Buying software applications or apps to incorporate into your accounting practice can be a daunting task.

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One only has to attend an accounting technology trade show or expo to be confronted by an ever-expanding number of software vendors who claim that their applications integrate with the major accounting practice management systems (PM). It is important that potential buyers understand the type of integration utilised.

Most vendors claiming integration will refer to an API. API stands for Application Programming Interface. An API is code that allows software programs to communicate with each other.

In practice management software there are 3 types of APIs – Private, Public and Partner:

  1. Private APIs are for internal use by the PM vendor’s own developers to improve their own products. Private APIs are not available to third parties.
  2. Public or Open APIs are published and available to be used by third-parties. An example of this in the PM vendor space is Xero.
  3. Partner APIs can only be used by third parties with whom the PM vendor agrees to share data. This type of API (also referred to as a closed API) is only made available by the PM vendor to partner vendors whose applications are complementary to their objectives.

If you are considering buying an application that uses a Public API, do not assume that the PM vendor has endorsed or in any way supports the third-party application. The responsibility for due diligence rests solely with the buyer – very much a case of “buyer beware”.

In most accounting practices, the PM system would be regarded as the “source of truth”. It follows therefore that if the third party’s application will be changing data or writing back into the PM system buyers should confirm that this has been approved by the PM vendor.

Last but not least is the matter of security. When shopping for cloud-based software applications always have at the top of your due diligence check list the matter of security. Ask the vendor these simple questions:

  • Is the application subject to regular independent penetration testing?
  • Where is my data stored?
  • Which other accounting firms use the application? Ask for references.
  • Did you develop the application and do you own the IP?

If you are not happy with the answers then start looking elsewhere!

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