The accounting market for retail is surprisingly complex for such a straightforward application. The primary reason for the complexity is due to vendor saturation among both vertically-oriented software vendors and horizontally-oriented accounting vendors. Companies approaching the market from both angles have developed a large number of accounting programs for every type and size of business, creating a complex and confusing market for buyers. This guide should help buyers understand how best to approach the retail accounting market and identify the right vendors for their needs.
Here’s what we’ll cover:
What is Retail Accounting Software?
“How much money is this business making?” is a difficult question to answer for a surprising number of retailers. If you have trouble answering this question, you may be in need of an accounting system. On the most basic level, a formal accounting program will track payables, receivables, the current value of inventory on hand, and depreciation of assets. The primary goal of accounting applications is to centralize all accounting-related data in one system and provide owners with accurate figures. By truly knowing their key metrics, owners can make data-driven decisions to improve the business.
Retailers will have two choices when implementing an accounting program: implementing a standalone accounting program like QuickBooks, or implementing a suite of applications that include modules for accounting, point of sale (POS), inventory control, and more. The decision will be based primarily on the size of the business and the extensiveness of the company’s needs.
What Type of Buyer Are You?
You will want to focus on accounting programs that are designed for the buyer category you fall into. We have found that almost all businesses belong in one of the following three categories:
- Small buyers. Most retailers with fewer than five locations will fall into this category. However, if a retailer operates one or a handful of large stores, they may be in one of the other two categories. These small buyers have straightforward accounting needs. They typically require an affordable option that can integrate with their POS system.
- Enterprise best-of-breed buyers. These larger retailers have already made substantial investments in point of sale and inventory control systems. They typically do not want to replace these existing systems and are looking for a standalone accounting program. Integration, flexibility, and scalability are usually key requirements. These buyers typically have more than five locations or a smaller number of large stores.
- Enterprise integrated suite buyers. Contrary to the best-of-breed buyers, these buyers are looking for one system that offers fully integrated applications for point of sale, inventory control, and accounting. They may also opt for modules for warehouse management, merchandise planning, or multi-channel management. Many of these buying decisions will be dictated by POS and inventory control needs since accounting functionality typically does not vary much from system to system.
The Vendor Landscape
Buyers should find the retail accounting software market much more navigable when approaching it with their buyer category in mind.
|This type of buyer...||Should evaluate these systems|
|Small buyers||Peachtree, QuickBooks|
|Enterprise best-of-breed buyers||Microsoft Dynamics, SAP, NetSuite, Sage MAS 90/200/500|
|Enterprise integrated suite buyers||Epicor, Cybex, Jesta Vision|
Market Trends You Should Understand
Various software trends are impacting the retail accounting software market. The primary trends include the following:
- ERP vendors as retail vendors. Software companies such as SAP, Microsoft Dynamics, and Epicor have traditionally offered horizontal accounting or enterprise resource planning (ERP) programs. Users of these packages for accounting would use a separate system for operations. Over time, these providers have developed extensive functionality to enable retailers to use them for point of sale, inventory control, warehouse management, and accounting.
- Software as a Service (SaaS). Many accounting programs have transitioned to SaaS. We typically encourage buyers to consider this model with an open mind as SaaS accounting solutions can ease the IT burden and help them avoid large upfront costs.
Benefits, Potential Issues & Costs
The benefits of implementing a formal accounting system are fairly straightforward but surprisingly difficult to attain without a proper system. Most adopters should expect the following benefits:
- Organization and efficiency. If you have ever tried to prepare a tax return without a formal accounting system or process in place, you know how much more organized a program will make your business. Having all of your data managed in one place saves a surprising amount of time when trying to determine performance of the business.
- Automated reporting. Most accounting programs come with a number of standard reports, as well as the ability to build custom reports if necessary. Buyers should find it very beneficial to make key decisions quickly without having to spend a lot of time manually pulling together information.
When selecting an accounting system, buyers should ensure that the system will integrate with their existing POS or inventory control software. Many buyers will find that simply exporting sales data into a .CSV file and then uploading it to the accounting package is sufficient. Bigger buyers with more data will likely require true integration though.
Buyers should note that there is a large price difference between smaller packages such as QuickBooks or Peachtree and larger tools like Microsoft Dynamics GP. As a result, most buyers will stick with a small program until the business has grown large or complex enough to justify the investment.