Software companies are businesses with the same needs as other businesses; they need the ability to purchase goods and services, pay vendors, service customers, account for activities, and report to stakeholders. In other ways, however, software companies have unique needs for specific software functionality and capabilities. Some are so specialized that few ERP software systems can truly provide for their needs.
One dilemma for software start-ups is the product development stage; to build an initial product offering, they incur significant expenses while they have no incoming revenue. Keeping track of capital raised from multiple investors and reporting operating results to those investors requires sophisticated software that is beyond the capabilities of most “simple,” PC-based accounting software.
Even after a software startup launches its product, other complications can occur.
Software is sold or licensed under a variety of contractual arrangements. These may include a perpetual license with periodic maintenance payments, a “pay as you go” annual or monthly subscription basis, or other market-driven pricing scenarios. In order to be competitive in the software marketplace, software firms must provide for all these acquisition terms for their customers.
Software firms must also comply with complex accounting rules regarding sales activities, especially deferred revenue from sales as well as licensing activities. Most accounting packages available to small start-up companies are not that sophisticated.
Additionally, there is the matter of investor reporting.
Start-up software firms usually have multiple investors who are naturally interested in the firm’s financial results, but they are also keenly interested in the impact of those results on their investment. Such transaction recording, allocation, and reporting requirements are well beyond the capabilities of most “basic” accounting software, and can place a significant burden on the accounting staff of the software firm or require outlays of much-needed cash for accounting services.
To read more about Acumatica's Cloud ERP for start-ups and learn about their “Smart-Ups for Startups” program, which combines software, implementation, and consulting services, visit the
Acumatica blog.
The Brown Smith Wallace 2014-15 Distribution and Manufacturing Software Guides are currently available for download. Please contact snelson@bswllc.com for more information about these latest editions.
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