News Column

SMEs must beware of outdated accounting software

June 23, 2014



A large number of SMEs are still using outdated accounting software solutions that were developed using legacy software that was discontinued many years ago. Not only can it compromise one's business, but it could also pose a massive threat to business executives who recommend this software to their clients. More importantly, it could result in huge fines or even jail sentences.

Many of these applications still in the market today have been developed using technologies that are long past their "sell-by" date. They are not only unstable, but also susceptible to corruption. A good example is Visual Basic version 6, a programming language where Microsoft ended mainstream support for it nearly 10 years ago is committing to "It Just Works" compatibility for Visual Basic 6.0 applications on Windows Vista, Windows Server 2008 including R2, Windows 7 and Windows 8, a huge risk to any business.

Palladium Software managing director Stephen Corrigan believes that there is an onus on accounting software vendors, supplying dated software and related technologies, to disclose this to their clients in terms of the Consumer Protection Act. "Businesses purchasing accounting software traditionally have at least a five-year view, but should desktop operating software vendors decide not to ship the Visual Basic version 6 components with new releases - then products developed with those technologies will simply be unusable. This is a real risk to any business and vendors not disclosing this to their clients need to be taken to task and be held accountable.

Modern technology has its benefits with true relational databases, and functionality such as supporting wireless networking a given. Software instability and corruptions are a scourge of dated technologies, and vendors blaming hardware for these idiosyncrasies is simply a case of them passing the buck.

Good corporate governance means that company executives have a responsibility to ensure that the software products they or their accountants are using, are developed with reliable, current technologies.

If one is considering an accounting software application, first check what database the product uses, what technology it has been developed in, and make sure that it retains data for life, just in case one needs it later.

"We all know that accountants often opt for one of the perceived market leaders when recommending financial or accounting software. However, accountants need to realise that when they recommend software, they may be held personally liable in terms of the FAIS act of 2002," he explains.

Ignorance of the law is not an excuse, penalties for not complying with the FAIS Act include fines up to R10-million or imprisonment for up to 10 years, as well as the withdrawal of the FSP's licence or debarment of a representative.

In South Africa, the law requires closed corporations to retain their financial records for 15 years, companies need to keep it for at least seven years and SARS expects all companies to retain records for a period of at least 5 years from the date of submission making that at least six years. So an accounting software solution that only retains data for anything less, is theoretically non-compliant.

Corrigan says a new era in accounting software is dawning. "The days of an accounting software vendor dictating how one should run one's business, is a scourge of the past. There is a clear trend toward modifiable accounting software, at both an ERP as well as at an SME level. If a business has that specific feature request that would redefine their business, why shouldn't they have it?"

"This is an exciting juncture in the industry with clients becoming more technologically savvy and less tolerant of aged technologies. There is a greater demand for custom, business defining features than ever before, that are having a fundamental effect on businesses, regardless of size, with flexibility being the order of the day," he concludes.


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Source: ITWeb


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