Accounting, IT Converge in Cloud

Despite TV commercials extolling the Internet “cloud” as a way to catch up on favorite programs while stranded in an airport, small businesses are discovering the benefits of moving their accounting procedures from desktop applications to cloud-based services.

At Therapon Skin Health in Springdale, accounting manager Christine Winston and IT manager Joyce Binam Davis recall when the company was shopping for new accounting software in 2009.

“What we had cost too much money and required too many resources to meet our needs,” Davis said.

Therapon, which sells clinical skin-care products, had been using Microsoft Great Plains. But Davis said the software “was too big for our purposes, needed several servers for our database, plus the cost of upgrades. It was not what we needed.”

They tested QuickBooks, she said, “but that was too small to meet our needs.”

Then the company spent about three months testing NetSuite, one of the most widely adopted “software-as-a-service,” cloud-based business applications.

“We put it through all our processes, like how we get in inventory and making assemblies,” Davis said. “We didn’t want to mess up, so we really looked at it closely.”

Then the company spent a little less than two months implementing NetSuite, and went live with it on Jan. 1, 2010.

“For us, it took out a lot of complexity from what we used to have,” Davis said, “but it’s still more what we need than the little-bitty accounting desktop programs” more appropriate for a mom-and-pop business.

She said she’s confident in the security of the cloud.

NetSuite “has teams of people that focus on this stuff, and I feel that’s safer than if I had to do it myself,” Davis said.

Also, software upgrades are made automatically, so she doesn’t have to deal with manually installing them once or twice a year.

“I really love cloud-based for that reason,” she said. “They handle all that, and we just pay a monthly fee.

“From an IT and cost-savings perspective, it’s great.”

Starting with an IT staff of two, the company is down to one person, Davis. The mom of a 2-year-old, she was able to cut her work schedule to part time. That wouldn’t be possible without NetSuite, she said.

Winston is a little less enthusiastic about NetSuite, though she said it’s a great fit for Therapon’s overall business needs.

“As far as accounting, it probably wouldn’t be my first choice,” she said. “Great Plains’ accounting is ironclad. But for small business, it’s overkill.

“You have to really be trained to use Microsoft software, and I’d used it for 10 to 11 years or more, and I understood the logic.

“It’s been an adjustment to me to go to NetSuite, because it doesn’t appear to be written from an accountant’s point of view, and I have to think outside the box to do accounting.”

On the plus side, she said, “I love that I can be anywhere and do accounting.”

Winston said with NetSuite, it’s easy to email reports, and it’s handy for communicating with people unfamiliar with accounting methodology.

She believes the main reason the company chose NetSuite was it’s e-commerce aspect and the ease of making changes to the shopping cart.

Ultimately, she said, “It doesn’t matter what you go with, it’s important that it fit the needs of the business,” she said. “[For us,] the shopping cart side was much more important than the accounting side.”

 

Adding It Up

Steve Hankins, CEO and co-founder of technology advising and management firm Accio.us, agrees that businesses need to know exactly what their needs are before they choose a software application.

Although Accio doesn’t market NetSuite, Hankins has helped a couple of companies that chose it get it set up.

He easily reels off the many advantages of using the cloud for business and accounting purposes.

First, he said, the biggest concern people have is security, but all data moved through NetSuite is encrypted, “so it’s not like anybody can spy on you.”

Another benefit of NetSuite and similar applications, Hankins said, is that they are integrated enterprise resource planning packages. That means users can manage their sales orders, purchase orders, inventory and other business activities. And NetSuite integrates e-commerce as well.

Because cloud software is browser based, he said, it’s very user friendly and has a short learning curve.

“And then compared to QuickBooks or most of the software small businesses would buy, it’s a much better general ledger package,” he said. “You can segment and report your business in a lot more detail compared to, say, QuickBooks.”

As for the bottom line, Hankins said the money saved by buying a cloud application offsets the initial purchase price.

“Typically people who think it costs too much don’t have a real view of what their cost structure really is, because they don’t count the cost of the server or taking care of the server, or annual licenses and that sort of thing.

“And they don’t count the fact that the software is very easy to use, the learning curve is short and you can use it anywhere. So every analysis I’ve ever done in the business, it’s been cheaper.”

Hankins points out that with the cloud software, there’s no need for a business to buy a server or internal network. That also means there’s no need to employ someone to take care of that server.

“Putting together a server is a $6,000 to $7,000 deal, and then you’ve got to pay annual maintenance, and have someone to take care of it,” he said. “And if they’re full time, that’s a $40,000-to-$60,000-a-year person.”

 

Eyeing the Cloud

Hankins’ assertion that cloud-based accounting is the wave of the future seems to be supported by available market research.

Research firm Forrester Research Inc. estimates the global market for cloud computing will grow from $40.7 billion in 2011 to more than $241 billion in 2020.

And the accounting industry is increasingly adopting the new technology. A survey conducted last year by CCH — a provider of accounting information, software and services — found that within the next three years, 60 percent of audit firms expect to adopt cloud-based audit applications, and 44 percent of tax firms expect to be using cloud-based compliance software.

Even the 125-year-old American Institute of Certified Public Accountants, an industry trade group with 386,000 members in 128 countries, has a subsidiary called CPA2Biz that hawks its own lineup of Web-based “solutions” for accountants.

The Illinois-based Cloud Accounting Institute, formed in January as “a clearinghouse for information on financial Software as a Service and cloud computing,” conducted a benchmark survey earlier this year of small to mid-sized businesses.

Of survey respondents, 52.4 percent said they currently use at least one cloud financial application. Moreover, 82.5 percent of those responding said they intend to use cloud accounting.

It must be noted, though, that the institute is headed by Lindy Antonelli, CEO of a company called AccessTek that sells NetSuite Rival Intacct and Microsoft Dynamics GP accounting software.

Winston said she hears from other accountants that they are increasingly going to the cloud, but most of these are CPAs choosing it for their firms.

She said companies considering a move to the cloud “really need to look at their processes, their business, where they are now, where they’re going in the future and can it do what they want it to do.”

Jim Kane, chief technology officer at Fayetteville-based Acumen Brands Inc., started working with NetSuite in 2007 at another company, mainly for its inventory management capabilities. When he and other staffers formed Acumen, which operates a group of e-commerce sites, he said, “It was natural to stick with what we already knew.”

He advises businesses looking to switch to a cloud-based accounting application to talk to someone else who has used the platform being considered.

“There are multiple Web-based accounting apps out there, but for a core business feature you’re going to use every day, it’s important to get an outside opinion,” he said.

“Also, in the case of NetSuite, the base system is very generic. You will need to budget time and money to have it customized to your business, but the increase in efficiency is worth the expense.”

Kane, who admits he has no accounting background or experience with desktop accounting applications, says using a desktop-based program would be almost impossible for Acumen.

“We process hundreds of orders per day,” he said, “and those orders have to flow into our accounting system automatically. A desktop-based accounting package would be unlikely to deliver the reliability we need to make that happen.”

As for NetSuite’s effect on the company’s bottom line, Kane said it’s a great product for Acumen’s accounting needs, “but everyone has to do their own math.”

“We do realize a significant savings in hardware and staffing, and we also get a more reliable service than what we could put together on our own.”