There are 5.7 million Small and Medium Size Enterprises (SMEs) in the UK with half of those reporting that they are being paid late with an average debtor payment period of 72 days (The Telegraph, 2018). There is said to be a strong positive relationship between accounting record keeping and performance according to Abdul-Rahamon and Adejare (2014), with accounting software arguably reducing the risk of human error. SME owners spend an average of 120 working days on administrative tasks, the majority accounting related (Sage, 2017). Yet 65% of UK200 members do not use an accounting software package, according to research by Accounting Web (2017).
To underpin the development of a framework for the selection of accounting software packages a critical literature review was carried out to identify the issues causing poor cash flow in SME’s. This showed that the invoicing process, getting invoices paid, expense management and the importance of regular cash flow forecasting are all essential ingredients for effective cash management. As part of examining the accounting software features that would best optimise cash flow, the literature review covered the potential cost benefit software can bring. The literature review also evaluated academic papers discussing software evaluation and selection methodologies.
The project used an inductive research strategy, collecting quantitative and qualitative data in a structured interview framework aimed to validate the project’s theoretical framework. Two out of a total of three respondents indicated that their businesses were experiencing cash flow issues. There was corroboration with the literature that this, to a degree, was caused by a delay in customer payment. Two out of three indicated they had a robust system for recording expenditure, with only one respondent using an ‘off the shelf’ software package. There was agreement with wanting to access accounting software from any device with a secure internet connection and bank account integration was cited as the most useful accounting software feature to help optimise cash flow.
Both research improvement and management recommendations were given, with the project’s framework being applied to three benchmarking packages.