As wisely put, businesses aren’t always just about the size, it’s about the capabilities. Quality would only improve if the personnel would follow a foolproof system. Accounting is seen by the companies as a burdensome evil. The traditional ‘book keeping’ is out of the window and special accounting solutions software are the new need based trend for enterprises.
It’s important to have a basic understanding of the question as to what kind of software would suit your business, since it sets the backbone of the financial processes in any business.
Technically, a ‘horizontal’ application is the one where all the functionalities are generic and which can be applicable to any industry, whereas, a ‘vertical’ application is industry specific. Smaller scale firms mostly go for softwares which generally are planned around a ‘one-size fits all’ approach. Whereas, large firms may go with customised application for their complex and unique needs of their specific operations. A lot of research is required before taking up any decision and one simply cannot trust other companies’ experiences since each firm has a different approach.
When would businesses need horizontal or vertical accounting software?
- Increased workforce: With the increase in the manpower strength of any company, it becomes necessary to have effective, as well as efficient, software which can make the calculations and evaluations easy. Now we all know that accounting is not only about calculations. It is much more.
- Improved technological usage: People have started using hosted technologies for say, horizontal accounting, as everything now is available on cloud. The usage of online servers and softwares have reduced the burden to assimilate data properly and then dealing on them.
- Perpetually growing functionalities: Even if the business is into one product or service, it has been growing in terms of added functionalities that it might provide. Hence the company has to be well off with the accounting softwares which could be proved useful in managing all at the same time by managing the work efficacy provided by that product. Plus it becomes easy for the company to divide the budget and various other expenses to those varied functionalities by providing weights to them.
- Save on Tax benefits: Accurate accounting leads to have tax benefits for the business which is the most looked feature in any accounting software. Things that are well formulated using account management softwares are likely to save on a large cost for the business thereby improving the profit margins of the firm.
Read More: Accounting Software Evaluation Checklist
In the wide pool of options, it could get confusing as to which solution would best suit your organization. It generally depends on what kind of business needs you want to be catered to. Generally, a businessman with low and high resources; hence, we will discuss the features provided by both the systems and which one better fits your firm, in terms of:
As defined, horizontal application is used for all collective jobs. It’s effortless to understand and follow, and therefore, it’s recommendable for newly recruited or trainees. It’s usually taken up by startups or smaller firms in order to get their financial processes in place in a jiffy. Such kind of an application is mainly used to study the trend of income statements, for evaluating management efficiency and performance and to look into the consistency of the financial statement.
A vertical system allows a company to have many aspects of various work processes to be amalgamated. All needs are fulfilled at a single location. The application is constantly active and makes adjustments abiding to the updated laws and regulations. It is more dynamic in its approach as it has many features to offer. It aligns the processes which need to be integrated, auto-fills the entries and also avoids redundancy. For example, product track record, customer track record, inventory management, profitability trail, invoices history etc.
#2. Cost and Efficiency
Since a horizontal application is not complicated or specific, it doesn’t cost much and doesn’t involve expertise to make a buying decision. It includes the basic requirements that a firm needs to utilize in its daily chores. It is efficient in a way that it systematically follows the daily tasks of a firm and constantly evaluates the output or discrepancies.
On the other hand, you pay hefty amounts for the vertical system, rather than the horizontal application. This is because vertical software provides high quality and intelligent features, specific to the industry. A few of them could be; inventory for manufacturing, depreciation and amortization calculations in real-estate firms and job costing for construction. With all of the data available in one location and being processed continuously, a vertical system becomes more vital for a company to carry on its task in a particular direction.
It’s safe to say that both the systems are efficient in the range of features that they have to offer.
#3. Scope of Enhancement
Even horizontal products have slowly started to enhance its features which they did not have earlier like incorporating functions such as payroll, inventory, human resource management and others. This results in the horizontal application system getting closer to a vertical system and eventually bridging the gap between the two. Hence, between both the applications the gap is diminishing that makes the choice of picking one over the other more troublesome and difficult.
‘73% of companies currently use cloud accounting applications — held steady from 2013’s study.’
As a conclusion, what one really requires in life is; ease. And also with a few pros, comes cons. You have to be wise and weigh them against the requirements whether the requirements are generic or specific. If your needs are in line with the aforementioned features, you have a smarter way to deal with your business in front of you.
At the end of the day, it’s in the firm’s hand to decide what kind of attributes they need; generic or specific. However, you can learn more about accounting software and may come to an end to your dilemmas and doubts.