Accounting software is a fundamental application that allows an organization to record the flow of money for internal and external review and auditing. It is the primary tool for assessing the financial health of an organization and for meeting legal compliance through tools like general ledgers, account payables and receivables, purchase orders, stock management, and billing.
Good accounting software is a must for entrepreneurs who want to steer their business to success. It should not only be capable of presenting a quick summary or detailed presentation of profits and losses, along with your other financial transactions; it should also keep you meeting the legal requirements of the specific region or country where your business is operating.
Aside from addressing evolving legalities, your choice of accounting software should let you automate labor-intensive accounting tasks, accelerate tax preparation, and reduce the risk of human error in the workplace, especially if you’re working in a virtual setup as a result of the COVID-19 pandemic. In this article, our software experts present a comprehensive definition of accounting software, explain how accounting software could help you manage your business and give you a list of candidate applications to help you acquire your ideal system.
As mentioned earlier, reliable accounting software should meet all the legal requirements of the region or country where your business operates. If you are in the UK, for example, your accounting software should be fully MTD compliant, to facilitate automatic tracking of professional and business transactions for taxation purposes. If you are in the US, the sweeping Tax Cuts and Jobs Act requires accounting software that is fully flexible when handling the new legal mandates.
Furthermore, the majority of accountants now feel that traditional accounting is no longer enough to stay competitive. Not only do they have to accurately process accounts receivables, cash flows, and other paperwork. They also need to remain compliant with industry requirements and keep up with regulatory changes is among the biggest challenges for accounting firms.
Plus, according to online accounting statistics, 82% of accountants recognize that clients have become more demanding today. Because of this, 91% of them rely on accounting technology to increase productivity. As such, aside from addressing evolving legalities, your choice of accounting software should let you automate labor-intensive accounting tasks, accelerate tax preparation, and in general, meet the demands of today’s modern businesses.
Accounting software FreshBooks is a fully-featured and simple client invoicing and time-tracking system used by more than 5 million businesses around the world. Ideal for freelancers and small businesses looking to fast track their sales cycle and keep their processes in line with standards and regulations. The solution is well integrated and mobile-friendly.
Cloud-based ERP and accounting software NetSuite ERP is designed primarily for small to midsized businesses. Boasting a comprehensive suite of inventory, accounting, warehouse management, order management, and CRM tools, the solution streamlines end-to-end back-office processes from sales to CRM to ecommerce workflows. Moreover, NetSuite ERP provides built-in reporting and business intelligence tools that provide real-time financial visibility across the business.
Cloud-based accounting software QuickBooks Online offers an all-in-one accounting platform for small businesses, freelancers, and independent accounting firms. This accounting solution offers robust tools, such as automated tax calculations, expense tracking, invoice management, balance sheet reporting, bill management, sales monitoring, and more. A product of Intuit, QuickBooks Online integrates seamlessly with other Intuit applications including QuickBooks Payments and QuickBooks Payroll.
Online accounting solution Sage 50cloud is an easy-to-use system for small companies and medium-sized businesses. A desktop app with cloud capabilities, it comes equipped with tools for tax preparation, budget management, inventory tracking, cash flow monitoring, and invoicing automation. What’s more it comes with activity tracking tools and visual dashboards that let you oversee employee performance, budget status, as well as revenue trends. That said, this platform can surely streamline the way you perform your accounting responsibilities.
Cloud-based accounts payable software Tipalti is a robust solution designed to automate the end-to-end accounts payable process. The solution streamlines global payable operations, saving suppliers huge amounts in annual international bank transfer remittances. Some of its notable features include supplier management, tax calculations, payment remittance, regulatory compliance management, invoice automation.
Cloud-based accounts payable tool Rossum concentrates on advanced automation of document management. This software solution is powered by a self-learning technology that is designed specifically for automating the end-to-end process of document gathering, data collection and extraction, and the processing of invoices. Furthermore, this platform is capable of handling different types and layouts of documents and invoices without the need for templates.
Cloud-based accounting software Xero is an intuitive all-in-one solution primarily geared towards small businesses. Xero helps businesses to process payments faster, save time on data entry, and make better business decisions. Features like invoicing tools, bank reconciliation, financial reporting, and more are available within a user-friendly platform. Xero can be integrated with over 800 apps to make the solution customizable for your needs.
There are many other examples of accounting software that are popular and reliable. For more ideas and alternatives, check out our list of top 10 accounting software solutions to consider in 2022.
We discussed what is accounting software, but what are its main benefits? Why use accounting software at all? The tool, with its in-depth financial information, shows you where to cuts costs and drive productivity. With an appropriate system in hand, companies automate bookkeeping tasks and draft in-time tax-friendly reports. Still, most importantly, they can forecast expenses and develop a smarter investment strategy with this system.
These are the key benefits of accounting software:
Let’s now proceed to the various types of accounting software. Depending on the type of operations, accounting & finance systems fall under four different categories. Note that there are also comprehensive accounting suites designed for enterprises that combine the best features of each category. Here is a brief overview:
Billing and invoicing systems complete companies’ basic, day-to-day tasks, including check writing and informing customers about their due payments. They are essential to preserve control over the accuracy of accounting figures and make service look more professional and credible to the end recipient. On the company’s side, billing and invoicing tools help document financial activity and prepare it for authorization and validation.
If you are looking to preserve control over your account payables and account receivables, you should be looking for payroll management systems that will handle it all. These tools were developed to perform an array of different tasks, including calculating employees’ salaries, cutting deductions, depositing the salary directly into staff members’ bank accounts, producing tax forms and payslips, and more. In the long run, they will secure your financial transactions, cut expenses, and help prepare detailed reports.
This is one of the most important accounting software categories. It combines all systems used for product planning, material purchasing, inventory management and control, distribution, accounting, marketing, finance, and HR. The latest ERP solutions also offer modules for CRM and business intelligence, so that the company can learn from its practices and prepare better strategies in the future.
These apps are designed to help expedite billing cycles and approve expenses on-the-go and are usually configurable enough for any business to adjust them to its operational pace. The core rationale behind them is to help collect payments faster and detect slow and ineffective practices that were not visible before. Their biggest advantage is being able to produce detailed graphical reports on how time and resources are being used in each company.
How does accounting software work exactly, and what features does it offer? There are many different ways in which accounting software can optimize your business, depending on its main features and objectives. From simplified invoicing to complex tax reporting, accounting systems come with all sorts of extras that are not even feasible without an appropriate system.
So what does accounting software do? Here are some of the features of accounting software:
Of course, the answer to this question depends mostly on the specific needs and priorities of your business. Still, there are several key criteria each system has to meet to be worth the money you’re investing in. Here are a few thoughts on what you should be looking for:
Accounting is not exactly the cheapest and small-biz friendliest software arena you will come across. Much of its premium functionality and instant technical support is still reserved for enterprises, but that doesn’t mean a quality system cannot be found below that line.
In general, accounting & finance systems come with flexible monthly/yearly subscriptions or single time quote-based licenses. At the same time, some of them are also available for free (or offer an unpaid package for small teams or such looking for basic functionalities). The gaps between different plans are usually formed by differences in available features, number of supported users, available storage, and access to support.
Here are the costs of accounting software of popular vendors:
The trend of designing industry-specific accounting systems. If facing a choice between a general, standardized accounting solution and one that has been developed to meet the specific needs of your industry, choose the latter. Note, nevertheless, that in most cases, you won’t be relying on years of reputation to support its quality, so make sure all the features you need are there and do so in advance.
Scalability and customization. Because accounting deals with a non-creative subject, there is little developers can do to make the digitized process more engaging than usual. Thus, accounting systems won’t be the most thrilling and open-to-configuration apps you can get your hands on. What could be a good course of action on your behalf is to choose a customizable solution and make sure you can implement your rules and business specifications inside. This will also ensure that you won’t have to replace the system as your business starts developing.
Lack of integrations. When looking for a reliable accounting and finance system, make sure it has an open infrastructure that supports third-party integrations, or at least that the connections you need are already taken care of. Settle for nothing but the best, as developers nowadays are more than aware their tool has to work in line with sales software, business intelligence systems, CRMs, project management apps, and a variety of other services.
A central position for workflow automation. Accounting statistics show that software developers are now focused on what more can be done to facilitate accounting, basically giving accountants and finances experts a break, and getting more of the heavy lifting off their shoulders. In technical terms, this means that workflow automation is rising, and soon there will be no operation that won’t be automated.
Deployment no other than in the cloud. It sounds almost incredible that all that complex accounting machinery companies took months to install will now become history, but that’s how it is. New accounting trends are leaning towards cloud hosting, as it is a safer, faster, and considerably more affordable alternative.
Machine learning: the future of accounting. The rise of AI-powered accounting will continue as businesses seek the aid of advanced programs to weed out low-value and redundant tasks, assign it to machines, and leave humans with more time to do tasks that are better left to their creative capabilities. Machine learning should allow accountants to enjoy faster computation time, more accurate calculations, effective detection of any fraud, and point to accounting trends to impact any business’s overall bottom line.
Having reached this section, you most likely have a good idea of what type of accounting software can give you the edge required in today’s digital business environment, which grew exponentially after the pandemic hit. But before buying any software, consider going for any free trial offered by a target vendor. If it’s Freshbooks, for example, you can easily sign up for its free trial.
You might want to expand what you’ve gained from this article to other areas of specific interest to you. If this is the case, how about checking out any of these:
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