When it comes to working out the cost of accountancy software there are no hard and fast rules. The difficulty is that costs will vary depending on your needs, the level of functionality you need and the level of support you require.

Whatever the reason for changing software, don't just go for the cheapest option, advises Rick Holroyd of Holroyd Howe. He suggests looking for something that will grow with the business over a period of years; without, of course, busting the budget.

Off-the-shelf solution

Smaller businesses, those of up to £1m-a-year turnover, should consider buying an off-the-shelf software package; one they can install and manage with minimum help. Such solutions can be bought for less than a couple of hundred pounds. However, most growing businesses’ needs are much more complex. A service business that wants to monitor and charge out its employees' time, for example, will require something with a greater degree of sophistication, while a manufacturing or distribution company might require a program that not only supplies financial information but integrates this with stock control that can also handle online orders from customers.

In short, the more complex your needs, the more expensive the package. When it comes to budgeting for the package you need to look at more than the box price. Extra costs you need to consider are data migration fees for transferring your current information across to the new system, maintenance costs, which will normally be 2 per cent of the software licence fees, support costs which are usually between 18-20 per cent of the licence, and upgrade fees. Added to that will be the cost of training and the costs of calling helplines to help with day-to-day glitches and difficulties.

In the case of contract caterer Holroyd Howe, a company with 550 full and part time employees and a turnover of £12.5m, its new system cost £48,000. Further up the price scale, computer memory product distributor Simms International, which turns over £8m and has 15 employees, has invested £150,000 on installation of a Microsoft Navision accounting system. It expects to spend the same amount again on further development.

As a guide, if you're a smaller company and have spent between £250 and £500 on an off-the-shelf package, you should budget to spend around £200 or £300 annually for support. Clearly the costs can mount up; so it's well worth devoting some management time during both the purchase and implementation to ensure you get the right system within budget.