By Mike Hart
The following is a typical scenario in the evolution of a small manufacturing business.
Every company needs accounting software to invoice customers, pay the bills, collect money, and run financial statements. When a company starts up and is small in size, it uses a low end software package such as QuickBooks or Peachtree because it performs these basic functions well and is low cost. .
The manufacturing side of the business gets by using the basic inventory, sales order, and purchasing modules offered by the accounting system and augments them with spreadsheets to handle manufacturing requirements.
This arrangement works satisfactorily when the company is small and transaction volume is light enough where a manager can still just walk out into the shop to get a handle on what’s going on with jobs and shipments.
The company has a good product and provides good customer service. Sales grow and transaction volume increases. And then it starts getting harder and harder to keep a handle on the shop. No matter how much effort managers apply to keeping up with growth, problems spiral out of hand and late deliveries and quality problems proliferate. Customers grumble and workers operate under duress.
This is when manufacturing software is needed because it is the only way to organize and deal with the complexity that is inherent to a manufacturing system once it reaches a critical mass in transaction volume.
The manufacturing people desperately need software that manages basic functions such as bills of material, routings and work centers, job scheduling and tracking, labor and overhead costing, process documentation, and subcontract service processing.
This is the juncture when conflict arises between the manufacturing and accounting sides of the business. Almost all mid-market ERP systems require using their financial modules and thus the accounting people are faced with changing all the processes they know so well.
The accounting people are perfectly happy with their software, and why shouldn’t they be? Today’s low end accounting packages are quite good when it comes to the financial applications of payroll, receivables, payables, banking, and general ledger.
If you avoid mid-market ERP systems and focus on small business software packages, several manufacturing systems enable you to continue using your existing accounting system.
In my Manufacturing Software Directory, the following software packages in the “small business manufacturing” category offer some type of linking with QuickBooks – Catalyst Manufacturing, ERPLite, Job Master, MISys SBM, pc/MRP, Pedyn P2000, RealTrac, and Visual Jobshop. Some of these products also link to Peachtree.
My company’s product, DBA Manufacturing, offers a financial transfer option that is generic in nature so that the product can be used with any outside accounting system, not just QuickBooks. DBA also includes its own financial modules if you prefer integrated accounting.
Be aware that these so called accounting “links” vary widely in how they work. You may be required to use certain versions of QuickBooks and you may have to synchronize versions in the future so that updates remain compatible. Be careful of systems that do not use their own sales order and purchasing modules because these modules in QuickBooks and Peachtree are not adequate for manufacturing requirements.
There are always compromises to make when you operate with two separate systems. If there is a clean separation between the operational modules in the manufacturing system and the financial modules in the accounting system, the compromises are minimized and the two system approach is a practical solution. On the other hand, if there is lots of mixing and matching of functions between the two systems, you can end up with a hybrid system that satisfies neither side of the business.
Mike Hart is the co-founder and President of DBA Software Inc., a leading provider of manufacturing software for small businesses.