How to pick the right Accounting Software?
Accounting is an essential business operation. It involves recording your past financial performance and current financial position so you can predict and plan for business growth.
However, accounting takes time and effort, yet it doesn’t directly generate revenue. Small businesses invest in accounting software early on to accelerate and automate much of the often mundane accounting work.
Such programs can efficiently record and store financial information, generate useful reports, create invoices, and more. With the right accounting software, you could see more growth while ensuring the accuracy of your numbers.
What is Accounting Software?
Accounting software — sometimes called bookkeeping software — is a comprehensive software program for recording and storing financial information. Most accounting software programs let you log expenses, create invoices, generate reports, and even manage your clients. In short, you can perform all of your accounting operations with the right accounting software. Today, most accounting software programs are in the cloud, meaning you can access them from anywhere with an Internet connection and laptop. Some even offer mobile apps.
Types of Accounting Software
Billing and Invoicing
Billing and invoicing software provides functionality for sending out professional invoices, writing checks, sending customers payment reminders, and more. Many also allow recurring invoices for regular payments (such as retainers). Billing and invoicing software stores this data automatically so you can quickly glance at your revenue numbers.
Square, founded by Twitter founder Jack Dorsey, is one of the most popular examples of this type of software.
Payroll software contains many standard accounting and bookkeeping features, but it also includes tools to help pay your employees accurately and on time. They will often assist in calculating salaries, figuring various payroll taxes, and generating reports.
Many popular accounting software programs aren’t strictly designed for payroll, though.
For example, Quickbooks provides core accounting and bookkeeping functionality but offers payroll as an add-on feature.
Other software, such as Freshbooks, don’t offer payroll at all — they instead allow for easy integration with other payroll-specific accounting software programs you may use.
Enterprise Resource Planning (ERP)
Built for medium-sized to large companies, ERP software combines features from several functional areas, including accounting, finance, HR, inventory management, marketing, and more. Most ERP systems also come with customer relationship management (CRM) software to help you track your relationships with each customer.
Benefits of Accounting Software
As of October 2016, 64.4% of small businesses used accounting software to aid in their accounting tasks. Here are some reasons why.
Accounting software can save you significant time by automating many routine tasks and speeding up others.
For example, many invoicing software programs let you create recurring invoices. You can make this invoice once, then never have to think about it going forward — saving you a few minutes every month. Another example would be logging expenses. You can often click a few buttons to categorize the expense correctly and have it in your system in a few seconds.
Whether or not you have accounting software, you’ll need bookkeepers at some point. However, software drastically enhances the efficiency of the bookkeeper that uses it. As a result, you can hire fewer bookkeepers without sacrificing your ability to perform your accounting tasks.
The software can reduce human errors because it can automate mundane, regular tasks that humans may make mistakes performing. For other tasks, software often has built-in controls to ensure any data you entered is correct.
The software lets you glance at your information from various angles almost instantly by generating reports. Since you can see reports faster and they are less likely to have errors, making decisions is much easier.
Lastly, accounting software helps you present yourself to clients in a more professional light. You can customize invoices with your logo and branding, payment terms, and more.
Features to Look For in Accounting Software
Online payments are one of the top features you should look for in accounting software. This lets you set up and send invoices and payment reminders online. Your customers can pay you quite quickly, as many programs’ invoices put payment buttons directly on the invoices.
Dashboards offer multiple screens, each covering a different area of your accounting so that you can absorb all the most critical information about your finances at a glance. The dashboard is the first screen you land on when you log in to most accounting software programs. Some software programs let you customize the screens in your dashboard.
Reporting helps you analyze your business’s health and performance. Accounting software with robust reporting features will let you dive deep into your income, expenses, cash flows, assets, liabilities, and more. Make sure to find a program that offers the features you need while also creating visually appealing reports.
Cloud accounting essentially lets you access your accounting data from anywhere you can access the Internet. Access via computer or laptop is the bare minimum. Some software companies work to make their programs mobile-friendly, while others have created mobile apps that contain essential features. With recent societal shifts towards working from home, it has become almost mandatory for you to reach your accounting software from anywhere.
2021 Accounting Software Trends
Moving Towards the Cloud
Thanks to the Software-as-a-Service (SaaS) business model — where you pay regularly for the software instead of downloading it to your computer — cloud accounting has flourished. The events of 2020 have further accelerated the adoption of cloud accounting software, as millions of people — employees and businesses alike — were forced to work from home.
Automation is, for better or worse, increasing efficiency in several industries — including accounting. Most accounting software products can automate more mundane tasks. For example, the Aberdeen Group found that companies can save an average of $16 per invoice issued by automating their accounts payable process alone. Consider what kinds of accounting and bookkeeping tasks you do regularly, and see if any programs on the market offer automation in those areas.
Almost any small business can benefit significantly from using accounting software. It can increase efficiency, cut costs, and save time — while helping you make better decisions faster.
Tiny businesses and sole proprietors (like freelancers and consultants) can often get away with free software. However, free software usefulness hits a wall once you’re beyond such a small size. At this point, investing in premium software would be a wise choice.
Not all software products are the same, though. Make a list of the features you find most important in accounting software, and narrow down the market based on those. Look through each of your top choices, and use each of their free trials/money-back guarantees if they offer them. Do it right, and you’ll reap the rewards.