Outgrowing Your First Accounting System

I recently had the opportunity to present at ADI 2024 Baltimore, a craft spirits conference and vendor expo put on by the American Distilling Institute. This was a really fun experience for me, not only because I work with many distillers as a Fractional Distillery CFO, but because I love being around the people, culture, and growth mindsets that are inherent parts of the craft spirits industry. 

My topic was related to distilleries finding themselves outgrowing their first accounting system. It happens to all successful businesses eventually. In distilling, it can happen fast! If their product takes off, gets good press, or wins awards and starts flying off the shelves, distillery owners suddenly find their financials hard to wrangle with systems that worked before things got big. 

This reminded me of another vertical I work with quite a bit as a Fractional CFO and Anticipatory Accountant: design builders and contractors. They often work with clients who have outgrown their home and they want changes, as quickly as possible, to keep up with their growing needs. 

It brought me to this comparison. Outgrowing your first home as a homeowner is pretty similar to outgrowing your first accounting system as a business owner. Here’s what I mean. 

Your First Does the Job…But it Can’t Handle Growth 

Moving into your first home is exciting. You pick out the furniture, paint the walls, and make the space your own. But over time, as your family grows or your needs change, the space that once felt just right for your needs can start to feel cramped. It’s the same when it comes to the accounting system that was once the perfect fit for your business.

When you first launched your business, your accounting system probably met all your needs. Like that first house, it provided the foundation for growth. But now as your business scales, you may be noticing signs that you’ve outgrown it. The systems that once served you well can start to limit your ability to expand, similarly to how a growing family can feel that the once cozy home is now way too small.

Recognizing the Signs You’ve Outgrown Your Accounting System

Over the years I have helped many businesses with their accounting and strategic financial leadership. One of the things I bring to the table for my clients is anticipating when they will need to make changes to support their growth. Oftentimes, that comes with putting the right technology solutions in place to support scale. 

As I’ve helped these businesses I’ve noticed that just as there are signs that you’ve outgrown your first home – like running out of storage or having to work from your kitchen table/home office- there are indicators that your business is ready for an upgraded accounting system. 

Some key signs include:

• Data Overload: Your system struggles to manage the volume of transactions, vendors, or customers, leading to slow processing times or even crashes.

• Lack of Integration: You’re finding yourself manually entering data between systems because your accounting software can’t integrate with your CRM, POS, or other operational tools.

• Reporting Limitations: You need more in-depth reporting, but your current system can only offer basic financial statements, preventing you from getting the insights needed to make informed decisions.

• Compliance Challenges: As your business scales, requirements like tax codes, audits, or industry regulations become more complex and your current system may not be able to keep up.

Just like how a small house with one bathroom might not cut it for a family of five, a basic accounting system simply won’t support the complex needs of a growing business.

The Risk of Staying in a System That No Longer Fits

Using an old accounting system can slow down growth and cause problems that hurt your profits. In the same way that living in a home that no longer suits your family’s needs can cause daily frustration, continuing to operate on a system that can’t keep up with your business’s pace can slow down your processes and create headaches.

For example, your team may spend hours manually balancing accounts or correcting errors due to outdated workflows. Even worse, a bad accounting system can cause you to miss opportunities to grow your business or avoid problems because you can’t clearly see your financial situation.

Upgrading Your Accounting System: Like Building a Custom Home for Your Business

When you’ve outgrown your home, you don’t just settle for any house – you want one that fits your current lifestyle, will give you room to grow, and includes the amenities that will make your life easier. Similarly, upgrading your accounting system is not just about moving to any new software. It’s about selecting a solution that’s scalable and specific to your needs.

Here’s some of the things we keep in mind when helping our clients with their new accounting system:

• Scalability: We look for a system that will grow with their business. Can it handle increasing transaction volumes, support multiple locations, or adapt as their revenue streams diversify?

• Integration Capabilities: The new system should easily integrate with other tools they’re using—whether it’s inventory management software, CRM, or payroll system. This helps their data move easily through their business and cuts down on manual work.

• Enhanced Reporting: We look for customizable reporting features that allow monitoring of KPIs and provide insights necessary for strategic planning.

• Automation Features: One of the many benefits of modern accounting systems is that they offer automation tools that streamline invoicing and billing. Automation reduces human error and frees up our client’s team to focus on higher-value tasks.

The Move: Making the Transition Smooth

Transitioning to a new accounting system is like moving into that custom-built home—it requires careful planning so that the process is smooth, everyone knows where to find things in the new space, and the whole team (or family!) is able to function as was intended. 

• Assess Needs: Just as you’d consider your current and future needs before building a home, we help our clients take a close look at what their business requires from an accounting system. We then evaluate their pain points and growth objectives.

• Plan the Move: The implementation process will take time, so we plan ahead. Together we design a timeline, so that key financial processes aren’t disrupted during the transition.

• Train Your Team: Moving into a new home requires learning where everything is and getting comfortable in the space. In the same way, our client’s team needs training on the new system and how to use it effectively.

• Review and Adjust: Like decorating your new home, there will be adjustments after the move. We continually review their system’s performance and make tweaks as needed so that it’s delivering the desired results.

Outgrowing your first accounting system is a milestone in your business’s growth, much like outgrowing your first home is an exciting step. It’s a positive reminder that you’re moving forward. By upgrading to a more integrated and scalable system, you’re positioning your business to continue thriving, just as building a new home gives you the space and tools you need for the next chapter of your life.

If your business is showing signs of outgrowing its current accounting system, it may be time for a change. At KBS CFO, we specialize in helping business owners through this transition. Contact us today to learn how we can help build the foundation for your continued growth.