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Software that speaks your language.

Until recently only the Goliaths of business had the financial prowess to survive as world merchants. Today, with trade barriers crumbling and new welcome mats on the doorsteps of many nations, midsized and even small businesses are quickly extending their markets beyond US. borders. But many are discovering that competing effectively requires more than international marketing know-how. It needs new, more sophisticated accounting tools.

For example, instead of dealing in a single currency, companies trading abroad may have to deal with a mix of dollars, pounds, rubles, yen, pesos, marks or francs. They often have to address myriad finance and tax rules. Also, collection and dissemination of timely and relevant management information is critical when a company is operating in a global environment. The basic tools that do these jobs constitute a unique class of accounting software designed to work in the international arena.

This trend by businesses to expand into the international marketplace offers both challenges and opportunities for CPAs. Increasingly, CPAs are being called on to advise their employers and clients on the selection and implementation of international accounting software. Thus, CPAs should become familiar with the specific features of accounting packages so they can recommend the best fit for a company's needs. This article examines some of the key factors that need to be considered when selecting software.

BEYOND THE BORDERS

While there are many application software products for word processing, spreadsheets and databases that are used worldwide, accounting software traditionally has been nationally oriented because accounting and tax rules differ from country to country. But, to some extent, that's changing. The growth of the global economy and the emergence of strong regional markets, such as Europe and the Pacific rim, are fueling a movement toward business operation commonality. A new breed of sophisticated accounting software addresses the diversity that nevertheless remains and may, in fact, never totally disappear.

European software houses have had a head start in the development of such products because of the formation of the Common Market. In fact, European vendors have already entered the U.S. market, and to support their products have recruited local organizations or have opened their own local offices. U.S. software vendors are making every effort to play catch-up.

WHAT THE ORGANIZATION NEEDS

As is the case for anv software selection, it's important to first determine what an organization needs in the way of accounting software. Not. every enterprise needs an international accounting software package. Some businesses with limited international transactions can manage adequately without it. However, as a company's foreign business grows, the need for specialized programs becomes apparent.

Adding to the complexity of software selection is the lack of standards defining international accounting software. Many vendors claim their products fall under the international umbrella, but users must look closely at each product's various modules to see if it contains sufficient international functions.

Price is not necessarily a good guide to a product's sophistication. Prices range from a few hundred dollars to the hundreds of thousands--all the more reason to fully understand the needs of the user as well as the different product features. The exhibit on pages 68-71 provides a list of some international accounting software packages.

MULTILINGUAL ABILITY

When a company does business in a country that speaks a different language, it isn't automatically necessary to have multilingual accounting software--especially if the employees who use the software speak the company's native language. But if a company has operations in a foreign country and has local employees and suppliers, the multilingual software becomes more important.

Two types of foreign language support can be provided for international operations:

* The screens and displays on the software package.

* The support manuals. The major Western languages-English, Spanish, French, German and Italian--are widely supported by many of the products listed in the exhibit. Some products support more than the major Western languages. SCALA, for example, also supports some Scandinavian languages, one or more central European languages and several Asian languages. In October 1992, SCALA released a Russian version; Ernst Young has exclusive rights to sell the program in the former Soviet Union countries. The North American Free Trade Agreement has led to a strong demand for accounting software that supports both English and Spanish.

To accommodate this Tower of Babel, the current software design trend keeps screen-handling routines separate from transaction processing. This allows users to design screens that meet their needs using any language. For example, IDEX designs its software so that a user can select the names of all key fields to appear on the screens. In fact, D.B. Concept designs its system to store the text seen on the screen and its reports in database files that aren't language dependent. These two packages can be adapted for use in any language.

MONEY TALKS, TOO

If an organization maintains accounts receivables or payables in a foreign currency or has an office in a foreign country with expenses and revenues recorded in that country's currency, it will need an accounting system powerful enough to accommodate this. The ability to quickly convert transactions and accounts denominated in a foreign currency to the host currency is important for both accounting and managerial control purposes.

While accountants can perform foreign currency conversions when preparing, say, monthly financial statements, the challenge faced in managerial control is different. For example, when profit margins are tight, a relatively small change in the value of currencies can wipe out the profit of the transaction; during such times daily or even hourly conversions may be necessary.

Multicurrency handling is available in varying degrees of sophistication. Some packages offer only partial currency facilities, where foreign currency accounts are kept in a separate file and are extracted and converted only at the time of consolidation. More powerful packages offer instant conversion and operate simultaneously in multiple currencies. With this capability the subsidiary of a U.S. company can instantly see its accounts in both yen and dollars. By providing real-time information on currency values, currency accounting software enables companies to implement strategies such as hedging to protect themselves against the risk of currency exchange fluctuations.

A BIT OF ENGLISH

Besides handling multilingual and multicurrency functions, a good international accounting software package should be flexible enough to handle different data practices. For example, in Europe, when the date is given, the day comes before the month--as in 1 April 1995. Also, the comma and the period are reversed, so that 1,234.56 is written 1.234,56. And the metric rather than the English measurement system is prevalent in many countries.

It's also convenient to have an accounting software package that handles business forms and prints checks in different styles, currencies and languages.

If a company has a branch or subsidiary in a foreign country, the software should be capable of preparing financial statements in that country's format. Many countries require that foreign enterprises maintain their books in local currency and according to local generally accepted accounting principles. Also, the accounting system must be able to provide the financial information needed to comply with the host country's tax code. The system would have to handle value added taxes, for example, which are common in Europe.

Many of the software packages are designed so the user can adapt the system to meet various countries' reporting standards. The report-writing modules of CODA and Ross can prepare country-specific financial statements. IDEX's report writer can provide alternative charts of accounts so that users can present the same data in multiple formats. Dillon allows users to consolidate their foreign currency financial statements according to the requirements of Financial Accounting Standards Board Statement no. 52, Foreign Currency Translation.

EXPORTING THE DATA, TOO

Another issue for users to consider is portability of the software package to different hardware platforms and operating systems. For example, if a U.S. company with Digital Equipment hardware has a foreign subsidiary using an IBM system, an accounting software package that runs on both platforms is required.

Because the trend in computing is toward personal computers running on a network, most of the international accounting packages are designed to run that way. Three of the products (Lawson, SCALA and Tetra) run on minicomputer and mainframe systems with Digital Equipment, Hewlett-Packard and IBM systems being the most common. Most of the software packages are available in a client-server environment.

GETTING SUPPORT

The best accounting software is only as good as its technical support. Companies contemplating a purchase should be sure each foreign installation can be serviced by a local office or representative of the vendor. Should problems arise in the branch office, it's reassuring to know that the vendor has a Japanese-speaking technician who is fully conversant with the accounting software package.

While most vendors provide some degree of support, generally it's the large vendors that provide it in many countries. For example, the SCALA group has offices in 12 countries and CODA in 11. Another approach is for dealers from different countries to form a consortium to provide software and technical support in various locations. One such consortium is Accounting Systems International. It provides internationally coordinated local support to multinationals, especially in the area of client-server ledger accounting systems.

Even domestically, companies are realizing that accounting should not be treated as a separate function but as a strategic component of the management information system. But when a business is operating in an international environment with the attendant organizational, cultural and operational complexities, such integration becomes a strategic necessity rather than merely an option. It's therefore important to ensure that the software selected interfaces with the other software or systems being used by the company.

For example, for a company significantly involved in international operations, multicurrency accounting software is necessary for daily accounting and reporting functions. From a decision-making perspective, however, currency information would be more useful if it could not only track the company's currency exposure but also implement short- and long-term currency exchange strategies to protect against fluctuations. For this to be possible in real time, the company's accounting and treasury management software must be able to "talk" to each other. Similarly, accounting systems should be able to interface with computer data from other functional areas such as marketing and production.

One way to facilitate systemwide integration is to purchase international accounting software from the vendor that supplies the rest of the company's business software. Most of the larger software vendors offer discrete modules that companies can mix and match according to their needs. Modular application areas other than accounting are inventory control, international distribution, international treasury management, manufacturing planning and control and project management. It's important to ascertain that the modules offered by a vendor are fully integrated and network compatible. To strengthen the integration and compatibility of their modules, many software vendors have designed their systems around a relational database accessible through a structured query language, which is used to ask a question of a database.

UNIQUE NEEDS

Organizations often have unique needs that aren't addressed by standardized accounting software. Companies with operations in hyperinflationary countries, for example, may have to make daily inflation adjustments to their accounts and revalue their assets each reporting period. Collection and payment policies in such countries usually are different because of the volatile economic environment. Companies facing such circumstances should seek out software that can be customized to accommodate their needs.

The international business environment is in a constant state of flux: Companies continue to seek new opportunities, entering and exiting different markets and reconfiguring their strategic alliances. Businesses internationally also face the prospects of changes in accounting and tax regulations in the countries in which they operate. Such changes place tough demands on their information systems. A good international accounting software package, therefore, should have built-in flexibility to compensate for such changes.

The demand for global accounting software is increasing. As enterprises expand internationally they will seek the advice of their accountants in selecting and customizing their accounting software. So it's incumbent on the profession not onlv to keep abreast of events in the international arena but also to keep current on available software packages that address this market.

RELATED ARTICLE: EXECUTIVE SUMMARY

* WITH TRADE BARRIERS CRUMBLING, midsized and even small businesses are expanding their markets beyond US. borders. But many are discovering that competing effectively around the world requires new, more sophisticated accounting tools to handle multiple currencies and myriad financial and tax rules.

* THE BASIC TOOLS THAT do these jobs constitute a unique class of accounting software specially designed for the international arena.

* NOT EVERY ENTERPRISE that sells abroad needs an international accounting software package. However, as a company's foreign business grows, the need for special programs becomes apparent.

* CPAs SHOULD BE FAMILIAR with the features of different international accounting packages so they can recommend the best fit between the software and the company's needs.

* THE CURRENT ACCOUNTING software design trend is to keep screen-handling routines separate from transaction processing. This allows users to design screens in any language.

* IT'S ALSO IMPORTANT that the software is able to accommodate different currencies and print checks in different styles, currencies and languages.

* THE BEST ACCOUNTING software is only as good as its technical support. So companies contemplating a package should be sure each foreign installation can be serviced by a local office or representative of the vendor.
COPYRIGHT 1995 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1995, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Title Annotation:accounting software
Author:Adhikari, Ajay
Publication:Journal of Accountancy
Article Type:Product/Service Evaluation
Date:Jul 1, 1995
Words:2217
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