Accounting Systems: Software Choice for Lola's Pet Supplies (BFA504)

This report examines the software options for Lola's Pet Supplies, a small to medium-sized business facing challenges with its current accounting package, MYBP. The analysis compares the advantages and disadvantages of developing an accounting system in-house versus purchasing an external software solution. The report highlights the benefits of in-house systems, such as customization and cost-effective modifications, while also acknowledging drawbacks like management time commitment and potential data loss. Conversely, external systems are praised for their reliability, advanced features, and cost-effectiveness, but they also present challenges related to third-party assistance, data security, and modification costs. The report then evaluates Chris's claim regarding the cost savings of an external system and recommends the adoption of an externally developed system for Lola's Pet Supplies, justifying this choice based on the company's size, operational focus, and the ability to mitigate security risks through appropriate controls. The report emphasizes the importance of focusing on core business operations and the cost-effectiveness of external solutions, particularly in mitigating security threats associated with cloud-based data storage.

Problem faced: Which software to use? Developed In-House or purchased from
outside?
Lola’s pet supplies
Advantages
In-House:
- Highly customized to the needs of the business
- Low cost of modifications that may be required in future
- No dependence on a third party for service and in case of any technical glitch.
External:
- Developed by experts and hence, usually free from bugs
- Incorporates the feedback from various users and hence includes many advanced features
- Cheaper to purchase and install
- Company can focus on its core area of operations.

Problem faced: Which software to use? Developed In-House or purchased from
outside?
Lola’s pet supplies
Disadvantages
In-House:
- Occupies a lot of time of the management, deviating focus from the core business.
- Requires a lot of modifications and changes, driven by needs for features which is felt during usage.
- At times technical glitches can also lead to loss of data of the company
External:
- Require 3rd party assistance, in case of a technical glitch
- Unrestrictedity of data needs to be protected when using a cloud based external software
- High cost of modifications

Lola’s pet supplies
Security risk:
In-House:
Internally developed systems which have their data stored in the local storage have low security risk
from data theft perspective.
External:
External accounting systems, which generally have their data storage on cloud based network, have a
high risk of data theft.
Measures to control
When using cloud based data storage systems for storing the confidential data, management should
implement stricter access control on the data, so as to prevent or reduce the chances of data loss.

Lola’s pet supplies
Recommendation
Externally developed system:
External accounting systems are generally more reliable, efficient and cost effective. Also, since the scale
of operations of Lola’s pet supplies is not that large as of now, it is advisable to go for externally
developed systems.
Justification:
- Management should focus on the core operations of the entity
- Accounting requirement is not that complex
- In-house development of an accounting system will require significant recurring as well as one time
cost
- Security threat from using external software can be mitigated by implementing appropriate control.

Lola’s pet supplies
Chris’s claim:
‘Once the system is acquired then the business can get back to normal and do what it does best — make great pet
products — without having to spend money on IT’?
Evaluation:
Claim made by Chris stands partially valid as
- The externally developed accounting system is generally a plug and play system, which, once
implemented, doesn’t require to be spent time on and the management can rather focus on the core
business area, in this case make great pet products, whereas,
- Second part of the statement, i.e. without having to spend money on IT, may not be true completely,
as even in case of procuring the externally developed software, the company needs to incur cost on
IT, on updates, modification, etc. required from time to time.