Outdated accounting software is something that can easily go under the radar within finance departments. Many companies won’t realise they’re using a legacy finance system until something goes wrong, or they won’t upgrade their solution until a drastic issue occurs (at which point they’ll have to scramble to find a replacement).
In terms of the issues they may face, the worst-case scenarios can involve losing data, experiencing a security breach, or seeing a system crash which halts the entire operation. Reliance on old accounting software can be a drain on business productivity too.
Worryingly, when conducting our Finance Trends Report, only 20% of finance professionals said they’re currently using Cloud-based software, and 60% said they don’t currently use any business software for gaining a real time view of KPIs.
This goes to show that many within this sector are still using traditional methods and are exposed to the associated risks. As for why this is the case, it could be that they incorrectly believe they’re already on the Cloud, or they’re yet to put their full trust in Cloud technology.
The benefits of upgrading legacy finance systems extend far beyond basic bookkeeping. It assists finance teams with evaluating trends, managing risks, and assisting with important decisions (by providing real time reports to stakeholders).
Cloud accounting software simplifies the process of storing and monitoring data. These platforms provide clarity around a company’s financial position and are the gold standard when it comes to modern financial management methods.
Why do businesses stick with legacy finance systems?
Reason #1: "It's difficult to find the right accounting software"
The process of finding a good replacement for outdated accounting software can take some time, which can be a serious blocker when it comes to digital transformation. Many finance leaders won’t know where to start. They may be too busy to put the search into motion or won’t know enough about the latest innovations to make a confident decision. It can often be less stressful to stick with what you know.
Reason #2: “Updating accounting systems costs too much"
Those in charge of the budget may think it’s too expensive to invest in a fancy new system. But the truth is that keeping legacy finance systems in place will be more costly in the long run. With Cloud solutions there are no nasty financial surprises when something goes wrong, as there is a fixed subscription fee each month which covers all support and updates.
Reason #3: "If it isn’t broken, don’t fix it"
If it’s perceived that the existing FMS is still capable of fulfilling day-to-day financial tasks, the leadership team may see no reason to replace it. As a result, they’ll perhaps stick with their traditional methods until they’re no longer functional at all. It could be argued that this way they’re getting their money’s worth, but really they’re just holding themselves back. CFOs should be pushing for digital transformation to keep their finance department up with the times.
What are the risks of using outdated accounting software?
With some old accounting systems, the provider may not even support them anymore. This means they’ll no longer be developing bug patches or adding new security protocols to the platform. Unpatched software is more at risk from attacks and automated scanning bots that could put your sensitive data in the wrong hands. Without support, you’ll be left to deal with security breaches by yourself.
Unable to meet legal and regulatory compliance
This lack of updates/patches also means the software will no longer be kept up to date with the latest finance legislation and regulations. It will be up to your team to ensure they remain compliant with the many laws that are constantly changing at pace. If you fail to remain fully compliant as a business, it could lead to some damaging fines.
Increased operating costs
The maintenance of on-premise solutions is costly and time-consuming. Elements of these systems are more likely to fail than new ones, leading to frustration for employees and poor outcomes for customers. Old accounting solutions cannot easily integrate with modern technology either. This means that processes aren't as efficient as they could be and opportunities to leverage new functionality are missed.
Less business productivity
Old financial management software runs slower, and therefore doesn’t execute tasks at the desired pace. This will lead to lower productivity which will ultimately harm the business’s revenue. The finance team will also be demotivated if they don’t have the tools to do their job well.
Delays in data processing
In today’s market, it shouldn’t take long for companies to attain the financial data they need to make informed decisions. If they can’t process or access data quickly, they won’t be agile or react to underperformance/market changes in a timely manner.
Software integration issues
Traditional accounting tools may lack the flexibility to export or integrate. Companies today use a plethora of digital platforms across their various departments. Without integration capabilities, they’ll have to manually move data between each system, which is extremely time-consuming. In the past many solutions were designed to be standalone, but this inhibits your ability to scale the finance function during periods of growth.
Outdated accounting solutions will often cause delays in reporting, inaccurate data analysis, and a high volume of financial errors. They may also lack critical features that are needed to streamline processes, such as automated data entry, reconciliation, and financial planning. As a result, more manual work will be needed, which will represent an inefficient use of time and energy.
These systems can also create a lack of order within the finance function. They may not be able to store large amounts of information, leading to the use of many spreadsheets that have been updated at different times. This lack of capacity could lead to inconsistencies in financial reporting or incomplete datasets.
Signs your legacy accounting system is slowing your business down
It's not scalable
Managing financial processes can quickly become overwhelming as your business grows. New subsidiaries, regulatory frameworks, tax jurisdictions, and product costs can be a lot to stay on top of. Legacy accounting software will have a threshold it cannot cross as you continue to expand.
Whereas Cloud accounting software can keep expanding while your processes are ramping up. Finance teams should be the driving force with Cloud adoption, as they’ll be the first to feel the effects of a system that has reached its capacity.
Insufficient automation capabilities
Technological advancement is bringing automation to numerous industries, including finance and accounting. If your legacy system doesn't have automation features, you are likely falling further behind competitors as time goes on.
Automation eliminates most of the errors that are inherent to manual processes. It can also eradicate the data entry involved with payroll, invoicing, bank reconciliation, and expenses management. Therefore, digital transformation can give you a competitive advantage.
Look out for:
- The use of manual labour to send recurring monthly invoices
- Sifting through endless paper receipts when managing expenses
- Taking several hours to reconcile bank statements at the end of every month
Updates no longer available
Continuous software development is essential for providers looking to retain their customers. Keep an eye out for the absence of essential updates. This can indicate they no longer want you on the software, as they’re in the process of discontinuing it. If your system hasn’t been updated in months, it’s probably time for an upgrade.
No compatibility with new applications
For your accounting software to be of value, it should be able to work seamlessly with other business applications. Without effective integration, it can be very tedious keeping all applications synchronised.
Look out for:
- No integration between your billing and expenses management systems
- Your legacy accounting software integrating with unsupported versions of other applications
- A decrease in the number of platforms your system can integrate with
No remote functionality
The ability to access your accounting software at home or on the road used to be considered a luxury. But that all changed with the pandemic, with many people shifting to permanent remote working.
In our Trends Report, 77% of the surveyed finance professionals said they can only work effectively in the office, which seems to suggest their businesses use traditional on-premise solutions. This means productivity will potentially be hindered by their location or the time of day. And it will not always be possible to apply data updates in real time.
Look out for:
- No iOS or Android application for your accounting software
- Limited mobile functionality, or lacking essential features on mobile
- Only having access to the system in a fixed place on a specific device
Future-proof your business with updated accounting software
By moving away from traditional on-premise systems, you can free your business from rigid data structures and outdated processes. As a result, you will no longer have to accept underperformance or poor productivity.
Customer and stakeholder expectations are continuously increasing due to market conditions, competitor capabilities, and tech advancement. Therefore, your technology strategy shouldn’t just focus on today, it should take into account the many years that lie ahead.
If you’re noticing the limitations of your existing legacy accounting software, and are starting to face the associated repercussions, it’s probably time to embrace Cloud accounting. Take a look at our Cloud-based accounting software, Advanced Financials, and find out how this powerful technology can future-proof your finance team.