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Implementing Accounting So ware

In Small Businesses In New Zealand:
An Exploratory Investigation
Venkateswarlu Pulakanam

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 Accountancy Business and the Public Interest, Vol. 9, 2010 

IMPLEMENTING ACCOUNTING SOFTWARE IN SMALL BUSINESSES IN NEW

ZEALAND: AN EXPLORATORY INVESTIGATION

Dr Venkateswarlu Pulakanam
Senior Lecturer, College of Business and Economics, University of Canterbury,
Christchurch 8140, New Zealand.

E-mail: venkat.pulakanam@canterbury.ac.nz
Tel. (64)33642638, Fax: (64)33642020

Dr Theekshana Suraweera
Lecturer, College of Business and Economics, University of Canterbury,
Christchurch 8140, New Zealand.

E-mail: theek.suraweera@canterbury.ac.nz
Tel. (64)33642631, Fax: (64)3642727

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IMPLEMENTING ACCOUNTING SOFTWARE IN SMALL BUSINESSES IN NEW

ZEALAND: AN EXPLORATORY INVESTIGATION

ABSTRACT
The implementation of off-the-shelf small business accounting (SBA) software has
become widespread among small and medium sized enterprises as it has become
affordable and technically powerful. At the same time, selecting and implementing a
suitable accounting software from among the numerous available software packages
is often difficult for small businesses. Using interpretive approach based upon a
qualitative research methodology, this paper explores the challenges faced by small
businesses in New Zealand implementing SBA software. User confusion, lack of
external guidance and support, and lack of accounting skills have been identified as
major issues faced by small businesses in implementing SBA software. The external
consultant’s play significant role in successful implementation of SBA software, but
currently very little research has been done in this area.

Key words: Small Business, Accounting Software, Information Systems, Information

technology

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INTRODUCTION
The accounting software, which comes under the broad definition of Accounting
Information Systems (AIS), is a computer software that records and processes
accounting transactions within functional modules such as accounts payable,
accounts receivable, payroll and trial balance. It may be developed in-house by the
organisation using it, may be purchased from a third party (off-the-shelf packaged
software such as MYOB and QuickBooks), or may be a combination of a third-party
application software package with local modifications. It varies greatly in its
complexity and cost. Today’s packaged accounting software not only records
financial transactions and produce accounting reports, but they include functionality
for managerial decision making aimed at gaining competitive advantage. According
to Collins [14], “small business accounting (SBA) software has made enormous
technological leaps in power, speed, sophistication and flexibility in recent years.”
Mohamed [39] noted that “over the years, software suppliers have been adding more
innovative features to their finance packages, such as web interfaces and better
integration with supply chain and other applications, and they have also altered
products to make them more useable for non-accountants.”

Many of the accounting software products have add-ons that can be used to
integrate the software with other software or web / internet. For example, Intuit, one
of the US based SBA software, offers more than 450 add-ons that a third party can
integrate with QuickBooks [11]. Accounting software for specific market segments,
such as retail industry, are also available in the market. Basic version of a stand
alone SBA software costs as low as $US100. According to one estimate, in New
Zealand, over 18,000 new copies of off-the-shelf accounting software packages are
sold every year. MYOB is the leading SBA software in New Zealand and Australia [4,
7] and has a worldwide following of 500,000 users [14]. The other popular software
used in New Zealand are QuickBooks, MoneyWorks and Quicken. Almost all of
these accounting packages have large customer base, which is good for small
businesses as it is a hedge against obsolescence [25].

Accounting and payroll application software packages are widely used packages
among small businesses [5, 26, 28, 31, 32, 39]. In a survey of Finland small
businesses carried out by Heikkila [26], 85 percent of the respondents were using an
accounting package. Similarly, in a survey of IT use in small businesses carried out

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in UK in 1998, 86 percent of the 800 respondents reported that they had

computerised their accounting systems [18]. In 2001, in New Zealand, 77 percent
used IT systems to complete accounts [56]. These figures would have increased
significantly in the last few years.

However, small businesses are at crossroads in terms of adopting a computer

system to manage their accounts. Their dilemma is, which one of the ever increasing
brands in the marketplace is suitable for them? If they already have one, should
they upgrade it to a new system? Do they need an external consultant? Which
consultant they should approach? Can they afford? Are there any risks?

Research on IT adoption in small and medium enterprises (SMEs) is rapidly

increasing particularly during the last decade [45]. There are also a number of
research studies on implementation and adoption of specific IT projects such as
implementation of e-commerce and Electronic Data Interchange (EDI) in SMEs.
However, published research on the implementation of accounting software in small
businesses is sparse, even though it is one of the widely used software among small
businesses.

Given the limited research in this area, the aim of this study is to increase our
understanding of issues and challenges faced by small businesses in New Zealand
in implementing SBA software. Adoption (making decision to adopt), implementation
and post-implementation (review and further technology adoption) are three different
stages in the technology innovation cycle [60]. The focus of this study is only on the
implementation stage of SBA software. That is, the focus of this study is from the
point the small business owner / manager decides to adopt (or upgrade) SBA
software till the point when the implementation is complete and the small businesses
start using the system. We believe adoption of SBA software is not an issue any
more, as majority of the small businesses are implementing some form of
computerised accounts.

The paper is organized as follows. A brief literature review is presented next, which
is followed by an outline of the research methodology. An analysis of findings is then
provided. The discussion and conclusions are presented last.

LITERATURE REVIEW

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A ‘small business’ is defined differently by different researchers (Table 1) and

different countries. In this study, a small business is one with nineteen or fewer
employees as defined by New Zealand Ministry of Economic Development [42]. The
SME sector plays a significant role in the national economies. In New Zealand in
2008, 97 percent of enterprises were small businesses, 87 percent of the enterprises
employed five or fewer people and the SMEs (businesses employing less than 99
people) accounted for 37.3% of the economy’s total output [42]. In Australia SME
sector accounts for 99% of all businesses, and within the United States and the
European Union they account for over 97% of all businesses [52]. Given the
important role played by small businesses in national economies and given a large
proportion of these small businesses use IT for accounts, we believe, this research
on implementing SBA software in small businesses will be useful for small
businesses as well as researchers.

Table 1: Employee sizes used in defining micro, small, medium enterprises by

a sample of IT researchers.

Author(s) Country Micro Small Medium SME

Holmes & Nicholls (1988); Australia 1-19
Burgess (2002) Australia 1-5 1-20
Cragg & King (1993) New Zealand 1-50
Igbaria et al. (1998) New Zealand 20-100
Chau (1995) Hong Kong 1-49
Ismail & King (2007) Malaysia 20-150
Thong (1999) Singapore 1-99
Duan et al. (2002) UK 10-249
Mathews (2007) UK 1-200
Wynn (2009) European Countries 1-249
Duxbury et al. (2002) Canada 2-9 10-99 100-500
Hunter et al. (2002) Canada 1-100
El Louadi (1998) Canada 1-300
Qureshil et al. (2009) USA 1-9 1-499
Bharati & Chaudhury (2006) USA 1-10 11-100 101-500 1-500

There is a gradual increase in the number of small businesses adopting IT. In 2006
in New Zealand, 93% of businesses used computers and 46% of staff had access to

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the internet [57]. Past studies have shown that the use of Information and
Communication Technologies (ICT) can play an important role on the growth of small
businesses [37, 49]. These studies suggest that IT can be employed to bring about
increased operational and administrative efficiencies [37, 50], cost savings,
enhanced internal communication, expand customer base, increase sales, better
customer service [53], help implement business strategy [33] and in general
increased competitiveness [37, 50].

However, according to Burgess [10], “small businesses are often placed in the
situation of knowing that IT can support their businesses in some way, but they lack
the expertise and resources to know how it can be effectively applied.” Typically, the
introduction of IT in SMEs is piecemeal and fragmented lacking any strategy and is
not well managed [23, 47]. The following is a summary of barriers and challenges
faced by small businesses as reported in the IT literature on small businesses.

Affordability [19, 51]: The costs associated with implementing an IT project include
the cost of hardware and software, the cost of hiring consultants, the cost of
employee training and the cost of on-going maintenance. This is a major issue with
small businesses as they operate on very restricted budgets and do not have
sufficient capital to invest towards state-of-the-art technologies.

IT expertise [19, 48, 51]: Small businesses do not possess any technical knowledge
or skills and are oblivious to the benefits that IT can bring. They lack information on
available technologies and finding useful impartial advice is difficult. Ignorance of the
power of IT is a major inhibiting factor for small businesses.

Owner’s cultural and technical background [46]: Conservative entrepreneurs and

entrepreneurs with limited technical background are expected to “remain attached to
traditional information sources and communication systems” while aware businesses
are expected to “add new information channels to the traditional ones.” Professional
background and knowledge of the entrepreneur play strategic role in implementing
new technologies.

Owner’s Management skills [10, 15, 48]: Small business management is informal
and ad hoc. Much of their time is spent in ‘surviving’ so that little time can be devoted
to examine IT projects. They lack time and planning and control procedural skills.

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Organisation size [10, 19, 61, 62]: A number of studies suggest that business
organisation size has a direct positive relationship to the adoption and successful
use of management information systems because larger organisations have more
opportunities to use IT, a more developed infrastructure and a more developed
strategic planning function.

External consultants and vendors [2, 3, 10, 19, 30]: In adopting IT systems by small
businesses, hiring a consultant is a common practice. However, one of the common
criticism of vendors and consultants is that they ‘do not understand the small and
medium business market and that the level of support provided by them is only
adequate or less than adequate.’

Other factors [15]: User resistance, lack of acceptable software may also inhibit the
use of IT in small businesses.

How to overcome these barriers is also covered extensively in the literature. Igabaria
et al. [30] cite a number of references to support the view that management support
can promote the acceptance of IT. Burgess [10] suggests that lack of IT knowledge
and lack of understanding of IT benefits can be overcome through appropriate
training leading to successful implementation. Igbaria et al. [30] have also found that
good external support provided by vendors and / or consultants such as technical
support, training and harmonious working relationship can reduce the risk of IT
failure in small businesses. Careful selection of vendors and / or consultants as
providers of hardware or software to integrate the IT into the business and / or to fill
the IT knowledge gap within the organisation is therefore vital to the successful use
of IT in many small businesses [10].

As mentioned before, even though, implementation of accounting software is very

common among SMEs, research on this and in general on packaged software is
limited and is over a decade old when packaged accounting software was in its early
stages. In an exploratory research on success of software packages in small
businesses, Heikkila et al. [26] argue that small businesses have often been
disappointed with their software packages because they are either difficult to use (for
businesses with less than 20 employees) or do not meet the needs of the company
(in businesses of more than 50 employees). Further they recommend that “small
businesses should place more emphasis on the acquisition, especially the

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requirements specification, and developers should improve user-friendliness, the

quality of support and documentation to fulfil the needs of the smallest of small
businesses.” Using a survey of 68 small businesses in Hong Kong who purchased
packaged software in early 1990s, Chau [13] examined the differences in the
importance given to software selection criteria by the owner and the relevant
manager involved in the software selection. They found that the owner and the
manager did indeed differ in the importance given to the different selection criteria.
Interestingly, of the 21 software selection criteria considered, ‘vendor technical
support’ was ranked highest by both the owner and the manager.

Ismail et al. [32] investigated the status of computer-based accounting systems

(CBAS) adoption among small and medium manufacturing businesses in the
northern region of Peninsular Malaysia. Specifically they investigated the following
questions: What was the extent of CBAS adoption among SMEs in Malaysia? What
was the quality of CBAS adopted by the SMEs? And, what were the factors that
influenced the extent of CBAS adoption? Their findings were: Over 90 percent of the
(32 survey respondents) firms adopted CBAS; years of adoption was positively
correlated with the overall quality of CBAS adopted; maturity stage of CBAS
adoption was significantly positively correlated with age of business; no evidence to
suggest that age and size of the businesses and type of ownership influenced the
adoption of CBAS. Their research did not address issues and challenges related to
implementing CBAS.

RESEARCH METHOD

Since this study attempts to get a deeper understanding of the issues and
challenges faced by small businesses in New Zealand in implementing accounting
packages, we have employed an interpretive approach based upon a qualitative
research methodology [20, 29]. This method is useful in addressing practical
problems where the experience of those who are familiar with and involved in the
particular scenario is important and the context of their actions is critical [24, 35].
According to Elharidy et al. [20], interpretive research is useful “…in studying real
world practices, decisions and settings, with the objective of analysing, interpreting
and understanding them: thereby identifying solutions to pragmatic problems. Its
focus is the everyday life of organisations as they exist "on the ground"; rather than

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exploring abstract problems and providing artificial solutions, "sitting at a distance"

and using some remote lens held by a "detached" researcher. … The primary aim of
interpretation is to explore individual and collective experiences in order to develop
an holistic understanding of people's actions and interactions in the field.” We
selected a convenient sample of eight small businesses (owner managed
independent businesses with less than 20 employees and using some form of
computer based accounting software) and eight IT consultants who provide services
to SMEs as our research participants. In addition, detailed discussions were also
held with the Managing Director of a leading SBA software company. We selected
the sample of small businesses and consultants from local yellow pages. In order to
give us maximum opportunity to capture all issues faced by these businesses, we
tried to include the small businesses from different industry sectors. The basic
characteristics of the case study firms and the consultants interviewed are given in
Tables 2 and 3.

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Table 2: Characteristics of Case Study Firms

Firm Industry Number of Number of Length Current Level of IS

Employees Years In of Use of Applications
Business Accounting
(Years) Software
(Years)
RT Radio 8 20 10 Switched from DOS based
transmitters- software to MYOB with
Manufacturing, advanced modules; some use
distribution of MS office;
GA Garments- 7 10 6 Switched from DOS based
Sales/distribution software to MYOB; some use
of Excel spreadsheets
VG Vegetables - 8 6 4 Moved from manual
sales/ distribution accounting processing to
MYOB basics; then to
premier and networked multi-
user system; uses Lynx and
MS windows platforms
GW Giftware 10 11 10 Started with MYOB basic
wholesaler ( + 4 sales package; Later expanded to
reps) Premier 9 version of MYOB
and payroll function;
Maintains company website
and B2C e-commerce
facilities; recently installed
Virtual Merchant (software
that links MYOB with the
web for data sharing)
PD Printing and 13 2 2 Accounting software used
Design from the inception of the
company. Owner/manager has
had previous exposure to
QuickBooks accounting
software; Website in place;
Business is operating at two
locations and data transfer
between the locations takes
place through internet.
VP Small toy making 6 12 10 Uses QuickBooks; used
and greeting card customer management
sales module, but not any more
RJ Manufacturer and 8 2 2 Uses QuickBooks; Website in
sales of Skis place
TS Wholesaler and 15 8 8 Uses MYOB with payroll
distributor of module; Uses Virtual
skincare products Merchant

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Table 3: External Accounting Software Consultants Interviewed In This

Research

Name Expertise Background and Experience

CP Independent MYOB Has accounting background; Was supporting MYOB since late
consultant 80’s; provides training courses on MYOB

MV Independent MYOB Lecturer; learned MYOB; does consulting; provides training

consultant

PO Independent MYOB Has accounting as well as IT background; was doing accounting

and IT consultant software development; knows MYOB, QuickBooks and XONet

AL Independent MYOB Network Consultant for 7 years; accounting software consultant

and IT consultant for 4 years

NBS Independent MYOB IT consultant for over 13 years; Familiar with a number of
and IT consultant accounting packages including MYOB and QuickBooks

MS Independent MYOB IT and accounting background; Worked for MYOB for five years;
and IT consultant Certified MYOB consultant

WD Independent MYOB IT and accounting packages; 20 years of experience

and IT consultant

DB Belongs to an Working for an accounting firm; Accounting background; worked

accounting firm for MYOB

DT Senior Manager Senior Manager of a leading software company in New Zealand

The backgrounds of the case study businesses include: radio transmitter

manufacturing and distribution, garment sales and distribution, giftware wholesale,
vegetable sales and distribution, and printing and design. The number of years they
were in the business at the time of this study ranged from 2 to 20 years with
employee sizes ranging from 6 to 15. At the time the data were collected, five of the
study businesses were using MYOB and the remaining three businesses were using
QuickBooks. Of the eight businesses two businesses switched from DOS based
accounting systems to Windows based off-the-shelf systems. Three of the eight
businesses were using only a basic version of the accounting software mainly for
bookkeeping. The remaining businesses had advanced versions of the accounting
software. Two of the businesses were using payroll modules and one business was
using inventory module. Four businesses networked the in-house computers and two

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of them were using “Virtual Merchant”, a piece of software that links MYOB with the
Word-Wide-Web. Of all the potential research participants contacted, only one small
business declined to participate in our research.
Of the eight consultants interviewed one of them belonged to an accounting firm and
the remaining seven were independent solo consultants. All the consultants were
familiar with MYOB while four of them also worked with other SBA software. Five of
the consultants had networking and other computer hardware consulting experience
as well. Four of these consultants were trained accountants. At the time of this study,
all of the consultants interviewed had a minimum of five years of SBA software
consulting experience.
A few days before undertaking the interview, the participants were sent a letter
explaining the purpose of the research study and the interview questions. We used
semi structured face-to-face interviews, which lasted about one hour each and were
guided by an open ended questionnaire, in addition to some demographic questions.
The small business investigations were centered around the following themes: (a)
Company background; (b) Need for accounting software and the required
functionalities; (c) Software acquisition and the implementation process; (d) Issues
and challenges faced in acquisition and implementation of accounting software; (e)
Skills and knowledge demanded for successful implementation and the availability of
such skills in the company; (f) Use of external support/expertise; (g) Price, cost and
scope considerations and (h) Overall quality and satisfaction. The IT consultant
interviews included the following themes: (a) Consultant’s background; (b) Software
implementation process (c) Issues / challenges in effective implementation of the
software. The interview proceedings were audio recorded and transcribed. The
interview data were then analysed to identify issues, challenges and the factors
contributing towards the successful implementation of the accounting software. The
findings of the data collected are described in the next section.

FINDINGS

Successes and Failures of Implementation

In our exploratory research on implementing SBA software in small businesses, no

major failures have been reported, although certain minor problems were identified
especially in the early stage of using the systems after installation. The external
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consultants as well as the business owners reported that they were generally happy
with the systems that they have implemented. In some cases, the performance far
exceeded their expectations.
In an exploratory research on success of software packages in small businesses,
Heikkila et al. [26] argue that small businesses have often been disappointed with
their software packages because they are either difficult to use (for businesses with
less than 20 employees) or do not meet the needs of the company (in businesses of
more than 50 employees). Based on our exploratory research, we believe that this
may not be valid any more with the currently available SBA software. Further
research of course is needed. Admittedly these conclusions are drawn using small
sample size. Further research of course is needed.

SBA Software Implementation Issues

Our exploratory survey research identified a number of key issues related to the
implementation of accounting software in small businesses. These are discussed
below.
Accounting Software Proliferation and Owner / Manager Confusion. In small
businesses, before computerisation of accounts, typically only two people managed
the accounts: the owner/manager and the business’ external accountant. The work
involved and the costs associated in ‘doing the books’ are clear and there are no
uncertainties or risks to the owner / manager. With computerisation of accounts
involving DOS based software, the number of people involved in the management of
accounts grows to three or more people: the owner/manager, the accountant, the IT
consultant and a few employees. The software is purpose built. There are no
automatic updates to the software, unless it is requested by the owner. The initial
costs are usually high, but there are no hidden costs. With the currently available
packaged software, benefits such as affordability and high functionality come with
potential complexity, risks, uncertainties and dependency. For example, the owner /
manager is now dependent on several specialised experts (sometimes on ongoing
basis): the accountant, the software consultant, the IT consultant and IT/ software
trained employees. The cost of coordination for the small business owner / manager
increases and the risk of something going wrong in maintaining and using the
accounting software also increases. The increased complexity of the “supply chain”
associated with implementing accounting software is depicted in Figure 1.
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Internal External

Manual Owner /
accounting manager + Accountant

Use of DOS Owner / IT trained Software / IT

based software manager + Employees + Accountant + consultant

Use of packaged Owner / IT trained Software IT Software

Accountant +
software manager + Employees + consultant + consultant + Vendor

Software and hardware Ongoing training

+ updates +
& consultation

Figure 1: Increase in System Complexity When Switching from Manual

Accounting to IT Based Accounting

Looking the software industry from the eye of small businesses, the small business
owner / managers are overwhelmed with choice and information. This phenomenon
may be somewhat similar to what is described as ‘consumer confusion’ in marketing
literature [38]. Deciding which package to choose is now more complicated and it
may have a negative effect on the decision behavior of the owner / manager [39].
Due to the condition known as ‘resource poverty’ [58], small businesses are often not
in a position to objectively evaluate if they needed an accounting software and if so,
which particular software should they acquire and how it can be implemented. Unlike
larger businesses, small businesses benefit from independent advice on selection
and implementation of accounting software. Lack of such independent advice
increases the risk of selecting wrong software, cost escalation and implementation
failure and it can be a barrier to uptake of IT in small businesses.
In summary, we observe that the complete absence of advice and support services
in selection and implementation of accounting software is a major issue for small
businesses. We believe, New Zealand Ministry of Economic Development (NZMED),
which formulates New Zealand nation’s economic and ICT policies and the Small
Business Advisory Group which was established by NZMED in 2003, could take
active role to help smooth implementation of accounting packages in small

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businesses. For example, they could take strategic training initiatives on accounting
packages for small businesses and provide necessary knowledge, support and
funding. They could provide web-based knowledge repositories. The web-based
knowledge repositories could consist accounting software package options, the
applicability of the software to different industry sectors, advice on employing
consultants, costs and benefits, and best practice case studies [6].
Role of External Consultants. Selection and implementation of accounting
package usually requires the help of an external consultant. According to Thong et
al. [58], “…top management may provide the resources needed for the IS
(Information Systems) implementation, but ultimately it is the external experts who
will implement the systems.”
Based on our survey research we can classify the external consultants into four
categories. The first category is ‘accountants’ belonging to a small accounting firm.
They prefer and recommend their clients to use the accounting software that they
use. It is convenient and easy to manage clients’ accounts that way. Many in this
group have limited knowledge of the software and usually do not keep up with the
software and technology updates. Often they help their clients with basic version of
the software. If the implementation is comprehensive with modules such as inventory
management, payroll and computer networking, the accountant refers the small
business to a software and / or IT consultant: “ .. they (accountants) tell somebody to
take MYOB and then they call me (the software consultant) to come and install it and
do it all properly.”
The second category is ‘IT consultants’ who in addition to their IT skills are adept at
learning different accounting software. They often can implement more than one
accounting software. This category of consultants often do not have accounting
background, but work with clients’ accountants when implementing an accounting
package. The third category of consultants is ‘solo consultants’ who are neither
accountants nor IT consultants, but have learned the software and have gained the
expertise by helping to implement for a number of small businesses. This category of
consultants is growing and has a niche market of small business owners who need
help with implementing stand alone standard accounting modules. These
consultants develop good working relationships with the clients and their charge
rates are usually low. The last category of external consultants is ‘large accounting
firms’ who often have both accounting software and IT expertise. Their
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implementation is more comprehensive and their hourly charges are usually high.
None of our survey respondents used such consultants.
Installation of basic version of the software (including training) is straight forward and
takes about ten hours. Problems are rare with such implementations. The
consultants provide ongoing support, the requirement of which is minimal with the
implementation of basic modules. For implementation of advanced versions of the
software, the expertise and experience of the external software consultant is critical
to the successful implementation. In addition to accounting and software knowledge
they need to have business analysis skills and coaching skills. With the
implementation of advanced modules, they should be good at customising the
software installation, providing training and be committed to provide ongoing support.
For example, in the last two years, the New Zealand Government has made changes
to holiday act as well as introduced a ‘Kiwi Saver’ programme. The help of external
consultant is almost always required in these cases to make changes to the
computations in the payroll module of the software.
The better the initial setup and customisation the easier for the small business to
operate the system. This will also reduce the training costs and on-going support
costs [27]. The affect of good customisation is, according to Hilson [27], “dumbing
down” the skill required to process repetitive entries. Hilson reports the following
comments of a small business owner on the importance of customisation: "…There
is zero accounting skills or knowledge required. It does all kinds of double checking
for you and it doesn't allow you to make a mistake."
According to Spinelli [55], “Most small business users and their CPAs find the initial
set-up in many applications easy - and that may be part of the problem. Without
forcing users to contemplate their initial preferences or stressing the impact of these
choices, these easy-to-build systems give small business owners very able
accounting systems with very incorrect data.”
The external consultants are likely to recommend to small businesses the packages
that they are familiar with and use it. However, this may not necessarily be the best
for IT needs of the business. While very few in our survey reported any issues with
the software that they are using, one consultant reported that one of his clients was
using a wrong software prior to his involvement. In another case, the owner was
using a basic version of MYOB (cash book) for bookkeeping and spreadsheets for
managing inventory. The external consultant should have recommended him to use
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standard MYOB with inventory module. Some software consultants in our survey
have commented that certain consultants (particularly accountants turned software
consultants) are not completely familiar with all the functionality of software
packages that they help setup for small businesses: “As soon as an accountant does
a journal entry into the control account, they have ruined it all. Some accountants are
aware but others are not. So you have to keep an eye on things.” According to Feiler
[22], “many of the professionals (accounting software consultants) involved do not
fully grasp the project’s implications, leading to confusion, misunderstanding and
errors.” In order to protect their brand name and to make sure the small businesses
get the best service possible, all major SBA software vendors have certification
programmes for consultants and provide a list of approved consultants of their
software on their respective web pages.
It is also revealed that some small business owner/ managers try saving costs by
procuring and implementing the accounting software (and hardware) by themselves,
without taking expert advice. This sometimes leads to wrong selection of software
and / or incorrect setup and compatibility problems. However, invariably such small
businesses solicit the services of an external software consultant to fix the problems.
In summary, the external consultants play a major role in implementing accounting
software in small businesses. Further, the IT consultancy business is growing rapidly
fuelled by the increased use of IT in SME sector. In 2006 in New Zealand, computer
consultancy services have increased by 39 percent compared to previous year and
accounted for 50 percent of all ICT businesses [57]. In view of the importance of IT
consultants, further research is warranted to understand the role and effectiveness of
the different categories of external consultants.
System Integration. One area of frustration for small businesses is system
integration. According to one consultant in our survey: “...I am helping someone buy
a computer at the moment. The issues involved around buying a computer are lot
more complicated than just going and getting one. … he has got an older version of
MYOB. It will not run with VISTA. So we are trying to get a machine with Windows
XP on it so it will run with his older version of MYOB. There are all sorts of issues …
he wants network his computers so he has to have network card ….”
System integration is an issue for large [7, 16] as well as small businesses [55].
According to Spenelli “products from same vendor did not communicate.”
Continuous change in technology and the associated software updates further
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aggravate this problem. The small business owner / managers are not only required
to adopt IT but also required to change along with the fast changing IT industry. This
is a big ask for resource poor small business owner / managers. These changes are
thrust on them, they have very little control over these changes. We believe this is
going to be increasingly a major issue in the future with more features and options
being added by the software and hardware vendors. Vendors need to pay particular
attention to this issue when coming up with new software updates.
Owner / Manager IT Competency. Based on our survey research, we could classify
business owner / managers into two groups: those who have aptitude for computers
and those who have fear of computers. For the first group, who have aptitude for
computers, the implementation is quicker and less costly. They master the software
and exploit all important functions of the programme. They take less help from
external consultants and some of them implement the software themselves. For this
group of business owner / managers, the availability of such affordable, user friendly
and powerful off-the-shelf packages is a boon. The implementation for this group is
smooth. The second group, who have phobia for computers, are slow learners, take
more help from external consultants and use minimal functionality of the programme.
Because of this the implementation costs are also likely to be high for this group.
According to one consultant: “…they don’t like using computers. They don’t trust
them and they don’t have confidence. If you have confidence, it makes whole lot
easier to use them. Kids of this generation don’t have that problem. … Once they get
over they are away I can do this, it is not going to break. The other thing about
MYOB is when they are using it they can’t see what is happening behind the scenes.
When you put something in, it automatically balances. A lot of people find it a huge
leap to take from manual accounting. … A lot of people have trouble with this
concept….” We believe those small business owner / managers who have not yet
switched from manual accounting to computerised accounting also belong to this
second group, who have fear of computers.
Almost all the external consultants in our study reported three most common issues
in implementing accounting software: not creating or incorrectly creating backup
files, file management problems and inability to use productivity features such as
short cut keys and ‘auto fill’ features: “…This person has been told to recycle floppy
disks using three rather than one for backup purposes. So every time she did a
backup which is at least once a week, she put the floppy disk in, saved it took it out
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and then went home. Eighteen months later the office got burgled and everything
stolen. … I came to restore the data. There were three backup disks, first one blank,
second one blank, third one blank. And what she has done, she put it in (the backup
disk) and on the backup window on the screen it was pointing to a folder on a C: /
drive.”
Although these are common recurring issues, in terms of successful implementation
of the software these are only minor issues. Lack of IT competency, in particular
poor understanding of computers and lack of internal computer expertise have been
identified as inhibiting factors of successful implementation of IT projects in small
businesses by a number of researchers [15, Thong et al. 1994). We argue that this
is becoming increasingly less of an issue with the availability of low-cost accounting
software that are user friendly with easy-to-use flow-chart-style navigation and
providing input efficiencies such as auto-fill [41].
Owner / Manager Accounting Knowledge. The evidence from our research
indicated that lack of internal accounting expertise is a more common problem than
lack of computing skills among small businesses. It is not uncommon to come across
owner / managers who have “phobia for numbers, they cannot even add two
numbers.”
Even though the currently available SBA software packages are “user friendly” and
the need for accounting skills such as double entry bookkeeping is significantly
reduced, one AIS consultant indicated that “entering data in wrong accounts and
invoking wrong accounting functions” are common mistakes of small businesses and
they require the help of external consultant to correct these mistakes. This happens
particularly with the businesses who have cut short training in order to save money.
Sleeter [54], a prolific writer on QuickBooks, gives an example of a typical data entry
error in using accounting packages:
“From my experiences over the years, I've discovered that people make the
strangest errors. Some have left me scratching my head, wondering how someone
could possibly have come up with such entries. Here's one example: An entry in
QuickBooks was attempting to write off an open invoice. The invoice was dated in a
prior year and rather than entering a credit memo to properly record the reduction in
AR and debit the bad debts expense account, the user opted for a discount
transaction, dated in the next year, that credited AR and debited an EQUITY

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account! Yes, EQUITY and to be specific, it was the Opening Balance Equity
account that QuickBooks uses for your setup entries. Sheesh!”
We believe this is going to be an on going problem in the foreseeable feature, unless
the software vendors make paradigm shift in the way they develop their packages
keeping the ‘dumb small business owner / manager’ in mind. Small business
entrepreneurs cannot be expected to have a good accounting knowledge. If the
small business owner to be comfortable in using an accounting software package,
their front-end interfaces need to be formulated to match the mindset of the small
business owner. The need to bridge this gap between “poor accounting knowledge
of small business owners” and “the demand of a good accounting knowledge of SBA
packages” may be the real issue associated with the implementation of accounting
software in small businesses.
Owner / Manager Leadership and Managerial Skills. Project Management
literature identifies, among others, two critical success factors for successful
management of projects: Top management support and project manager leadership
and management skills [1, 40]. In small businesses, however, the owner / manager
is often the “top management” as well as the project manager. When asked the
external consultants about issues in implementing accounting packages, there were
hardly any specific comments on owner / manager’s managerial or leadership skills.
However, we believe, the relative importance of the role of the owner /manager
(being top management as well as project leader) depends on the project scope. If
the implementation is a very basic version of the accounting software (for example,
just book keeping), the leadership and managerial skills of the owner / manager may
not be critical. However, if the implementation is a comprehensive involving
advanced functions of the software (involving more money and time), then,
managerial and leadership skills do matter. The bigger the project the higher the
commitment and the more the need for leadership and managerial skills of the owner
/ manager. Larger and complex projects demand more control.
Work Pressure, and Lack of IT and Financial Resources. The owner/ managers
of three sample businesses indicated that work pressure was a cause for acquiring
and implementing the new software and it is also a major hurdle while implementing
the software: “It’s just purely pressure of trying to do/ make work and everything that
needed to be done.. It’s (upgrade to multi-user system) to be done and it was only
me who was able to do it.” According to Cragg & King [15], “Systems were often
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acquired to save time as well as to reduce costs. But the installation and
implementation of systems alone absorbed considerable amounts of senior
managerial time - time these businesses could ill afford. This problem, linked with the
lack of expertise, caused some businesses to take a very cautious approach.”
Small businesses lack slack resources and cannot afford to have IT champions to
professionally manage the acquisition and implementation process. Research
indicates that in large corporations, these champions play critical roles in leading
successful innovation adoption and diffusion [34]. Small businesses are also often
not as willing to pay for ongoing support and services as larger businesses. A
number of external consultants in our survey reported that some owner / managers
cut training to save money. According to one consultant: “They are usually enough
price conscious and they say that they have enough of an idea on how to use it and
they don't need any more training.” Small businesses, in general, underestimate the
total cost of implementation that includes consultant’s fees and training expenses.
We observe that in spite of dramatic reduction in the cost of personal computers and
packaged accounting software, lack of resources continued to be an issue for small
businesses. Small businesses also fail to ascertain the real cost of the total project.
Further, these businesses typically have fewer slack resources with which to absorb
the shocks of an unsuccessful implementation.

CONCLUSIONS

The purpose of this research is to increase our understanding of issues and

challenges faced by small businesses in New Zealand in the implementation of
accounting packages. Given that small businesses account for 97 percent of New
Zealand businesses and a large proportion of these small businesses use IT for
accounts, this research has significant relevance to New Zealand economy. Neither
the owners nor the external consultants reported any major failures with the software
implementation. However, there were a number of recurring issues such as owner /
manager’s lack of confidence, lack of skills in IT and accounting and problems
associated with IT systems integration. An important implications of this research for
vendors is that there is lot more scope for further improving the SBA packages
keeping the ‘dumb small business owner / manager’ in mind. External consultants
play a critical role in the implementation of accounting software in small businesses.

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In addition, IT consultancy businesses are growing rapidly. In view of the critical role
played by external consultants, further research is needed to understand their role
and effectiveness in implementing SBA software. Currently, published research in
this area and, in general, on the implementation of SBA software is limited. As a
direct result of this research, the author is currently undertaking a research project
that explores the role and effectiveness of consultants in implementing SBA
software.

This study has some limitations primarily due to its exploratory nature using a small
sample size. The study sample, while represents both small businesses from
different industries and consultants, was a convenient sample which makes it difficult
to generalise the results obtained. A more comprehensive theory building and
empirical analysis is required for further research.

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