Accounting software is a program used by businesses and accounting professions in processing their financial transactions. This includes invoicing, accounts receivable and payable, tax compliance, cash flow analysis, general ledger, income and expense statements, trial balance, payroll, balance sheet, among others.
The software is essential, and a small business owner can use it to keep an eye on money received and spent. They have to use the right accounting software to analyze their businesses’ performances at various angles.
Accounting software helps to assess the financial health of a business and ensure it meets legal compliance. There are many types of accounting software, but choosing the right one is hard. This article has relevant information to guide you in selecting the right accounting software.
Types of Accounting Software
Accounting software is an excellent tool for the proper administration of a business. Before deciding the software to use, consider these types of accounting software and understand the circumstances of which one to use:
If you have a small business, you can run it correctly with an electronic spreadsheet as accounting software. It is inexpensive and can be configured easily.
The downside of spreadsheets is prone to error as the information is entered manually and ends being at the wrong place. It will give erroneous financial statements and can only be used in those businesses with low transaction volumes.
- Commercially-available software
This type of software is the one being used across the world as an accounting tool. It will be configured according to business needs.
The software has multiple layers of detecting errors to avoid entry of incorrect information. It produces standard reports easily configured to the user’s needs.
- Enterprise resource planning software
This type of software will integrate all information from different parts of the business to put it in a single database. It helps to eliminate independent department-specific software problems that avoid sharing information.
ERP software is costly and might require more than a year to install it fully. It is suitable for large and complex firms.
- Custom accounting software
This is an accounting software developed explicitly for an organization. It can be used primarily when the entities can’t be met by the others above.
Most firms avoid this software because it requires more maintenance and tends to be buggy.
How To Choose An Accounting Software
It is challenging to choose the best software for your business. Each software comes with different specific features, multiple pricing plans, number of users, among other factors.
If you want accounting software, keep these factors in mind:
- Understand your business accounting needs
The first step is understanding the accounting needs of your business. To achieve this, undertake business analysis addressing both financial and managerial needs. Do it correctly as the last thing you will want is repeating the same process in the coming years.
Proper planning will help you avoid changing software even after unexpected forces or growth takes place.
- Understand your budget limitations
The money you are willing to spend is a crucial concern. Some of the most popular and affordable software include Freshbooks, Gusto, and QuickBooks. If you consider industry-specific types, the cost will be higher.
- Provide multiuser access feature
Most of the accounting software will allow different users to their system and control data. Therefore, if you have business partners, you can give them full access and enable employees to track time and invoice customers. The accounting software that allows you to invite multiple users also comes at additional cost.
- Provide mobile access and cloud-based software
Check whether the accounting system is cloud-based to allow you to access your business account anytime and anywhere. Such helps you run the business remotely.
Many have mobile apps that allow you to monitor vital information on the go. Some will even offer separate apps to be used by employees, although they have limited features.
Features of A Good Accounting Software
Using excellent accounting software is vital for business. However, it should have these features:
- Payroll – It handles the company’s data related to employee payments. These include deductions, incomes, overtime calculations, generating payslips, and leave.
- Invoicing and billing – It handles the production of invoices. The software also sends reminders to the company’s customers regarding payments.
- Bookkeeping – It deals with purchase and sales ledgers. It also reconciles with the general ledger.
- Reporting – Helps generate reports such as balance sheets, cash flow, or trial balances that show the company’s financial position.
Benefits of Accounting Software
- It provides accurate reports
The software helps businesses in getting accurate financial information. For example, if a report of cashflow is needed for the meeting, by clicking a button or filling a form, it can be generated immediately. Most accounting software comes with built-in modules to create such reports.
- It improves accounting accuracy
Another accounting software benefit is getting increased accuracy. Software is built to eliminate or detect human errors during the calculation.
- It helps reduce the overall cost
The advantage you get from the efficiency and speed of such a software goes directly to reduced overall costs. It allows one to do more within a short time, and that helps a small team to do much work.
- It helps increase compilation speed
When using business accounting software, it will allow your business to process your account faster than the manual process. The speed is from computers where the software is installed because they can process the figures faster.
Running a business is a must to have a good accounting program. It helps steer the success of that business. The software not only presents a quick summary, but it also shows profits and losses, financial transactions. It also allows the company to meet legal requirements depending on the geographical region it is operating.
The choice of accounting software is a significant factor. It should allow you to accelerate tax preparation, automate labor-intensive tasks, and reduce human error in the business.