Balmori Software Inc.

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Photo: Kari Shea

In our line of business, we've watched thousands of entrepreneurs and companies struggle with computerization. None needed to be persuaded of the benefits; the problem was that too many were hobbled by misconceptions and mistaken beliefs. These mental blocks made their computerizing experience more difficult and more stressful than it needed to be, or actually led to its failure.

Here, in Q & A form, are the strange beliefs we've had to address frequently. We hope this discussion will help SMEs roll out their own computerization more smoothly and successfully.

1) When is the best time to computerize my company's accounting?

Anytime is a good and valid time to start computerizing your accounting. Anytime.

Regardless of what many people may think, no month is inherently better or more convenient than another as a starting point for computerization. November or August or February is every bit as good as January.

And regardless of what many may think, you don't have to start with the first day of the month either. November 22 or April 27 is just as good a starting point as June 1 or February 1. Or January 1.

Yes, all of this sounds counter-intuitive. Hold your horses, because there's more on this below.

2) We have this vague, half-formed conviction that it's necessary to capture the entire first year's transactions in the computer. How true is this?

This question is related to question #1. Short answer: it's not necessary.

If you don't think things through carefully, you might assume that January is the only time you can start your computerization. This is because, you might think, only by starting on January 1 can you capture every single transaction of the year, which - you might assume - is essential for a computerized set of books. To this way of thinking, therefore, you have to start your computerization with January.

When you see it put down on paper like that, it's easy to see that this can't be right. Surely, even an inexperienced person will see that companies all over the world don't computerize only in January.

The simple fact is, there's no need to obsess about inputting every single transaction of the year, because in accounting practice, balances can be forwarded.

What this means is, the ending balances of the last day of your manual-mode accounting can be brought forward as the beginning balances of your computerized-mode accounting. And this procedure can be done any day of the year.

And because this accounting technique is known to all accountants, the practical implication is that it's not necessary to start from January 1 when you are undertaking a computerization project.

All well-designed accounting applications have provisions for accepting beginning balances. Therefore, if you want to start your computerized books, say, today, and today happens to be March 17, no problem. You can simply input your ending balances as of March 16th, then be encoding all transactions into the computer starting with March 17. And you're off and running.

So, for the rest of this year, and beyond, your company is computerized. Done; wonderful.

Now, what about your transactions for those first 10 weeks of the year - January 1 to March 16? Here's a counterintuitive recommendation: for that ten-week period, your company's financial records remain in old-fashioned paper form. And you should be OK with that.

And this is precisely the big stumbling block for so many people. What? they gasp. We spend all that money and effort to computerize, and then [insert number here] months of our transactions are not captured in the computer?!

This is the time when someone, somewhere in your organization will succumb to temptation and say, "People, shouldn't we input our transactions for January 1 to March 16 into the computer, so that we can have complete data for the year?"

Sure, the idea sounds very reasonable at first blush, but it's actually insidious. Bordering on sabotage, even. Why? Because this suggestion all but guarantees that your computerization quest will be unnecessarily tedious, will be more complicated than it needs to be, and will ultimately take a lot longer than it needs to. How so?

Think about it. Real life never stops unfolding for you and everybody else on planet Earth. Assuming you're a going concern and not a protection racketeer, a kickback-taking bureaucrat, or a retiree, you're doing business and transacting transactions every single hour of the unfolding year.

When do you think you're ever going to have time to input the transactions of January 1 to March 16?

And unless the voice of common sense intervenes here, this is where a lot of companies go astray and make the wrong choice.

The brutal fact is, you won't have time to input those two and a half months of backlog, because you'll be too busy dealing with the inexorable onrush of new, oncoming transactions.

Let's mull this over for a minute and see if our unspoken assumptions hold up. So what if your January to March 16 transactions are not in the computer? This will only be true for this year, and will be a non-issue thereafter.

Soon, as time's winged chariot rushes us all into the inescapable future, this year that you obsess about so much, will be a mere memory, and your company is already firmly in the binary world; and by next year , your non-computerized fragment of this year is no longer a concern.

Most receivables from that period would have been long since collected, most payables long since disbursed.

Remember how you managed your books manually for 10, 20, or 30 years? So, what's wrong with managing part of this year manually for just two more months? six more months? or even nine more months? So, by the middle of next year, or the year after that, or the year after that, how much did not starting on January 1 of this year, hurt you?

The important thing is to attain breakthroughs in productivity; and you'll attain those only when your computerization is on-stream, not in a perpetual state of almost-but-not-quite-ready-to-go-live. And it doesn't take much insight to see that insisting on perfectly complete data for the year is an obstacle, not an aid, to that goal.

Therefore, if you look at the big picture - and where your true interests lie - you'll see that there are much more important things to pursue than the anal-retentive insistence on starting your computerization on January 1. Don't worry about capturing every single transaction of the first year of your computerized accounting. Trying to do so will only delay and endanger your computerization project.

3) What if our fiscal year is not the same as the calendar year?

What if your fiscal year ends on March 30? or June 30? It doesn't matter. You can still start your computerization any day of the year, as explained in #1 and #2 above. Fiscal year, calendar year - the reasoning is the same.

4) We need to start with absolutely perfect beginning balances, right?

Again, here's another paralyzing misconception. Paralyzing, because satisfying this condition makes it doubly challenging for you to get up and running. The counter-intuitive answer is, No, your beginning balances don't have to be perfectly accurate when you launch your computerization, because in accounting there is such a thing as adjusting entries. You can always adjust your beginning balances later.

The important thing about computerization is to get it on-stream. And here, let's be crystal clear about what we mean by "getting your computerization on-stream." Getting it on-stream means nothing more and nothing less than: a) You are already routinely inputting current transactions; and b) you are routinely extracting accurate, believable reports. It does not, does not, does not mean: you are currently populating the reference files.

That's difficult enough in itself, and therefore should be your main focus when you embark on a company computerization. Your concern now is to get the process established, and not to distract yourself polishing details that can be polished later.

Insisting on perfect beginning balances will make getting on-stream much harder than it already is, because getting perfect beginning balances consumes time and effort. Before you know it, another 20 days or 120 days have elapsed since your target cutoff date, and your "perfect" beginning balances have come at the price of further delaying your computerization - and bloating the number of old transactions that you'll need to catch up to encode. It becomes the same problem as insisting on encoding every single transaction since January 1. Again, as stated in connection with an earlier question, there are much more important things at stake than the anal-retentive insistence on starting out "perfect."

So... no. Get the computerization started with reasonable beginning balances. Get the computerization process on-stream, then adjust your beginning balances later if necessary. (For more on this crucial decision, read this article.)

Shake off the superstitions - about starting on a certain sacred day, or capturing every single transaction of the year, or getting your data absolutely perfect before encoding it. Shake off the imaginary restraints, and you'll computerize sooner, more smoothly, and with a lot greater likelihood of success.

Now that you know how to avoid major computerization pitfalls, read here about how Balmori Software has made the set-up and roll-out of a major computerization project much easier and more stress-free. - rsr

(Images in this article are photographs of art works from Pinto Art Museum in Antipolo, Rizal.)


Title:   Superstitions: Blow past these imaginary obstacles to your successful computerization



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