Get with the program: should you build your own accounting software?

21 February 2020: over the years, individuals, businesses and even governments have dabbled in developing accounting software systems. But are the potential benefits actually worth the time and effort? Mark Taylor investigates.

From the Big Four to one-person outfits, organisations across the world have tried creating their own accounting software, frustrated with the existing options or believing a home-made solution is worth the risk to elevate them to new heights.
 
Not all attempts have been successful, however. The state of California spent $1.1bn on FI$Cal software – replacing its legacy accounting technology with the new system to track how taxpayers dollars are spent – in an endeavour widely described as a fiasco.
 
The advent of cloud computing has changed accounting’s relationship with technology. Cheap, scalable software is now widely available and has helped firms grow rapidly without the costs of investing in mainframes, data inventories and data centres. 
 
A decade ago, options may have been limited for an accounting firm wishing to create its own system, but now there is a dizzying array of off-the-shelf solutions that can be combined.
 
This has prompted a glut of new cloud-based accounting vendors to emerge on the scene, contributing to a recent swell of start-ups as they successfully enter the market.
 
Crunch was one of the first software-as-a-service vendors in the UK accounting market, targeting freelancers and small businesses. It said the decision to build its own accounting software paid off – but not without a fight and concern that it was doing something “completely mad”.
 
“The barrier to entry is high and it is not for the faint-hearted. You need to be committed to constantly evolving and developing your software,” said co-founder Darren Fell. 
 
Fell built his first startup, Pure360.com, more than a decade ago, and was looking for a new challenge in 2007 when he decided to create a cloud accounting system.
 
“Without too much due diligence on my part I went for it, and very quickly realised the scale of the problem; a cloud-based double-entry accounting system and live tax system was quoted by our technical architect as a six-year development project,” said Fell. “My partners instantly got cold feet and pulled any more investment. However, I literally bet the house on pursuing a dream and I soldiered on.”
 
Few software systems in the world are as complex as double-entry accounting systems and the challenge balloons when including UK tax rules.
 
“We’ve pumped in almost £10m over the past decade and we’re still innovating,” said Fell. “But, to do this, you ... [have to] have a clever way of generating cash through services while you build a complex, large-scale accounting platform, or you need stacks and stacks of cash.”
 
CEO of inniAccounts, James Poysner, said the opportunity for his firm emerged some 15 years ago when no such platforms existed.  
 
“There was very little competition, but also nothing we could piggyback on,” Poysner said. “If we look at our codebase now – and we serve niches, not even the mass market – we have over 750,000 lines of code in our app. The consensus is that software costs around £10 to £20 per line of code, so you can see it can get expensive, quickly. And if you're not used to managing software projects it'll cost you more again.”
 
He said if inniAccounts was to do it again, the business would look at what it was trying to achieve and split what is truly special from the common or core application.
 
“We'd then look to leverage another cloud platform for the core parts, such as ledgers [and] invoicing, and focus our efforts on what's unique, where we can add value,” Poysner said.
 
Experts agree that firms need to carefully weigh up the costs of building a bespoke solution and investing the time and effort to ensure what is created exactly reflects the company’s needs.
 
“With so much available from tried and tested vendors offering accounting software in the cloud at different price points – and most of this supported by a wide variety of add-on apps, covering all sorts of vertical sectors and horizontal requirements that enable firms to create software solutions that suit them and their clients – firms may question why they would they build their own.” said Richard Anning, Head of Tech Faculty at ICAEW. 
 
“In the very long-term, software ... is set to become dramatically quicker to develop – and potentially [will] self-develop – but in the short-to-medium term there is a great deal on offer from existing suppliers of accounting software.”