cautionThere are a number of reasons law firms have for changing their accounting system. In some cases, it is justified, but in most cases it’s not. And if firms who had changed accounting software were honest about it they would almost certainly admit that, with hindsight, they should rather have stuck with their old accounting system.

The main reason for this is that when a firm’s accounting department is inefficient, it is almost always caused by under-qualified and/or under-trained bookkeeping staff or poor financial discipline, rather than the accounting software. That’s not to say accounting vendors are blameless, but odds are that a firm with a weak accounting department will have as many problems after the installation of the new system. So just why then do firms go the massive expense of changing their accounting systems?

The most usual cause is when a newly employed bookkeeper recommends that the firm change to the system he or she was using at their old firm. This is understandable, since the bookkeeper will naturally be far more proficient in the use of the old system, and the software at the new firm might be a little frustrating at first. In most cases however, once the bookkeeper becomes used to the new firm’s accounting software, they aren’t as keen to change to their “old” system. The new bookkeeper might also have enjoyed a loyal relationship with the previous accounting vendor’s sales or support people, and they might simply want to help old friends by giving them business. Of course, this is not true in all cases, but firms would do well to hear alarm bells if their new bookkeeper recommends a change to his or her previous firm’s system.

Another regular cause of change is where a salesperson for a different accounting package convinces the partners that by implementing their accounting software, they will be able to increase fees substantially, and they usually cite “missed disbursements” or “unbilled time” as their justification. What firms often don’t realize is that nearly all accounting systems cater for direct debiting these days, so the odds are that their existing system already offers what the salesperson is suggesting. The problem is that the partners at most law firms are generally unaware as to what their system can do for them, and fee-earners often also lack the discipline to record disbursements and fees in ‘real time’. In fairness, most legal accounting software vendors do a poor job of educating their clients as to the functionality of their systems, but it is also fair to say that most lawyers really have little interest in their legal accounting system. “We’re lawyers, not accountants…”

In the third scenario, firms may be frustrated with their existing accounting systems, either because the system doesn’t appear to do what they want, or because the support from the system’s vendor is bad. Again, I have to say that most accounting packages can do the job, unless, of course, your firm really has outgrown your small-firm accounting system, or your practice needs have changed substantially. It is much more likely that firms become frustrated because the vendor has not explained the functionality of their system to the partners of the firm properly, or as stated earlier, the vendor has tried to do this, but the partners just aren’t interested in accounting matters. My advice to firms in this situation is firstly to get their existing vendor in to do a presentation on their current system’s functionality – and it should be compulsory for all partners and book-keepers to attend. If the problem is bad service, they should call the incumbent vendor in and explain their unhappiness in no uncertain terms in an attempt to fix the situation before they go through the substantial expense of changing their accounting software.

There is another point that needs to be made here: Partners of law firms are often guilty of not investing in training on the software used at their firm. It’s a bit like giving someone a motor car, but never teaching them how to get out of first gear. Put simply, training is seen as an expense, and not an investment. This is probably the biggest mistake a law firm can make, but since the cost of too little training cannot be easily measured, training (and re-training) remains an unnecessary expense. But it’s not just that partners don’t like spending money on training, it is also because no-one has explained to them why they should be spending money on training.

So just what are these reasons? Firstly, at the initial training course, the user (bookkeeper or fee-earner) is overwhelmed with information, much of which is forgotten by the time they get back to their desks. So at the very least, they need a refresher course 3-6 months after the initial training. By this stage, they will also have some experience in using the system, so they will have a better idea of what they want to know. Next, over a period of time, book-keepers and fee-earners leave the firm, and new employees join who are usually trained by the outgoing member of staff, perpetuating any bad habits. Add to this that software products are continually enhanced, and without training law firms simply don’t get the benefit of the new features in the system. The result is that the firm gets further and further behind until the point where a new supplier offers them “salvation”.

And that brings me to my second recommendation: Before you change your accounting system, spend some money re-training your book-keeper/s and fee earners on your existing software. If you’re right, and your existing system is useless, you won’t have wasted too much money. But if you change systems, and your existing system could in fact have met your needs with a little training, you are going to be wasting a lot of money on an unnecessary change.

Over the past two years, there is renewed competition in the legal accounting software market in South Africa. One new entrant to the market is offering free analysis, free conversion, free training, three months of free support, and a three month money-back guarantee. In theory, that should mean a free conversion to their accounting system, and firms can be forgiven for thinking that the conversion will be plain sailing. The truth is that any change of accounting system is disruptive and almost always way more expensive than anticipated.

So what are the costs? It is near-impossible to quantify the real costs of change, but for a mid-sized law firm it can easily amount to hundreds of thousands of Rand – especially if things don’t go smoothly. Another aspect that is often underestimated is that planning for the new accounting system can take months of partners’ time. And because one can’t think of everything up front, quite a bit of customization is usually required after you begin using the new system. And as routinely happens during such changeovers, tempers can flare, bringing a whole new set of distractions for the partners.

Another category of expense is that changing to a new accounting system often necessitates upgrading of hardware. Typically a new server will be required, and workstations also sometimes need upgrading. Most accounting systems make use of an underlying database, and this usually also has a cost. In fact, the hardware and software upgrades alone can add a few hundred thousand Rand to the costs of change.

Having said all of this, sometimes firms have no choice but to change their legal accounting system. For example, where a vendor goes out of business. Even then, there is almost always someone to pick up support of the affected system. You may also find that when you started out, a small-firm system was all you needed, and after a few years you have simply outgrown it. You might also have been using a generic accounting system, and you are now finding that you need a system that also manages your trust accounts. In cases such as these, change is justified – but you shouldn’t underestimate what that change will cost.

If you are still planning on changing accounting systems, don’t believe all the glowing letters of recommendation provided to you by the salesperson, since you can be pretty sure you’re not going to be given any letters from their unhappy clients! For a more balanced view, you might consider asking the outgoing vendor for a list of the potential new vendor’s problem installations. Also be sure to ask the reference sites all the right questions, for example “How was the change over?”, “How long did it take?”, “Were there any problems or things you didn’t expect?”, “Did the vendor keep their promises?”, “How was their support, availability, and attitude?”, and “Did the support consultant have enough law-firm accounting experience?”. This should give you a good idea whether or not your prospective supplier is a safe bet.

In conclusion, over the past 20 years I have had the benefit of working with most of the South African legal accounting systems in some form or another, and it is true to say that I didn’t come across one that didn’t have at least some drawbacks. If it wasn’t that there was no support to speak of, it was that the accounting program was losing data, or didn’t balance, or that it was too new on the market, or lacked features, or the support was too expensive, or non-existent. So before you take a decision to change your accounting system, remember the old caution that “the grass is always greener on the other side…”, and spend a bit of money on training just to be sure you actually need to change your system.

Contributed by:
Chris Pearson
AJS Group of Companies
chris@ajs.co.za
http://www.ajs.co.za

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