More than a third of companies buying accounting software in 2017 had never used these solutions before. This is the most notable figure we learned from a new report revealing some fascinating statistics on the reasons why companies decide to invest in a new accounting solution.
Analysing the market for accounting software
To help better understand the market, Software Connect released a new report based on over 3,000 companies looking to upgrade their accounting solution in 2017. Software Connect offers software advising and consulting services, with accounting being one of the areas they focus on.
Understandably, only some specific types of companies would reach out to a consulting firm to make sure they selected the right software. Nevertheless, the study tells us a lot about today’s market.
- The figure that struck us the most was the fact that as much as 37% of companies were first-time buyers of accounting software.
- 35% of those companies who were seeking an upgrade were previously QuickBooks users, while 11% used Sage 50.
- Of all companies analysed, as much as 20% needed the solution to handle not just accounting but payroll, inventory, and invoicing as well.
- Business Intelligence features were sought after by 70% of companies with over 50 employees.
- Large companies were 41% less likely to invest in cloud-based accounting solutions.
Why do companies buy accounting software?
The analysis included an extensive section on why companies decide to select a new accounting solution. We learned that 43% needed increased functionality, 29% were looking to replaced legacy systems, while 17% required the new system to offer improved usability.
Other reasons to upgrade include: better product support, lower cost, and better reporting.
What non-core features were the most sought-after
The study also sheds some light on what non-accounting features companies desire the most. For 20% of companies, payroll, inventory, and invoicing were the most desirable features to use as part of a software package.
For 72% of companies that employ 50 or more staff, Business Intelligence and budgeting were the most interesting. Other features worth considering by larger companies were fixed assets (71%), fund accounting (55%), and procurement (49%).
It seems that there is high demand for multi-faceted accounting solutions which grow with the size of the company. The bigger the budgets, the more need for financial analysis and prediction features integrated with an accounting solution.
Where is the change coming from?
While the new report showed the rapid growth of accounting software, the study also included some answers on what has been driving this change.
One of the drivers was industry consolidation–many businesses either merge or acquire other companies or their subsidiaries. This fact drives the need to consolidate reporting and budgeting across merging organisations.
Another reason to upgrade company software is the rise of telecommuting. The New York Times reported that in 2016 as much as 43% of US employees worked remotely at least some time during the week. Features such as remote access, remote team management, or time-tracking are now in demand.
Have a look at this list of QuickBooks plugins that augment what’s possible with the platform alone.
The report also mentioned that government compliance might lead companies to change their systems. A good example is the US law that requires all companies doing business with the federal government to be compliant with the Defense Contract Audit Agency (DCAA). In the UK, the upcoming Making Tax Digital initiative may be an important factor too.
Both hosted, and installed solutions are acceptable
Interestingly, the new study indicated that there wasn’t a notable preference towards locally installed vs. hosted accounting solutions.
The report revealed that 20% of companies preferred hosted systems, while another 20% favoured local solutions. For the remaining 60%, both options were feasible. However, large companies (over 50 employees) were more reluctant to consider cloud. According to the research, they’re “41% less likely” to go cloud compared with their lower-staffed counterparts.
This figure is probably highly related to the specific client base used for the research, given that the overall market figures seem to favour cloud. According to Intuit’s report “The Appification of Small Business” published in 2015, as much as 65% of US companies used cloud accounting and invoicing solutions.