If your idea and code is the core of the product, accounting is the core of the business.

Its the only way that one can empirically evaluate the value of your work. If your total sales end up being less than the cost of your labour plus expenses plus taxes, then your business is unprofitable, and the time is better spent doing something else.

Its that simple.

Its simple math -- except there is human nature to contend with. There's a natural desire to not want to address all the little bits and pieces that don't fit our vision of a profitable company: we stop accounting for our time (first mistake) don't account for the extra hours doing all nighters, don't account for the computers, etc. Next thing you know, a completly self delusional person who wants to believe they are running a profitable company is marking down negative expenses, and calling sales profit.

Accounting packages keep people honest. They make it easier to plug in the numbers required to make informed analysis, and they make it harder to relabel expenses as anything else but expenses.

For that simple reason, I'm always looking around for an accounting package that will handle as many of the following features as possible:

Raw Basics:

• General Ledger:  this is the core of accounting (accounts and moving around money from one to another)
• Accounts Payable: You need a way to track invoices from vendors, and payments due, when, so that you budget.
• Accounts Receivable: you need a way to track the invoices you've sent out: who owes you what, when, and who needs a reminder.
• Payroll: I know its a small startup, and you don't need a payroll system to pay your dog...but you need a system that can grow up to offer this when you get there.
• Inventory: Track stock and inventory levels (in the digital download era, ISV's have very little use for this, but worth knowing about).
• WhatIfs: When you start out, you have no rules cast in stone. Anything is possible. You have to think on your feet, and make whatifs (projections). There is no better tool than a spreadsheet for this (accounting systems are way too rigid). So you need to find a system that can export/import data to Excel (or other) quickly. It shouldn't be a chore.

Essential Features:

• Server based:
  5 to 1 these days, you're working on a laptop. In this field, more like 10 to 1. 
  Do you really want to keep all your financials on it and risk the possibility of getting it left behind after a meeting with a prospective client, stolen from the back of your car, etc? 
  Didn't think so...
  Whether hosted inhouse (freeAccounting.net), or by a service (eg: Xero.com), you want to have your data on a different computer.

Desired Features

• Database backend:
  Its your accounting. Your money. The numbers should be in a backend storage system that is easily queryable so that you can generate webpages for your clients, etc.  In other words, you want a DBMS backend rather than some quirky special in-mem file system (again: Quickbooks is a let down in this area).
• Import/Export to Excel easily:
  Whatifs are essential decision making processes for startups. Some accounting packages  provide budget analysis modules, but so far I've never seen one as flexible as Excel.  Life only fits nice standard curves in fairy tales.
• Multiple Companies:
  If entreneurship is in your blood, you probably won't stop at one creating one company. You'll try one or more different ones before you find the one best suited for you. And because you probably won't close one before you open the next one, they will overlap in time: wouldn't it be nice to be able to switch easily between companies to enter your daily expenses, without it taking a long time (hint to Quickbooks, grrr)
• Currency Settings: 
  Ten years ago, you could set up a software company in the US, and work with a market that was big enough by itself. Its a different world these days: you'll (hopefully) be selling to not only England (pounds) but Europe (Euros) and if you get a hang of designing interfaces that can be flipped left to right Asian and Arabic markets. 
  You may not be there yet, but it will happen faster than you think.
• Various Tax Systems:
  If you are not an ISV, but more of a consultant, and you plan to travel around the world, offering your talents to the highest bidder, you will find that not all countries tax the same way...its helpful if your accounting system can handle such eventualities -- rather than having to pick up a secondary accounting system.
• Tax Modules:
  Although NZ's tax system is just about the easiest in the world, some countries have a tax system that is a nightmare of complexity and ambiguity (cf: USA). A software that has settings that can be finessed for each country's tax structure is a bonus.
• Understandable by your Accountant:
  Whatever system you use, if it isn't an online webservice, your accountant has to have the same software, and be proficient in it.
  The more obscure your software choice, the less chance there is of you finding such an accountant.
  If they don't have the software, you have to pay for them coming to your office. More time lost, more cost, etc. 
• Web Access:
  There was a time when the idea of saving your accounting data up in the cloud sounded dangerous. Not anymore: every time you check your bank balance online, you are trusting the current level of encryption -- so why not for the rest of your accounting? 
  If you can find a service with a good fast web interface...great.
• Easily Import/Export Time and Expenses:
  My experience so far is that accounting software firms don't know how to make good time and expense collecting modules: they're concentrating so much on adding features to the main product, that they have a hard time remembering to be simple when it comes to a mobile app. 
  So you'll probably need a 3rd party application for these tasks, and therefore you'll need a very intutitive import and export features between the two apps, or your expenses will most often stay on your mobile phone, and your accounting will be incomplete.
•  I'll be adding more to this list as I think of points, but in the meantime, any other essential ideas any of you can think of?

Below the level of Accounting packages there's a whole category of bits and pieces...some are actually quite wonderfully designed.

For example, there are solutions for creating invoices on the fly, as well as recording expenses.  The first (and possibly best in this category) that comes to mind is http://blinksale.com which does a wonderful job in this category.

But I don't recommend it: no matter how fast and easy it is to use. These types of solutions are wonderful at bringing in cash, especially if you havn't gotten around to choosing an accounting package and you already have a live client on the line, but because they don't have any means of analysing, reporting, etc. your income and your expenses, you are in essense making money, not making a business.

Another category of tools are the needed 3rd party Time and Expense applications. 
Why its so hard to find a good easy solution that works well with any accounting system...beats me.

Personally, what I've been looking for is a solution that works on my mobile pc for freelance work

• imports client names from my accounting system
• imports item units (ie the types of Service times/units I sell)
• a one (1!!! with no popups) form, forward matching combo box driven input form with validators (ie impossible to log a task without a note)
• A timer...(or since PPC has funky threading issues a  TimeStart, and TimeSinceStart)

For my expense, I want it even easier: a one form, forward matching combo driven form, with splits.

Is that so hard?!?

From the list below, it appears it is...

Know of a great software that is not listed above? Know of one that is dead, dead, dead and should not be listed?

Have more tips on what to look for in an accounting package for an ISV, SMB/SME?

Then contact me so that I can add it to the page.  I can be reached at:

comments at xact-solutions dot com.