Sometimes something happens and although it is not immediately applicable to you, you are aware it could matter in the longer term. A few years ago this would have included, for example, e-commerce. The upper end of the market used it; the mere mortals among us with less money and IT talent didn't bother. Boom and bust in the e-biz market aside, it's obvious to everyone that ordering items over the internet from comparatively small companies is now commonplace.

In general, IT tends to start off at the top end of the market and move downward as costs and acceptance across a broad market converge. This is where the accounting systems market is an odd one: only 45% of companies with up to 50 employees use computers to run their accounts in spite of the ability to do so cheaply, often with change from for less than £200. But Microsoft is clearly interested and has just agreed to buy Navision, a Danish accounting and financial company that specialises in mid-market companies turning over £5m plus. It did something similar a year and a half ago when it bought Great Plains, a US company doing the same thing. Presumably it expects the take-up among the middle market, if not the smaller players, to look pretty good in its balance sheets.

So, why do so few smaller companies go down the IT route for their accounts? The most probable explanation is the most prosaic: frankly, changing a system that seems to work is one hell of a faff. "The owners and managers of smaller companies are often too busy doing their job to proactively investigate ways of making it easier," says Alistair O'Reilly, managing director of accounting systems house Access Accounts. A bit like the general who was too busy directing a sword fight to meet with the machine gun salesman," he adds. Budget is also an issue, since the smaller business will need accurate accounts just as much as the larger business, but will not have the money to pay for them.

It's worth stepping back and looking at just how to get a company's accounts in order electronically. It's May after all, which 's a good time to start. Essentially it's not difficult, as long as you start with the right paperwork around you: your last bank statement, a list of who owes you money and a list of people to whom you owe money.

Different systems handle the initial setting up of a company in different ways, mostly because they are aimed at different customers. The Small company accounting systems from Sage, Pegasus and others offer wizards to guide you through data entry to an extent but they assume a certain competence in accounting. Quickbooks from Intuit, for example, assumes you know nothing and asks very simple questions like "how much are you owed, who by and how many bank accounts should you set up?" Also at the lower end, Simply Books offers something that looks like a spreadsheet but has a 16-page booklet to explain how it works since the company believes the small trader will want to read this rather than get all their knowledge online.

Essentially, all are designed to get your records up-to-date as quickly and painlessly as possible and will help you to put the right data in the right places. Points to watch are whether your VAT registration is on a cash or accrual basis, and whether you have a personal credit card that you sometimes use for business purchases. It's actually a very good way for sole traders to realise how slapdash their accounts, which they will previously have assumed to be immaculate, have been.

The advantages of automating the process are clear. As discussed in the last issue of Business Solutions (May 2 2002), it's increasingly easy to use a good accounting system to link up to the government's websites and submit company returns, VAT returns and income tax automatically, and calculating those payments will take minutes rather than days. Peace of mind in always being up-to-date is equally important. This, presumably, is why the Gates empire knows it's on to a winner.

The fallout from Microsoft's second entry into the market should be worth watching, more for the inter-company politics than for any impact on the business customer, whose system will still work. Industry commentators and competitors were taken by surprise by the initial announcement, particularly in the light of the Great Plains deal, but have been quick to offer opinions. Eduardo Loigorri, managing director of accounting systems company Exchequer, believes the presence of the two product lines will lead to conflict. "Microsoft will be rationalising these two acquisitions on a worldwide scale and I think we may see product and headcount culls," he says. "Also, Sage really seems to have missed a great opportunity to acquire some mid-market muscle." Having said which, Sage bought and assimilated Tetra in that space a few years ago. Fleming Beisner, managing director of Navision in the UK, stresses that the takeover has been agreed but the deal not completed as yet, so the details of what will happen are understandably sketchy; for the moment, for Navision customers and partners, he confirms it's business as usual.

What is certain is that Microsoft will now own financial and accounting systems for the larger end of the "small to medium enterprise" market, as the DTI calls anyone from the sole trader to someone employing 249 people. In fact it owns two systems, and no doubt the debate on how it will harmonise them will rage until the deal is at least done rather than just agreed.

Interestingly for industry watchers it also has its financial system for individuals, Money, and the professional version, Money Personal and Business, which will handle basic invoicing and receipt of payments for a self-employed person. This leaves a fairly substantial gap in the small office to lower end of medium office market as dominated by Sage at the moment; as Philip Taylor, executive product director and founder of accounting systems developer Squaresum says, "What does not seem to be happening is a simple bookkeeping system that can be sold as part of Office. That was supposedly the original idea behind the Great Plains purchase. If it ever was the idea perhaps Microsoft has discovered that it is difficult to have a bookkeeping product that is as ubiquitous as Office but meets the legal requirements of countries all over the world."

Tips on selecting your accounts package

· Decide whether you or a colleague have good accounting skills. If not, opt for one of the simpler systems - TAS, MYOB, Quickbooks, Simply Books - that works in plain English. If so, some of the more complex systems - Sage, Access, Exchequer, Squaresum and numerous others - will offer more financial analysis as you grow.

· Talk to your dealer: it's easy to buy a system that's actually more sophisticated than you need, which means you end up spending too much money. o If your accounts are very simple indeed - perhaps you're a sole trader not registered for VAT and running a service rather than product-oriented business - consider whether a spreadsheet would be just as efficient as a full-blown accounting system.

· Larger companies will need larger systems: many suppliers, for example Sage, offer products throughout a company's growth cycle, but they're not the only ones.

· If you're changing your accounting system rather than starting from scratch, make sure your chosen system is backwards-compatible, in other words that it will read whatever format your accounts are in at the moment. Or keep your old financial software as well as its replacement. You're still accountable for your old transactions and the VAT and Inland Revenue people get mightily annoyed if you can't tell them how much you earned a couple of years ago because of a computer glitch!