Your Legacy Accounting Software May Be Costing More Than You Think by Shanna Shim, CPA
Posted on September 11, 2024
by
Shanna Shim
When small and mid-size businesses assess their existing accounting systems, the adage “if it ain’t broke, don’t fix it” often comes to mind. After all, if employees are comfortable working with a solution that continues to function the way it is supposed to, why spend the dollars and resources to find and deploy a new system? Truth be told, legacy platforms come with an array of hidden costs that can drain your budget while also slowing down productivity, increasing vulnerability to hackers and impeding business growth. Following are five hidden costs of using legacy accounting systems.
Maintenance Costs
The costs needed to keep legacy systems running can be significant, especially when the solutions providers no longer offer regular updates or service support. Under these circumstances, you will invest substantial time, energy and dollars to find qualified tech support to fix and replace failed components that can cause extensive interruptions to normal business operations and lost productivity.
Outdated Features and Incompatibility with Modern Systems
Legacy systems not only lack many of the features found in the latest technologies, but they also cannot integrate seamlessly with newer, more efficient solutions that businesses need for real-time reporting and managing their growing operations efficiently. As a result, companies are left with a patchwork of incompatible solutions and complex workarounds that require more maintenance and costs in terms of invested dollars and inefficiency that can lead to lost business.
Data Security Risks
Legacy systems lack the most up-to-date security features you need to protect your organization’s mission-critical data and your employees’ and customers’ personal identifying information. This makes you an easy target for cybercriminals. A potential breach or ransomware attack could be far more costly in terms of dollars and reputational damage than you would incur by simply updating your system.
Moreover, businesses in many industries are subject to some form of data security compliance regulations requiring that they implement tools and processes to safeguard customers’ privacy and personally identifiable information from unauthorized disclosure, access or use. For example, most individuals are familiar with HIPPA regulations governing how hospitals, healthcare providers and insurers must protect patient information, whereas the Safeguard Rules, introduced in 2023, apply similar standards to businesses engaged in activities that are “financial in nature or incidental to such financial activities.”
Information stored in legacy systems with outdated features is isolated from other applications, making it challenging to implement a comprehensive data security compliance program that can keep up with ever-changing standards.
Tax Compliance Costs
Accurate financial reporting and tax compliance are crucial to business success. However, growing companies face a complex tax environment with different rules and rates that vary widely across state and international borders. Today’s cloud-based accounting solutions keep up to date with these ever-changing regulations, helping businesses maintain tax reporting and payment compliance and ultimately avoiding the threat of penalties. They also integrate seamlessly with other business software and financial reporting tools, automatically collecting needed data and providing users with on-demand, real-time analytics of their financial circumstances. This eliminates the time-intensive and error-prone data entry process, allowing business owners to focus on growing their operations.
Business Intelligence Risks
Data silos created by legacy systems complicate a company’s ability to get a complete and accurate view of its current operations and financial picture, both of which are critical to making informed, data-driven business decisions. As a result, businesses face an additional risk of lost opportunities, particularly the inability to respond to economic trends and improve operations.
About the Author: Shanna Shim, CPA, is an associate director of Managed Solutions and Technology with Berkowitz Pollack Brant Advisors and CPAs, where she helps small and mid-size companies deploy integrated accounting systems and translate that data into actionable business intelligence. She can be reached at the CPA firm’s Miami office at (305) 379-7000 or info@bpbcpa.com.
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