Most companies that have been in business for more than 10 years have already experienced the challenges associated with switching from one accounting or ERP system to another. Many will agree that the task is not easy, it will not go exactly as planned, and the end result is never exactly what it looked like in the sales presentation. However, the same people will also say that the new system helped grow their business and created efficiencies in many areas of the business. Staying in their existing system would have been the wrong decision.

How does a small business decide when the time is right to evaluate new systems? Companies are always actively looking for opportunities to increase revenue or reduce costs, therefore they must constantly evaluate their current business system and new systems in order to act quickly on these opportunities.

In general, there are five areas to look for no matter what opportunities you face:

1. Increased transaction volumes can affect performance

Many entry-level accounting systems have well-documented limitations on the number of transactions that can be stored in the system. However, long before a commercial system reaches those limitations, performance can suffer, gradually at first, but eventually reaching a point where users expect more than necessary.

2. Adapt to business growth

New locations, lines of business, or sales commission plans require a company to review its existing business processes and business systems. Often companies “patch” a business process with spreadsheets or other external databases when their current system cannot handle the changes. This may work in the short term, but it rarely makes economic sense in the long term.

3. Users take turns with the system

Many entry level accounting systems and the “patched” systems mentioned above do not allow two people to access data at the same time. As more people need to access the system or are involved in a transaction or workflow, an inadequate system prevents users from doing their jobs effectively due to inadequate visibility and access to real-time information.

4. External parties demanding more

Customers, suppliers, lenders, investors, and external auditors are all capable of influencing a business to evaluate a new business system. Customers and vendors may have unique workflow requirements that require a company to implement EDI, credit card processing, online banking, or other e-commerce solutions to do business with them. Lenders and investors may require a new system so that they can have more confidence in the information provided to them regarding the health of the company. External auditors, like investors, often recommend that a small business switch to a new system to address internal control weaknesses they may have discovered during their audit. Similarly, as these external parties recommend new systems, they also seek further feedback or reports on the health of the business. Many companies move to new systems looking to fully integrate all areas of the business not only to create efficiencies, but also to access tools that can help measure and report their performance.

5. Vendor challenges and support

Possibly the most painful reason to choose a new system is that a company cannot find vendors or consultants to support the product. New hardware, new technologies, and new ways of doing business are critical reasons why a business system needs to stay up to date. If your software vendor no longer supports the system you use today, your system will likely be preventing you from taking advantage of an opportunity to grow your business five years from now. In some cases, the vendor supports the product, but there are no local resources that can help you get the most out of the system you have today.

Your business software, like your business processes, must be flexible enough to accommodate the many changes your business will experience as it grows and evolves over time. As your business identifies these changes, having the right system, or at least knowing your options, puts you in a better position to respond effectively.