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As a business owner, your main job is to provide good products/services, and increase sales, not do accounting or manage books. Using one from available software can alleviate the list of tasks and release some stress. Accounting Software is very simple and automated to the level that it can be used by anyone, even those who are not an accountant.
In this article, we will focus on some key factors to be considered while choosing accounting software.
The most critical part of running a healthy profitable business is to maintain healthy cash flow. You have to keep track of invoices to find out how much money is coming in and going out. With the help of the right Accounting software, you can automate the below processes to accomplish daily accounting tasks.
Reconcile Transactions: You can link your bank accounts to your software which will import all the data from your transaction and save time in reconciliation work.
Tracking Invoices: You can keep track of unpaid invoices and send reminders to the customer when it is overdue.
Invoicing customers: When you create an order in software, it will automatically update the inventory level, convert the order into a sales invoice, and send it to the customer directly.
Tracking expenses: You can set a monthly/annual expense budget and track expenses all the time.
Recording Payments: You can monitor overdue payments to suppliers and record payments against the products or services you get from the supplier.
Before you select any software, it is advisable to look at how you will use the software, who will use this software and create lists of functions based on priority. We have tried to bring all factors we think you should consider while choosing software that best suits your accounting needs.
Cash-based Accounting: It uses a Single-Entry Bookkeeping system that records only one entry per transaction/expenses that go out and payments that come in. You can learn more here: Single Entry Bookkeeping
Accrual Accounting: It uses a Double Entry Bookkeeping system that records the transaction in a minimum of two accounts -credit in one account and equal debit in another account. You can learn more here: Double Entry Bookkeeping
Cash-based accounting (Single Entry Bookkeeping) works well with small businesses with few transactions, no inventory, and no fixed assets. As your business grows, you need to track your business’s progress and make measured financial decisions.
The double Entry Bookkeeping system wins the competition here.
Accounting software based on the Accrual method (Double Entry Bookkeeping) has several tools that will give a clear picture of your financial transactions and record them accurately.
It is crucial to determine whether the software you are choosing is appropriate for your company’s accounting needs. First of all, find out your company is falling under which of the following categories:
Based on which industry sector your business falling in, you need to define accounting goals for your business.
Bank Reconciliation: You should look for the accounting software based on how much control you need over bank feeds, bank rules, and how it will categorize information or assign it to vendors.
Payroll Management: There are various accounting software in the market that have an inbuilt payroll management feature Some software also comes with an option where you can avail of add-ons at an extra price. You must find out if the cost of this added feature is justified or not.
Inventory Management: Do you need basic inventory management such as Creating PO, Sales Orders, Invoices etc? Or do you have to manage a heavy inventory system where you have to track items, serial numbers online, barcode system, FedEx/UPS integration, and multiple locations?
Budgeting/Forecasting: You must choose software that allows you to centralize the business’s financial data and allow the accountant to prepare budgets and visualize the business’s financial and operational plan.
Financial Reporting: You should select accounting software that allows you to generate various reports like balance sheets, P&L sheets, cash flow reports, inventory reports, etc. Some software also allows you to customize reports.
Payment Gateway: You should look for a payment gateway option in the software, you choose for accounting. If your business needs secure payment options such as debit cards, credit cards, online bank transfers for your customers to pay and online. You can learn more here: What is Payment Gateway?
Tax Preparation: You should look for accounting software that can calculate your tax liability, work with multiple tax rates, and generate tax reports to help you comply with the tax rules laid out by your government.
Invoicing: You should look for software that can create an invoice automatically from sales orders. You can choose the plan which allows you to customize the invoice template.
Multi-User Access: It is very important to determine how many employees are going to use particular software. All the software has various plans which allow access to a certain number of users.
Multi Business Support: Most online software allows access per user per company. It means if 2 users are working with 4 companies, they have to purchase 8 subscriptions to work for 4 companies. Where some desktop version gives access to unlimited companies, it means 2 users are working with 4 companies, they have to purchase only 2 subscriptions for 2 users to work for 4 companies. So, you have to find out which option is more affordable.
Customize Control Access:If your business has multiple users and you want to give control to some users and restrict access to some confidential data and some features from other users. Please look for accounting software where you can customize user access.
Automation:Accounting software is made to save time by automating some tasks. Therefore, when you have decided on your accounting goals, you have to look for features that will automate tedious tasks related to your goals and save time.
Add-Ons:You should look for accounting software that has add-ons available at a convenient price that you think you will use down the line as your accounting goals are changed with your business’s growth.
Integrations:You should look for accounting software that is capable of integration with different 3rd party applications such as CRM, Project management tools, inventory management tools, etc. inside your accounting software.
Multi-Currency Transaction Support:If you are selling your products worldwide and accept payments in multiple currencies or your business has locations worldwide, you should look for accounting software that can work with multi-currency and consolidate all the financial data from multiple locations.
Scaling: You should look at the accounting software that can support you with your business’s expansion and allow you to add extra functions, add users, and add-ons at an affordable price.
After-sales support:Accounting software must have excellent after-sales support for their clients. If something is wrong with your accounting software or you have some queries, you should be able to connect to customer support easily to fix the issue.
Data Security:Your accounting software should protect your confidential data against hacking and phishing. Therefore, you should look for software that uses data encryption, take a backup of your precious financial data, and take enough security measures to work with outside applications.
Resources:You can choose the accounting software that will feed industry-specific information and provide you with the knowledge to help your business grow.
Compliance:You should look for government-certified accounting software if you are going to use it for tax return filing.
Training:Employees who are responsible for performing some tasks may need knowledge of accounting software. Therefore, look for software that can provide training to your employees. You can also find many videos on YouTube teaching how to use various software related to accounting.
The topmost priority of any small business owner is the ease of use of software. Large companies with specific accounting departments and accounting firms that need more features from accounting software may look for some complex solutions. You should consider the following points:
Cloud-based accounting software is very easy to set up against desktop versions where you need knowledge of computer, network, and certain computer specifications are required.
Accounting software is available on two platforms: Cloud-Based and Desktop versions.
You have to purchase a monthly plan and need internet connectivity to use cloud-based accounting software. Cloud-based accounting software is easy to use and offers flexibility to use anywhere over a phone app or desktop with internet connectivity. You can work on multiple companies at a time and can easily share your files with your accountant using the cloud.
Unlike Cloud-based Accounting software, you just have to pay once, and you will get the subscription for 3-5 years depending on which software and plan you are choosing. The desktop version is difficult to use as knowledge of computers and networking is required. You can work for only one company at a time and have to transfer files manually to your accountant.
Both options have significant differences. You can read: Cloud vs. Desktop Accounting: What’s the Difference?
We recommend you do a little research online or get honest expert advice before buying any software for your accounting needs.
Please do research online and compare various accounting software. You should always look for reviews about the software when you are shopping around. Also, look at the user base of the software. Is it used by hundreds of millions of people and businesses, or is relatively new and has a smaller user base?
You can ask your accountant or bookkeeper if he/she has particular software in his mind. He/she may have experience working on various software for various businesses. He/she can help you to find out which software is right for your business and also make your life easier at the same time.
Beware that some accountants are software resellers and they may have an interest in selling some software. Therefore, it is recommended to take advice from an individual who can give you impartial advice.
Some software resellers are software developers who can create customized solutions to suit your needs.
You can also ask some companies similar to yours which software they are using and what is their experience.
Some accounting software gives you a free trial to give you a free idea of how the software works and allows you to check if your all requirements are satisfied or not.
Most accounting software offers various plans based on the features they include. You should look out for the plan which includes only the features you need. So, you don’t need to pay extra for what you don’t need.
You should also consider the affordability of monthly fees for availing of accounting software. It will not be helpful if you can afford to pay the monthly fees throughout the year. Therefore, you must think about including a certain budget to cover the price of the chosen accounting software in the current year and future too.
You are still not too sure about which accounting software you need? Don’t worry!
Accounting Farm will be more than happy to help you select the perfect accounting software for you. Please contact us. Someone from our team will be in touch with you within 24 hours.
Explore the benefits of outsourcing and learn how our team can support your firm with a range of accounting services. From tax preparation and bookkeeping to financial statement audits and advisory services, we provide scalable solutions to meet your evolving needs.
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