint, given that tailored solutions require significantly higher upfront investment. However, there is a range of clear indicators that should help you make an informed decision:
Organizations that work in sectors with high regulatory scrutiny, like healthcare and finance, often need custom accounting software to address the industry’s unique demands. For example, most US healthcare providers have to comply with HIPAA. Consequently, healthcare accounting software has to employ robust security measures to ensure the integrity of patient financial data. Similarly, financial institutions must comply with SOX, which requires organizations to have strict financial auditing frameworks. This calls for specialized accounting software that can accurately report financial data.
Project- and subscription-based accounting
Companies working in construction, engineering agencies, and custom manufacturing firms often have unique needs for tracking their financials. Construction firms have to track the costs of building materials, permits, on-site labor, and equipment maintenance. Similarly, companies that offer subscription-based services, like SaaS providers or media streaming platforms, have complex billing cycles and revenue recognition rules. Custom accounting software can automate subscription billing, handle revenue recognition in compliance with accounting standards, and provide insights into subscriber retention and churn.
Scalability and integration
Off-the-shelf solutions provide much less scalability and integration capabilities. As your business grows, your accounting processes will likely become more complex. It’s often hard to predict what exact CRM, ERP, or payment gateway systems you will need to integrate with your accounting solution, so the more flexibility, the better.
Off-the-shelf accounting solutions usually have integration capabilities and can be scaled on demand, but all ready-made platforms have limitations. The capabilities of custom accounting software, on the other hand, are almost limitless, only partially constrained by the technical prowess of your software vendor.
The degree of automation
In a nutshell, the higher the volume of accounting tasks, the more value automation brings. Large enterprises have to generate a myriad of invoices, reconcile transactions, create purchase orders, ensure compliance, set payment reminders, etc. – all in high quantities daily. By automating these manual tasks, the value of custom accounting software is maximized in the context of large enterprises.
Making a strategic decision
Figuring out if custom accounting software is the best option for your particular use cases comes down to understanding your organization’s unique needs and long-term vision. Undeniably, off-the-shelf solutions offer much faster deployment for less upfront investment but fall short in flexibility and customizability.
In the context of industries, custom accounting solutions should be seriously considered by healthcare, financial, and construction companies, as well as by organizations that provide project- and subscription-based services.