<PAGE>   1
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                             ---------------------
 
                                   FORM 10-Q
                                QUARTERLY REPORT
                        PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
                        FOR QUARTER ENDED MARCH 31, 1999
 
                         COMMISSION FILE NUMBER 0-23117
 
                              BEST SOFTWARE, INC.
             (Exact Name of Registrant as Specified in its Charter)
 
<TABLE>
<S>                            <C>                            <C>
          VIRGINIA                         7372                        54-1222526
(State or other jurisdiction   (Primary Standard Industrial         (I.R.S. Employer
     of incorporation or        Classification Code Number)        Identification No.)
        organization)
</TABLE>
 
                           11413 ISAAC NEWTON SQUARE
                                RESTON, VA 20190
                                 (703) 709-5200
  (Address, including zip code, and telephone number, including area code, of
                   registrant's principal executive offices)
 
                             ---------------------
 
     Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months, (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
                         YES  [X]               NO  [ ]
 
     Indicate the number of shares outstanding of each of issuer's classes of
common stock as of the latest practicable date:
 
<TABLE>
<CAPTION>
                                                               NUMBER OF
                                                                 SHARES
                                                             OUTSTANDING ON
                      TITLE OF CLASS                         APRIL 30, 1999
                      --------------                        ----------------
<S>                                                         <C>
Common Stock, no par value................................     11,715,856
</TABLE>
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
                              BEST SOFTWARE, INC.
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
PART I  FINANCIAL INFORMATION
  ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Consolidated Balance Sheets at March 31, 1999 and December
     31, 1998...............................................    3
  Consolidated Statements of Operations for the three months
     ended March 31, 1999 and 1998..........................    4
  Consolidated Statements of Cash Flows for the three months
     ended March 31, 1999 and 1998..........................    5
  Notes to Consolidated Financial Statements................    6
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
     CONDITION AND RESULTS OF OPERATIONS....................   10
PART II  OTHER INFORMATION
  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
     HOLDERS................................................   17
  ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.................   17
  SIGNATURES................................................   18
</TABLE>
 
                                        2
<PAGE>   3
 
                                     PART I
 
ITEM 1.  FINANCIAL STATEMENTS
 
                              BEST SOFTWARE, INC.
 
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                               MARCH 31,    DECEMBER 31,
                                                                 1999           1998
                                                              -----------   ------------
                                                              (UNAUDITED)
<S>                                                           <C>           <C>
                                         ASSETS
Current assets:
  Cash and cash equivalents.................................    $29,902       $29,549
  Short-term investments....................................      7,929        16,731
  Accounts receivable, net of allowance ($877 and $938
     respectively)..........................................      7,398         8,198
  Inventory.................................................        172           138
  Prepaid expenses and other current assets.................      2,747         2,390
  Deferred tax asset........................................        228           602
                                                                -------       -------
          Total current assets..............................     48,376        57,608
                                                                -------       -------
Property and equipment, net.................................      4,916         4,333
Deferred tax asset..........................................      4,961         4,521
Acquired intangibles, net...................................     11,973         7,178
Long-term investments.......................................      8,580            --
Other assets................................................        816           930
                                                                -------       -------
          Total assets......................................    $79,622       $74,570
                                                                =======       =======
                          LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses.....................    $15,874       $14,255
  Notes payable -- current..................................        383           139
  Deferred maintenance and services revenue.................     21,001        19,350
                                                                -------       -------
          Total current liabilities.........................     37,258        33,744
                                                                -------       -------
Note payable -- noncurrent..................................        115           125
Deferred maintenance and services revenue...................        563           616
                                                                -------       -------
          Total liabilities.................................     37,936        34,485
                                                                -------       -------
Shareholders' equity:
  Preferred stock, $0.01 par value; 1,000,000 shares
     authorized, none issued................................         --            --
  Common stock, no par value; 40,000,000 shares authorized;
     11,707,566 shares and 11,687,676 shares issued and
     outstanding, respectively..............................     38,123        38,079
  Additional paid-in capital................................      1,382         1,281
  Deferred compensation.....................................        (88)          (95)
  Accumulated other comprehensive income....................        (68)          (77)
  Accumulated earnings......................................      2,337           897
                                                                -------       -------
          Total shareholders' equity........................     41,686        40,085
                                                                -------       -------
          Total liabilities and shareholders' equity........    $79,622       $74,570
                                                                =======       =======
</TABLE>
 
 The accompanying notes are an integral part of these consolidated statements.
 
                                        3
<PAGE>   4
 
                              BEST SOFTWARE, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
                                                                  (UNAUDITED)
<S>                                                           <C>        <C>
Revenue:
  License fees and royalty..................................  $ 9,342    $ 6,803
  Services..................................................   10,700      6,895
                                                              -------    -------
          Total.............................................   20,042     13,698
                                                              -------    -------
Cost of revenue:
  License fees and royalty..................................      340        440
  Services..................................................    3,365      2,139
                                                              -------    -------
          Total.............................................    3,705      2,579
                                                              -------    -------
Gross margin................................................   16,337     11,119
                                                              -------    -------
Operating expenses:
  Sales and marketing.......................................    7,552      4,704
  Research and development..................................    3,340      2,121
  General and administrative................................    2,171      1,710
  Write-off of purchased research and development...........    1,200      3,850
  Amortization of acquired intangibles......................      350         --
                                                              -------    -------
          Total.............................................   14,613     12,385
                                                              -------    -------
Operating income (loss).....................................    1,724     (1,266)
Other income, net...........................................      591        594
                                                              -------    -------
Income (loss) from operations before income taxes...........    2,315       (672)
Income tax provision (benefit)..............................      875       (270)
                                                              -------    -------
Net income (loss)...........................................  $ 1,440    $  (402)
                                                              =======    =======
Basic net income (loss) per share...........................  $  0.12    $ (0.04)
                                                              =======    =======
Diluted net income (loss) per share.........................  $  0.12    $ (0.04)
                                                              =======    =======
Basic weighted average shares outstanding...................   11,699     10,981
                                                              =======    =======
Diluted weighted average shares outstanding.................   12,329     10,981
                                                              =======    =======
</TABLE>
 
 The accompanying notes are an integral part of these consolidated statements.
 
                                        4
<PAGE>   5
 
                              BEST SOFTWARE, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
                                                                  (UNAUDITED)
<S>                                                           <C>        <C>
Net income (loss)...........................................  $  1,440   $   (402)
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation and amortization.............................       904        383
  Compensation associated with stock options................         7          6
  Write-off of purchased research and development...........     1,200      3,850
  Tax benefit from option exercises.........................       101         --
  Deferred tax asset........................................       (66)    (1,470)
(Increase) decrease in assets:
  Accounts receivable (net).................................     1,063        200
  Inventory.................................................       (34)        (6)
  Prepaid expenses and other assets.........................       395       (586)
Increase (decrease) in liabilities:
  Accounts payable and accrued expenses.....................     1,270      2,552
  Deferred maintenance and services revenue.................     1,162        904
  Other (net)...............................................       (24)        (3)
                                                              --------   --------
     Net cash provided by operating activities..............     7,418      5,428
                                                              --------   --------
Cash flows from investing activities:
  Purchases of property and equipment.......................      (927)      (652)
  Purchases of investments..................................   (14,538)   (13,695)
  Sales of investments......................................    14,760      5,889
  Acquisitions, net of cash acquired........................    (6,178)    (6,800)
                                                              --------   --------
     Net cash used in investing activities..................    (6,883)   (15,258)
                                                              --------   --------
Cash flows from financing activities:
  Proceeds from exercise of stock options and warrants......        44        193
  Purchase and retirement of treasury stock.................        --         (6)
  Repayment of notes payable................................      (235)        --
                                                              --------   --------
     Net cash (used in) provided by financing activities....      (191)       187
                                                              --------   --------
Effect of exchange rate changes.............................         9         --
                                                              --------   --------
Net increase (decrease) in cash and cash equivalents........       353     (9,643)
Cash and cash equivalents, beginning of period..............    29,549     33,164
                                                              --------   --------
Cash and cash equivalents, end of period....................  $ 29,902   $ 23,521
                                                              ========   ========
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the period for:
     Income taxes...........................................  $      5   $     --
     Interest...............................................  $     --   $     13
 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
  ACTIVITIES:
     240,000 shares issued to HR Management Software GmbH...  $     --   $  3,630
</TABLE>
 
 The accompanying notes are an integral part of these consolidated statements.
 
                                        5
<PAGE>   6
 
                              BEST SOFTWARE, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
1.  BASIS OF PRESENTATION
 
     The accompanying unaudited consolidated financial statements and notes
thereto have been prepared in accordance with generally accepted accounting
principles for interim financial information and should be read in conjunction
with the audited consolidated financial statements for the year ended December
31, 1998 included in the Company's Form 10-K. Certain information and footnote
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted as permitted by rules and regulations of the Securities and Exchange
Commission. Interim results of operations for the three-month period ended March
31, 1999 are not necessarily indicative of operating results for the full fiscal
year.
 
     In the opinion of management, all adjustments (consisting of normal
recurring entries) necessary for the fair presentation of the consolidated
financial position, results of operations, and changes in cash flows for the
periods presented have been included. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
 
     At March 31, 1999 marketable securities included securities of U.S.
Government agencies, municipalities and corporations with maturities not greater
than 20 months at date of purchase. These securities were classified as
available-for-sale. The carrying amount of these investments approximated their
market value at March 31, 1999.
 
     In general, the functional currency of a foreign operation is deemed to be
the local country's currency. Consequently, assets and liabilities of operations
outside the United States are translated into United States dollars using the
exchange rate in effect at the balance sheet date. Revenue and expense accounts
for these operations are translated using the average exchange rate during the
period. The effects of foreign currency translation adjustments are included as
separate component of shareholders' equity.
 
2.  NET INCOME (LOSS) PER COMMON SHARE
 
     In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings per Share", basic net income per share and diluted net income per
share can be reconciled as indicated below (in thousands, except "per share
amount" column):
 
<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED            THREE MONTHS ENDED
                                                  MARCH 31, 1999                MARCH 31, 1998
                                           ----------------------------   ---------------------------
                                                              PER-SHARE                     PER-SHARE
                                           INCOME   SHARES     AMOUNT     INCOME   SHARES    AMOUNT
                                           ------   -------   ---------   ------   ------   ---------
                                                   (UNAUDITED)                    (UNAUDITED)
<S>                                        <C>      <C>       <C>         <C>      <C>      <C>
Basic net income (loss) per share:
  Income available to common
     shareholders........................  $1,440    11,699     $0.12     $(402)   10,981    $(0.04)
Effect of dilutive securities
  Preferred stock........................                --                            --
  Options and warrants...................               630                            --
                                           ------   -------     -----     -----    ------    ------
Diluted net income (loss) per share:
  Income available to common
     shareholders........................  $1,440    12,329     $0.12     $(402)   10,981    $(0.04)
                                           ======   =======     =====     =====    ======    ======
</TABLE>
 
     For the three months ended March 31, 1998, the options and warrants
outstanding were excluded from the computation of diluted loss per share as
their impact was anti-dilutive.
 
                                        6
<PAGE>   7
                              BEST SOFTWARE, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
3.  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
     The American Institute of Certified Public Accountants (the "AICPA") has
issued a Statement of Position (the "SOP") SOP 97-2, "Software Revenue
Recognition". The Company has adopted SOP 97-2 effective January 1, 1998. The
adoption of SOP 97-2 did not have a material impact on the Company.
 
     The AICPA has issued a Statement of Position (the "SOP") SOP 98-9,
"Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain
Transactions" effective for transactions entered into in fiscal years beginning
after March 15, 1999. The Company is evaluating this statement, but does not
believe it will have a material impact on the Company.
 
     In 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income" and No. 131, "Disclosures about Segments of an Enterprise and Related
Information". The Company adopted SFAS No. 130 effective January 1, 1998 which
requires companies to report comprehensive income which is the total of net
income plus all changes in equity during the period except those resulting from
investment by owners and distribution to owners. The Company's comprehensive
income includes net income and cumulative adjustments in foreign currency
translations.
 
     In 1998, the Company adopted SFAS No. 131 which establishes standards for
reporting information about operating segments in annual financial statements
and requires selected information about operating segments in interim financial
statements. Operating segments are defined as components of an enterprise about
which separate financial information is available that is regularly evaluated by
the chief operating decision maker of decision making group, in deciding how to
allocate resources and in assessing performance.
 
4.  ACQUISITIONS
 
     On March 25, 1999, the Company acquired the assets of OmniVista Software
Corporation ("OmniVista"), a leading provider of planning and analytical
software. The acquisition price was for $5.0 million in cash, $350,000 in
assumed net liabilities and acquisition expenses of approximately $350,000. The
acquisition was accounted for as a purchase and the Company recorded a charge
for $1.2 million in the first quarter of 1999 associated with in-process
research and development ("IPR&D"). The Company used an independent third-party
appraiser to assess and value the IPR&D. The value assigned was determined by
identifying significant research projects for which technological feasibility
had not been established. The purchase price allocation represents the estimated
fair market value based on risk-adjusted cash flows related to the incomplete
products. The excess of the purchase price over the fair value of the net assets
of approximately $4.5 million represents completed technology and product base
of approximately $1.7 million, assembled work force of $275,000, and customer
base and strategic alliances of $2.5 million. These intangible assets will be
amortized over four to six years. The Company believes that the assumptions used
in the IPR&D and intangible valuations were reasonable at the time of the
acquisition. No assurance can be given, however, that the underlying assumptions
or the events associated with such projects will transpire as estimated. For
these reasons, actual results may vary from projected results.
 
     On March 25, 1999, the Company acquired HR Management & Software AG ("HRS
AG"), a provider of human resource software in the European marketplace. The
acquisition price was approximately $900,000 in cash. The acquisition was
accounted for as a purchase. The Company assigned $632,000 to intangible assets
related to the completed technology base and the assembled workforce and will be
amortized over seven years. The Company recorded approximately $610,000 in
tangible assets consisting primarily of cash and accounts receivable and
$342,000 in assumed liabilities of HRS AG.
 
                                        7
<PAGE>   8
                              BEST SOFTWARE, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     In March 1998, the Company acquired HR Management Software GmbH (HRS), a
provider of human resource software in the European marketplace. The acquisition
price was for approximately $10.4 million consisting of $6.4 million in cash,
240,000 shares of Common Stock, and acquisition costs of approximately $400,000.
The acquisition was accounted for as a purchase and the Company recorded a
charge of approximately $3.9 million in the first quarter of 1998 for amounts
allocated to in-process research and development. The Company assigned
approximately $6.5 million to intangible assets and existing technology and is
amortizing this over the expected economic useful lives, which range from three
to seven years. The Company recorded approximately $2.7 million in tangible
assets consisting primarily of accounts receivable and fixed assets and $2.7
million in assumed liabilities of HRS.
 
     Results of operations for all acquisitions have been included with those of
the Company for periods subsequent to the corresponding date of acquisition.
 
     The following consolidated proforma information assumes the HRS acquisition
occurred on January 1, 1997 (in thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                              FOR THE THREE
                                                              MONTHS ENDED
                                                                MARCH 31,
                                                                  1998
                                                              -------------
                                                               (UNAUDITED)
<S>                                                           <C>
Proforma results of operations:
Revenue.....................................................     $15,150
Loss from operations before income taxes....................        (656)
Net loss....................................................        (386)
Loss per share..............................................     $ (0.04)
</TABLE>
 
5.  COMPREHENSIVE INCOME
 
     The Company accounts for comprehensive income as prescribed by SFAS No.
130, "Reporting Comprehensive Income". Comprehensive income is the total of net
income plus all changes in equity during the period except those resulting from
investment by owners and distribution to owners. The Company's comprehensive
income includes net income and cumulative adjustments in foreign currency
translations.
 
<TABLE>
<CAPTION>
                                                               THREE MONTHS
                                                                  ENDED
                                                                MARCH 31,
                                                              --------------
                                                               1999    1998
                                                              ------   -----
<S>                                                           <C>      <C>
Net Income (loss)...........................................  $1,440   $(402)
  Other comprehensive income, net of tax:
     Foreign currency translation adjustments...............       9      --
                                                              ------   -----
Comprehensive income (loss).................................  $1,449   $(402)
                                                              ======   =====
</TABLE>
 
                                        8
<PAGE>   9
                              BEST SOFTWARE, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
6.  SEGMENT REPORTING
 
     The Company has three reportable segments: Accounting Products Group
("APG"), Human Resources Products Group ("HRPG"), and International operations.
They are strategic business units that offer different products and services or
serve different geographic markets. They are managed separately as each business
requires different technology, domain expertise, marketing strategy and
knowledge, and level of services. The portion of cash equivalents, short-term
investments and related interest income, that are not identifiable with a
particular segment are included in "Unallocated Corporate" as well as
unallocated general and administrative costs. The segment information is as
follows (in thousands):
 
<TABLE>
<CAPTION>
                                                    TOTAL                     UNALLOCATED   RECONCILING
                                 APG      HRPG     DOMESTIC   INTERNATIONAL    CORPORATE    ADJUSTMENTS    TOTAL
                               -------   -------   --------   -------------   -----------   -----------   -------
<S>                            <C>       <C>       <C>        <C>             <C>           <C>           <C>
THREE MONTHS ENDED MARCH 31, 1999
Revenues from external
  customers..................   10,390     7,297    17,687         2,355             --            --      20,042
Write-off of purchased
  research and development...    1,200        --     1,200            --             --            --       1,200
Segment operating profit
  (loss).....................    2,573       806     3,379          (418)        (1,237)           --       1,724
AS OF MARCH 31, 1999
Segment assets...............   46,317    19,060    65,377          (318)        19,110        (4,547)     79,622
Long-lived assets............                       10,087         6,639            163            --      16,889
THREE MONTHS ENDED MARCH 31, 1998
Revenues from external
  customers..................    8,102     5,469    13,571           127             --            --      13,698
Write-off of purchased
  research and development...       --        --        --         3,850             --            --       3,850
Segment operating profit
  (loss).....................    2,817     1,281     4,098        (4,036)        (1,328)           --      (1,266)
AS OF MARCH 31, 1998
Segment assets...............   32,726    13,967    46,693           757         22,551        (3,112)     66,889
Long-lived assets............                        2,380         6,960              6            --       9,346
</TABLE>
 
                                        9
<PAGE>   10
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
     This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties. For this purpose, the following discussion of the financial
condition and results of operations of the Company should be read in conjunction
with the Form 10-K, the Consolidated Financial Statements and Notes thereto.
Statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes", "anticipates", "plans", "expects", and similar expressions are
intended to identify forward-looking statements. Important factors known to Best
Software, Inc. that could cause such material differences are discussed under
the caption "Certain Factors That May Affect Future Results" in Item 7 of the
Company's annual report on Form 10-K, which is incorporated herein by reference.
These and other important factors could cause the Company's actual results to
differ materially from those indicated by such forward-looking statements. The
Company undertakes no obligations to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
 
                                    OVERVIEW
 
     Best Software, Inc. is a leading supplier of corporate resource management
software solutions, helping organizations to better manage their people, assets
and budgeting processes. The Company's feature-rich, cost-effective solutions
enhance productivity by automating management, compliance and reporting
functions in areas of specialized expertise that entail complex and frequently
changing laws and regulations. The Company's solutions have been designed to
complement core accounting systems and are scaleable from stand-alone desktop
applications running on personal computers to multi-user work group and
client/server programs designed for use on personal computer local area
networks. The Company reaches its customer base and target market through a
multi-channel sales and marketing strategy that includes its network of value-
added resellers, accounting firms and consultants ("Business Partners"), a
direct-response telesales operation, strategic marketing alliances and a direct
sales organization. As of March 31, 1999, the Company had over 47,000 licensed
customer locations, representing approximately 135,000 licensed seats.
 
     In March 1999, the Company began to offer its budgeting and planning
software solutions through the acquisition of assets of OmniVista Software
Corporation, a leading provider of planning and analytical applications
software. The acquisition price was for $5.0 million in cash, $350,000 in
assumed net liabilities and acquisition expenses of approximately $350,000. This
new product line will be distributed under the "Best! Imperativ Analytics"
label, which includes an allocation tool and the capabilities to provide
flexible budgets. Also in the first quarter of 1999, the Company acquired HR
Management & Software AG, a Swiss-based human resource software distributor. The
acquisition strengthens the Company's European presence and extends its
professional services capacity for the international version of Best! Imperativ
HRMS planned for release later this year.
 
     In 1998, the Company extended its human resource and payroll offerings
through acquisitions. In March 1998, the Company acquired HR Management Software
GmbH, a leading provider of human resource software in the European marketplace.
In October 1998, the Company acquired certain technological assets of HRSoft,
Inc., a leading provider of human resource software. In December 1998, the
Company acquired a 25% share of S&P AG, a provider of payroll software in the
European marketplace.
 
     In addition to revenue from product licenses, the Company derives
significant recurring revenue from maintenance and support agreements.
Maintenance and support agreements are generally priced as a percentage of the
initial license fee for the underlying products. Under its maintenance and
support agreements, the Company provides technical support and periodic software
updates. The Company also provides consulting services, which include
installation, set-up and conversion services. Training and consulting revenue
are anticipated to have lower gross margins than revenue from maintenance and
support agreements.
 
     The Company recognizes revenue on license fees upon shipment of the
product, net of provisions for returns and allowances, provided that no
significant Company obligation remain and that collection of the
 
                                       10
<PAGE>   11
 
resulting account receivable is probable. For products with free trial periods,
revenue is recognized upon acceptance of the product by the customer. Revenue
from maintenance and support agreements is recognized pro rata over the term of
the agreements, which is generally one year. Revenue from other services, such
as training and consulting, is recognized as the services are provided.
 
                             RESULTS OF OPERATIONS
 
     The following table sets forth for the periods indicated certain
consolidated statement of operations data expressed as a percentage of total
revenue (unaudited):
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS
                                                                  ENDED
                                                                MARCH 31
                                                              -------------
                                                              1999    1998
                                                              -----   -----
<S>                                                           <C>     <C>
Revenue:
  License fees and royalty..................................   46.6%   49.7%
  Services..................................................   53.4    50.3
                                                              -----   -----
          Total.............................................  100.0   100.0
                                                              -----   -----
Cost of revenue:
  License fees and royalty..................................    1.7     3.2
  Services..................................................   16.8    15.6
                                                              -----   -----
          Total.............................................   18.5    18.8
                                                              -----   -----
Gross margin................................................   81.5    81.2
                                                              -----   -----
Operating expenses:
  Sales and marketing.......................................   37.7    34.3
  Research and development..................................   16.7    15.5
  General and administrative................................   10.8    12.5
  Write-off of purchased research and development...........    6.0    28.1
  Amortization of intangibles...............................    1.7      --
                                                              -----   -----
          Total.............................................   72.9    90.4
                                                              -----   -----
Operating income (loss).....................................    8.6    (9.2)
Other income, net...........................................    3.0     4.3
                                                              -----   -----
Income (loss) from operations before income taxes...........   11.6    (4.9)
Income tax provision (benefit)..............................    4.4    (2.0)
                                                              -----   -----
Net income (loss)...........................................    7.2%   (2.9)%
                                                              =====   =====
</TABLE>
 
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
 
     License Fees and Royalty Revenue.  License fees and royalty revenue
consists of fees from software licenses and royalties from the small business
account product line ("MYOB License"). License fees and royalty revenue
increased approximately $2.5 million to $9.3 million for the three months ended
March 31, 1999 from $6.8 million for the three months ended March 31, 1998,
representing an increase of 37.3%. The increase in license fees and royalty
revenue was due to a significant increase in royalty from MYOB License and an
increase in license fee revenue from APG and HRPG products, which resulted
primarily from increased sales of higher priced Imperativ and multi-user
products. As a percentage of total revenue, license fees and royalty revenue
decreased to 46.6% for the three months ended March 31, 1999 from 49.7% for the
three months ended March 31, 1998 reflecting the increased efforts in providing
support services to our customers, increased services provided with our
client/server products, and the additional revenue from the European operations
acquired in March 1998 which produce a higher relative percentage of service
revenue.
 
     Services Revenue.  Services revenue includes revenue from maintenance and
support agreements, training, consulting and implementation services. Services
revenue increased approximately $3.8 million to $10.7 million for the three
months ended March 31, 1999, from $6.9 million for the three months ended March
31, 1998, representing an increase of 55.2%. The increase in services revenue
was primarily attributable to an increase in the number of maintenance and
support agreements as a result of a larger installed base of
 
                                       11
<PAGE>   12
 
customers throughout the United States and International operations and higher
average contract value. To a lesser extent, the increase in services revenue was
due to the Company's increased focus on offering training and other consulting
services, which include installation, set-up and data conversion activities.
Services revenue comprised 53.4% of the Company's total revenue for the three
months ended March 31, 1999, compared to 50.3% for the same period in 1998.
 
     Cost of License Fees and Royalty Revenue.  Cost of license fees and royalty
revenue consists primarily of the costs of media, product manuals, shipping and
fulfillment, and royalties paid to third parties. Cost of license fees and
royalty revenue decreased approximately $100,000 to $340,000 for the three
months ended March 31, 1999 from $440,000 for the three months ended March 31,
1998, representing a decrease of 22.7%. As a percentage of license fees and
royalty revenue, cost of license fees and royalty revenue decreased to 3.6% for
the three-month period ended March 31, 1999 from 6.5% for the three-month
periods ended March 31, 1998, resulting from the increase in sales of higher
margin Windows-based and multi-user products and cost improvements on the
license media and fulfillment operations.
 
     Cost of Services Revenue.  Cost of services revenue consists primarily of
personnel costs, telephone charges and other costs related to providing
telephone support, training and consulting services. Cost of services revenue
decreased approximately $1.3 million to $3.4 million for the three months ended
March 31, 1999 from $2.1 million for the three months ended March 31, 1998,
representing a increase of 57.3%. The increase in cost of services revenue was
primarily due to increases in service personnel to meet the demands of the
higher number of maintenance and support customers and the increased services
related to the European operations. Cost of services revenue represented 31.5%
and 31.0% of services revenue for the three-month period ended March 31, 1999
and 1998, respectively.
 
     Sales and Marketing.  Sales and marketing expenses consist primarily of the
costs of the Company's sales and marketing personnel as well as the costs of
direct mail, advertising, and other sales and marketing activities. Sales and
marketing expenses increased approximately $2.9 million to $7.6 million for the
three months ended March 31, 1999 from $4.7 million for the three months ended
March 31, 1998, representing an increase of 60.5%. This increase was primarily
attributable to hiring additional personnel and increased marketing activities
as a result of new product releases and increased web site and corporate brand
awareness activities. As a percentage of total revenue, sales and marketing
expenses increased slightly to 37.7% for the three-month period ended March 31,
1999 from 34.3% for the three-month period ended March 31, 1998.
 
     Research and Development.  Research and development expenses consist
primarily of personnel costs and fees paid to outside consultants who research,
develop, maintain and enhance the Company's existing software product lines and
develop new products. Research and development expenses increased approximately
$1.2 million to $3.3 million for the three months ended March 31, 1999 from $2.1
million for the three months ended March 31, 1998, representing an increase of
57.5%. This increase was primarily due to the increased expenses relating to the
development of the Company's new budgeting and Imperativ products. As a
percentage of total revenue, research and development expenses increased to
16.7% for the three-month period ended March 31, 1999 from 15.5% for the
three-month period ended March 31, 1998.
 
     General and Administrative.  General and administrative expenses include
the costs of corporate operations, finance and accounting, human resources and
other infrastructure costs. General and administrative expenses increased
approximately $461,000 to $2.2 million for the three months ended March 31, 1999
from $1.7 million for the three months ended March 31, 1998, representing an
increase of 27.0%. The increase in general and administrative expenses was the
result of increased staffing and related expenses necessary to manage and
support the expansion of the Company's operations. General and administrative
expenses represented 10.8% of the Company's total revenue for the three-month
period ended March 31, 1999, compared to 12.5% for the same period in 1998.
 
     Write-off of Purchased Research and Development.  A charge of $1.2 million
was recorded during the three months ended March 31, 1999 for the appraised
valuation of the purchased IPR&D costs acquired from OmniVista (see Note 4),
which represents 6.0% of total revenue. A charge of approximately $3.9 million
was recorded for the three months ended March 31, 1998 as a result of the
purchased IPR&D costs acquired from HR Management Software GmbH (see Note 4)
represented 28.1% of total revenue.
                                       12
<PAGE>   13
 
     In connection with the acquisition of OmniVista in March 1999, the Company
allocated $1.2 million of the $5.7 million purchase price to incomplete research
and development projects. This allocation represents the estimated fair value
based on future cash flows that have been adjusted by the project's cost-based
completion percentage of approximately 21 percent. At the acquisition date, the
development of these projects had not yet reached technological feasibility and
the IPR&D in progress had no alternative future uses. Accordingly, these costs
were expensed as of the acquisition date. The remainder of the purchase price
was allocated to completed technology, other intangibles and goodwill. These
amounts are being amortized over periods ranging from four to six years.
 
     The Company used an independent third-party appraiser to assess and value
the IPR&D. The value assigned was determined by identifying significant research
projects for which technological feasibility had not been established. In the
case of OmniVista, this included the development, programming and testing
activities associated with the creation of a multi-dimensional product
extension, report writer, and other emerging technologies.
 
     The value assigned to purchased in-process technology was determined by
estimating the contribution of the purchased in-process technology in developing
a commercially viable product, estimating the resulting net cash flows from the
expected sales of such a product, adjusted by the project's cost-based
completion percentage and discounted to the present value using an appropriate
discount rate.
 
     Revenue growth rates for OmniVista were estimated by a third party
appraiser based on a detailed forecast prepared by management, as well as the
appraiser's discussions with finance, marketing, and engineering representatives
of the Company and OmniVista. Revenue growth rates beyond 2000 were based on
industry growth expectations. Allocation of total OmniVista projected revenues
to IPR&D was based on the appraiser's discussions with the Company and OmniVista
management.
 
     Selling, general and administrative expenses and profitability estimates
were determined based on management forecasts as well as an analysis of
comparable companies' margin expectations, including those of the Company.
 
     The projections utilized in the transaction pricing and purchase price
allocation analysis exclude the potential synergistic benefits related
specifically to the Company's ownership. Due to the nature of the forecast and
the risks associated with the projected growth and profitability of the
development projects, a discount rate of 30 percent was used to discount cash
flows from the in-process products. Because the in-process projects are such an
integral part of the business enterprise, only a moderate increase in the
discount rate for the in-process technology was deemed appropriate.
 
     No assurance can be given, however, that the underlying assumptions used to
estimate sales, development costs, profitability, or the events associated with
such projects will transpire as estimated. For these reasons, actual results may
vary from projected results.
 
     Remaining development efforts for OmniVista's research and development
include various phases of development, programming and testing. Anticipated
completion dates for the projects in progress will occur in 1999 at which time
the Company expects to begin generating the economic benefits from the
technologies. Funding for such projects is expected to be obtained from
internally generated sources.
 
     Amortization of Acquired Intangibles.  The acquired intangibles and
goodwill resulting from the 1998 acquisitions are being amortized over useful
lives of three to seven years resulting in amortization of approximately
$350,000 for the three month period ended March 31, 1999.
 
     Other Income, Net.  Other income, net consists primarily of earnings from
investments, net of any interest expense. Other income, net decreased slightly
to approximately $591,000 for the three months ended March 31, 1999 from
$594,000 for the three months ended March 31, 1998.
 
     Income Tax Provision (Benefit).  The Company's effective tax rate for the
three months ended March 31, 1999 was 37.8%, as compared to a 40.2% for the same
period in 1998 exclusive of the tax benefit related to the write off of
purchased research and development. The provision for income taxes for the three
 
                                       13
<PAGE>   14
 
months ended March 31, 1999 is based upon the Company's estimate of the
effective tax rate for calendar year 1999.
 
                        LIQUIDITY AND CAPITAL RESOURCES
 
     The Company has funded its operations primarily from cash provided by
operations. At March 31, 1999 the Company had approximately $11.1 million in net
working capital, including $29.9 million in cash and cash equivalents and $16.5
million in high quality investments.
 
     For the three months ended March 31, 1999 and 1998, net cash provided by
operating activities was approximately $7.4 million and $5.4 million,
respectively. The increase in cash provided by operating activities was
primarily due to a decrease in prepaid expenses and other assets, a decrease in
accounts receivable and an increase in deferred maintenance and services
revenue.
 
     Net cash used in investing activities was $6.9 million for the three months
ended March 31, 1999. This amount included approximately $6.2 million paid in
acquisition and $927,000 in capital expenditures, offset in part, by sales and
maturities (net of purchases) of investments in marketable securities of
approximately $200,000. For the three months ended March 31, 1998, net cash used
in investing activities was $15.3 million. For that period, purchases (net of
sales and maturities) of investments in marketable securities during the period
were approximately $7.8 million, cash paid for acquisitions totaled $6.8 million
and capital expenditures were $652,000. Although the Company does not currently
have any material identifiable commitments for capital expenditures, the Company
expects to continue to invest in the acquisition of property and equipment in
the ordinary course of its business. The Company does not have any material
commitments related to its royalty obligations arising from licenses of certain
products and technologies used in the Company's products.
 
     Net cash (used in) provided by financing activities for the three months
ended March 31, 1999 and 1998 was approximately ($191,000) and $187,000,
respectively. Financing activities for the three months ended March 31, 1999
consisted of repayment of notes payable of $235,000 from the acquired operations
and $144,000 in proceeds from the exercise of stock options.
 
     The Company believes that its current liquidity, together with anticipated
cash flow from operations, will satisfy the Company's anticipated working
capital and capital expenditures requirements for at least the next 12 months.
 
                                YEAR 2000 ISSUES
 
     Certain computer programs were written using two digits rather than four to
define the applicable calendar year. Such programs may recognize a date using
"00" as the year 1900 rather than the year 2000. This is referred to as the
"Year 2000 Issue" or "Y2K Problem".
 
     The Company has established an internal Y2K readiness committee consisting
of at least one member of every functional department. The committee has
developed a Year 2000 readiness plan and will develop contingency plans as the
need arises.
 
     The Company has completed certain internal testing of the file server
versions of its human resources and payroll products, as well as its client
server human resources products, and has confirmed that they are Year 2000
compatible. ITAA certification (meaning that the Company has been found to meet
the information technology industry's best software development practices for
addressing the Year 2000 issue) has been obtained for the Abra Suite and Best!
Imperativ HRMS products. The Company has further determined that the Abra Tax
File product is not Year 2000 compatible, but it is currently anticipated that
the effort and cost to resolve this issue will be minimal and that a release,
now planned for the third quarter of 1999, will resolve the problem. The DOS
versions of the Abra product lines are not Year 2000 compatible. Existing
customers of these DOS versions have been informed that the Company will not
support the DOS products beyond 1999. The People Manager HR product is not Year
2000 compatible. This product has been discontinued and sold to an unrelated
third party. Existing customers of this product are in the process of being
informed that the Company will not support the People Manager product beyond
current support contract commitments.
                                       14
<PAGE>   15
 
     The Company has completed testing its Windows based FAS products. For the
FAS Windows 95/98 Novell and Microsoft NT-based products and the Best! Imperativ
Asset Accounting product, the only significant date-related restriction of which
the Company is currently aware is that the "placed in service date" field will
not allow new assets to be entered in years beyond the year 2019. By definition,
this restriction will not negatively impact a user of the existing FAS products
for approximately 20 years. The Company's next generation of FAS Windows
products, scheduled for release within the next two to three years, will not
contain this date-related restriction. The DOS versions and certain Windows 3.1
and 3.11-based products of FAS are not Year 2000 compatible. Existing customers
of these versions have been informed that the Company will not support these
products beyond 1999. The Company is conducting campaigns to convert these
customers to its Year 2000 compatible products.
 
     Notwithstanding the above, there can be no assurances that the Company's
current products do not contain undetected errors or defects associated with
Year 2000 date functions that may materially and/or adversely affect the
Company's financial condition or results of future operations.
 
     The Company has not specifically tested third party software that is
incorporated into its products, but the Company has obtained assurances from its
third-party licensors that the licensed software will not have date-related Year
2000 issues. Despite this, unknown errors in the Company's third-party licensed
software may materially and/or adversely affect the Company.
 
     Some analysts have stated that a significant amount of litigation will
arise out of Year 2000 compliance issues, and the Company is aware of an
increasing number of lawsuits against other software vendors. Although no
lawsuits have been filed against the Company, the outcome of any such lawsuits
and the impact on the Company cannot be determined at the present time because
of the unique nature of such potential litigation. Furthermore, because it is in
the business of selling software products, the Company's risk of being subjected
to lawsuits relating to Year 2000 issues with its software products is likely to
be greater than that of companies in other non-software related industries.
Because computer systems may involve different hardware, firmware and software
components from different manufacturers, it may be difficult to determine which
component in a computer system may cause a Year 2000 issue. As a result, the
Company may be subjected to Year 2000-related lawsuits independent of whether
its products and services are Year 2000 ready. The outcome of any such lawsuits
and the impact on the Company cannot be determined at this time.
 
     For IT related systems, the Company has completed its assessment and
testing of the Company's mission critical system for its Reston, Virginia and
St. Petersburg, Florida locations, namely its AS 400 information management
system and has determined that minimal modifications are required for the system
to be Year 2000 compatible. A third party reviewer of the system has recommended
certain additional testing to insure Year 2000 compatibility. Management's
expectation is that the additional testing and modifications will be complete by
September 30, 1999. The Virginia and Florida locations utilize the Company's own
payroll and human resource applications, which are Year 2000 compatible.
Management's expectation is that the general ledger system and a call center
phone system for the Virginia and Florida locations will be upgraded or replaced
with Year 2000 ready systems by September 30, 1999. The cost to upgrade or
replace these systems was previously budgeted for in the Company's 1999
operating plan, and is not expected to exceed $500,000.
 
     For IT and non-IT systems, a campaign to contact significant suppliers and
vendors of products was completed on March 31, 1999. The Company is and will be
placing significant reliance on these suppliers' and vendors' statements
regarding their Year 2000 readiness. In this regard, the Company faces risks and
uncertainties to the extent that such third parties with whom the Company
transacts business on a worldwide basis do not have business systems or products
that comply with the Year 2000 requirements. Although the Company is currently
analyzing the impact, if any, of the Year 2000 issues surrounding such third
party interactions, failure of any critical technology components to operate
properly in the Year 2000 and beyond may have a material adverse impact on
business operations or require the Company to incur unanticipated expenses to
remedy any problems. Contingency plans will be prepared if it is determined that
the compliance objectives will not be met.
 
     Management's assessment to date is that minimal modifications will be
necessary to the Company's IT and non-IT related systems to achieve Year 2000
compatibility. All costs of the above IT and non-IT
                                       15
<PAGE>   16
 
measures are being funded out of current operations, but have not been
separately accounted for in the past. Cost of the above measures includes
systems software and hardware, outside contractors, technical support from
various internal groups and administrative costs to manage. The Company's total
cost relating to these activities has not been and is not expected to be
material to the overall financial position, results of operations or cash flows
of the Company. However, there can be no assurance that there will not be a
delay in or increased costs associated with the above measures, or that the
Company's significant vendors and suppliers will adequately prepare for the Year
2000 issue. It is possible that any such delays, increased costs, or supplier
failures could have a material adverse impact on the Company's operations and
financial results.
 
                                       16
<PAGE>   17
 
                                    PART II
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     The Annual Meeting of Shareholders of the Company was held on April 21,
1999. The following is a brief description of each matter voted upon at the
meeting and the number of affirmative votes and the number of negative votes
cast with respect to each matter.
 
     (a) The shareholders elected James F. Petersen as Class I Director of the
         Company whose term will expire upon the 2002 Annual Meeting of
         Shareholders.
 
     (b) The shareholders elected John H. Martinson as Class I Director of the
         Company whose term will expire upon the 2002 Annual Meeting of
         Shareholders.
 
     (c) The shareholders ratified the appointment of Arthur Andersen LLP as the
         Company's independent auditors for the fiscal year ending December 31,
         1999.
 
     The votes for, withheld and abstained for each matter were as follows:
 
<TABLE>
<CAPTION>
                                                                      VOTES       VOTES
                        MATTER                           VOTES FOR   WITHHELD   ABSTAINED
                        ------                           ---------   --------   ---------
<S>                                                      <C>         <C>        <C>
Election of James F. Petersen..........................  9,824,876    79,134         --
Election of John H. Martinson..........................  9,832,493    71,517         --
Appointment of Arthur Andersen LLP.....................  9,869,140     3,925     30,945
</TABLE>
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
 
     (A) EXHIBITS:
 
          Financial Data Schedule, which is submitted electronically to the
     Securities and Exchange Commission for information only and is not filed.
 
     (B) REPORTS ON FORM 8-K:
 
        None
 
                                       17
<PAGE>   18
 
                                   SIGNATURE
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
                                          BEST SOFTWARE, INC.
 
                                          By:    /s/ DAVID N. BOSSERMAN
                                            ------------------------------------
                                                     David N. Bosserman
                                                 Executive Vice President,
                                                Chief Financial Officer and
                                                          Treasurer
 
Date: May 17, 1999
 
                                       18
<PAGE>   19
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C>           <S>
    3.1       -- Second Amended and Restated Articles of Incorporation of
                 the Company. (Incorporated by reference to Exhibit 3.1 of
                 Form 10-K filed for the year ended December 31, 1997)
                 (Registration Statement #0-23117 -- "Form 10-K")
    3.2       -- Amended and Restated By-Laws of the Company.
                 (Incorporated by reference to Exhibit 3.2 of Form 10-K
                 filed for the year ended December 31, 1997)
   27         -- Financial Data Schedule*
</TABLE>
 
---------------
* Submitted only with the electronic filing of this document with the Commission
  pursuant to Regulation S-T under the Securities Act of 1933, as amended.
 
                                       19