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.
Accounting takes time and effort, yet it doesn’t directly generate revenue. Businesses both large and small invest in accounting software early on in order to accelerate and automate much of the often mundane accounting work.
Such programs can efficiently record and store financial information, generate useful financial reports, create invoices, help with inventory tracking, and more. With software that provides the right accounting features, 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. Some full-service accounting programs even provide help with financial forecasting. Most accounting software programs let you log expenses, create invoices, generate reports, and even manage your clients. Many integrate with third-party apps to assist with everything from project management to credit card processing. In short, the right accounting software will allow you to perform all your accounting operations, regardless of whether you're an entrepreneur just starting out, a well-established small business owner, or a multi-currency, multi-national corporation. You won’t even have to download anything to get started. Most accounting software programs are in the cloud, meaning you can access them from anywhere, so long as you have an internet connection and a laptop. Some even offer user-friendly 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, so you can streamline 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, Intuit’s QuickBooks provides core accounting and bookkeeping functionality. If you want payroll, it’s an add-on feature.
Other software, such as FreshBooks, which is a small business accounting software, 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 and medium-sized businesses used accounting software to aid in their accounting tasks. Here are some reasons why.
Accounting Software Saves Time
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 accounting system in a few seconds.
Accounting Software Saves Money
Whether or not you have accounting software, you’ll need bookkeepers and accounting tools at some point. However, software drastically enhances the efficiency of the bookkeeper who uses it. It also combines numerous accounting tools into one easy-to-use program. As a result, you can hire fewer bookkeepers and purchase fewer tools without sacrificing your ability to perform your accounting tasks.
Accounting Software Reduces Error
The best accounting software can reduce human errors because it can automate mundane, regular tasks that people may make mistakes performing, whether related to time tracking and sales tax calculations or to data entry and sending out invoices on time. For other tasks, software often has built-in controls to ensure any data you enter is correct.
Accounting Software Means Faster Decision-Making
Another great feature of accounting software is that it 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 around everything from how to meet day-to-day business needs to planning for long-term financial health becomes much easier.
Accounting Software = Professionalism
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, customer support number, 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, so you can more easily get paid via e-checks, credit card payments, or mobile payment apps. In many cases, 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 online accounting software and computer-based accounting software programs. Some software programs are customizable, so you can determine which screens and financial data appear on 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 even more common for you to be able to reach your accounting software from anywhere.
2021 Accounting Software Trends
Moving Toward the Cloud
Thanks to the Software-as-a-Service (SaaS) business model — where you pay regularly for online access to 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, self-employed individuals, and businesses alike — were forced to work from home.
Automation is 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 or medium-sized business can benefit significantly from using accounting software, even just an entry-level program. Accounting software can increase efficiency, cut costs, and save time — all while helping you make better decisions faster.
Tiny businesses and sole proprietors (like freelancers and consultants) can often get away with free accounting software. However, free software usefulness hits a wall once you’re beyond such a small size. At this point, investing in premium software with a wide variety of software options would be a wise business choice.
Not all software products are the same, though, and what industry you're in will determine a lot of what accounting solution will — and won’t — work for you. After all, an eCommerce startup’s accounting needs will be different from a hardware store's. Make a list of the features you find most important in accounting software. Do you need something with a mobile app that works on Android? Something that integrates with your Amazon store? What about team member access and unlimited users? Whatever it is you need, narrow down the market based on it. 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.