How to Select the Best Accounting Software for Your Business
Accounting is a business process with a task to record business changes related to assets, liabilities, capital, income and overall costs. In short, the accounting takes care of all that is of value in your company, whether it's material resources such as furniture, computers, vehicles or intangible values such as software, patents, including your human capital and employees. Accounting is no longer done manually. A new time has brought new technologies that have significantly improved efficiency, accelerated the process and made it easier for bookkeepers and accountants.
Accounting Software helps the fast and efficient realization of accounting processes in business systems.
Since the accounting function of each business system includes frequent and routine operations, the implementation of this type of software is practically unavoidable. Therefore, accounting software among the first is introduced into the modern business. Using this type of software is an efficient way of recording costs, debts and claims of a business system. Based on the data recorded, the special modules of accounting software allow user-defined data processing and creation of the necessary reports.
The accounting service greatly facilitates the automation of posting - the transfer of data into financial accounting and the creation of a posting scheme. Systematic data archiving enables detailed analysis of operations and making a series of significant reports. The accounting software often operates on the server / client system, which means that all data is centralized into one database that can be accessed from multiple different computers. The program has a large number of built-in reports that cover all aspects of the business. There is a possibility of making priorities so that the user is not burdened with excess information. Based on business data, the accounting software generates a special structure that allows almost instant access to the desired data through the tables defined by the user.
When we summarize all the advantages and disadvantages of accounting software, we can say that in any case, it is a good solution for businesses of any size, and especially for accounting agencies.
What are the Features of Accounting Software
Accounting Software records and processes accounting transactions within functional modules such as accounts payable, accounts receivable, general ledger, payroll, and trial balance. It functions as an accounting information system.
Accounting software can be on-line based, accessed anywhere at any time with any device which is Internet enabled, or may be desktop based. The core modules in Accounting Software includes Accounts receivable—where the company enters money received, Accounts payable—where the company enters its bills and pays money it owes, General ledger—the company's "books", Billing—where the company produces invoices to clients/customers, Stock/inventory—where the company keeps control of its inventory, Purchase order—where the company orders inventory, Sales order—where the company records customer orders for the supply of inventory and Bookkeeping—where the company records collection and payment.
Accounting Software includes features such as: Workflow Automation, Online Payments, Sales Reports, Purchase Reports, Manual Journals, Chart of Accounts, Trial Balance, Balance Sheet, Accounts Receivable, Master Files, Accounts Payable, General Ledger, Point of Sale, Aging Reports, Order Management, Account Reconciliation, Cost Prediction.
- Workflow Automation: Set up payment reminders, auto charges and other common repetitive tasks and save more time.
- Online Payments: Avoid unnecessary waiting by providing the convenience to your customers to pay online from any location.
- Sales Reports: Manage and supervise customer balances, remind them of upcoming payments and identify collectible payments.
- Purchase Reports: Track purchase activities, convert purchase orders to bills and adapt reports to your business needs.
- Manual Journals: Correct errors that can occur when transferring balances to other accounts; record small transactions.
- Chart of Accounts: Easily post entries for daily accounting activities and round up important financial data.
- Trial balance: Used for generating financial statements (balance sheet, income and cash flow statements) and providing balances for every account in the Chart of Accounts.
- Balance Sheet: Represents a catalog of the company`s assets and equity; used for managing reports and estimating the financial condition of the company.
- Accounts Receivable: Identifies deposits to bank accounts and enables the deposit information to be uploaded automatically to customer accounts.
- Master Files: Collection of important customer information (name, address, phone number).
- Account Payable: Ability to track money and payment terms for invoices; printing computer-generated checks.
- General Ledger: Initial point for all accounting information, including the data from other modules; creates main financial documents and records all financial transactions.
- Point of Sale (POS): Records transactions between customers and commerce/vendors.
- Aging Reports: Used for checking which reports are overdue for payment.
- Order Management: Manages orders and purchase from customers/vendors.
- Account Reconciliation: Locates untracked transactions or data entry errors synchronizing company`s books with bank`s.
- Cost Prediction: Statistical analysis and forecasts will support making data-based decisions.
What are the Benefits of Accounting Software
The Accounting Software benefits are capable of transforming the way company works:
- Security: Sensitive information, personal data and accounting records are stored on password protected software.
- Minimized Mistakes: Instantaneously correct input mistakes, check digital documents quick and easy, avoid calculus errors.
- Simplified Tax Compliance: Accounting Software provides a reliable source of information for tax or audit preparations and makes notes for future references.
- Flexibility: It is possible to adapt the accounting solution to your needs using a large number of parameters.
- Openness: Export reports in one of the popular formats, like Excel.
- Quality Support: Download the current program changes, ask questions by email and quickly get a response, download useful free utilities, use useful links.
- Reduced Monthly Expenses: Save time and money by using available, free fully functional products.
- Increased Capacity: Quality accounting software will automatically keep your books up-to-date and de-clutter your working space, thus allowing you to focus on the most important business tasks.
What are the Key Performance Indicators (KPI's) of Accounting Software
Accounting Software KPIs inform management and employees about department’s efficiency and also, aligns activity of the employees with the objectives of the company:
- Cost per Invoice: Total amount of expense divided by the total number of processed invoices.
- Financial Close Cycle Time: The number of business days necessary to finish and close the books and submit financial reports to managers.
- Percentage of Payments: The number of processed payments with approved purchase orders; enables payments approvals.
- Finance Staffing Ratio: It represents the total number of employees per finance employee.
- Vendor Payment Processing Time: Time required to process one vendor invoice.
- Inventory Discrepancies: Coordination and management of warehouse and inventory analysis employees in order to identify and resolve possible inventory issues.
- Distribution Center Operations: Representing everyday operations of distribution centers.
- Vendor Invoice Error Rate: The number of invoices in % sent by vendors to Accounts Payable Department.
- Payroll Staffing Ratio: It represents the number of total employees per payroll employee.
What are the Types of Accounting Software
Accounting software can consist of modular solutions that meet only certain needs for processing information from various transactions (sales module, procurement module, material accounting module) or integrated multi-modular solutions.
There are two main types of Accounting Software:
- Financial Accounting Software (FAS): Financial Accounting Software consists of the following modules: General Ledger, Sales, Procurement, Fixed Assets, Books, Supplies, Earnings, Staffing.
- Management Accounting Software: Management Accounting Software consists of the following modules: Cost Calculations, Resource Planning, Production Management and Business Process Reengineering.
What are the Latest trends in Accounting Software
In order to use technology as a strategic advantage, it is important to monitor technological and functional improvements of accounting software that will have a major impact on how the business is done. Therefore, it is necessary to see and evaluate the main trends in the accounting software industry:
- Cloud Computing: It is possible to use resources from anywhere at any time. The use of resources is automatically controlled and optimized according to user needs. Resources are allocated so that they can serve a large number of users at the same time.
- Outsourcing Strategy: Many organizations choose outsourcing as their main IT strategy focusing exclusively on those activities in the value-added chain which represent can their competitive advantage on the market.
- Intelligent Scanning: Optical character recognition eliminates the need for manual entries of handwritten materials, printed receipts and checks. Companies will automatically turn any printed material into accounting data.
How to choose the right Accounting Software
Today, many different accounting solutions are offered. So, in order to choose the right one, here are some things to consider and do before the final decision:
- Read Reviews: By Reading the reviews of other customers, you will have a glimpse at what can be expected from your specific choice. Find and read reviews that examine and discuss accounting software compatibility, customization abilities, integration, ease of use, training, reporting and support. Analyze collected information and decide whether that accounting software is the right solution for your needs.
- Data Security: Essentially, if the security issue is critical to the organization, then it definitely needs to be analyzed very seriously. Pay attention to all the fine details when it comes to this topic. In order to ensure data security, it is necessary to apply a periodic revision of internal controls over the security of data, networks, backups and the overall availability of the system. No matter what level of the security you need, make sure that your software has these abilities built in. That is the fastest way to protected personal information and your cusotmer`s information.
- Price and possible additional costs:
- Licenses (one-time expenses)
- Software upgrade and maintenance (annual costs)
- Implementation (one-time expense)
- Hardware (one-time cost - typically only 5% of the total software costs, implementation, and periodic upgrades)
- People (annual costs regarding employees that are necessary for maintaining the system).
Consider these costs and establish a budget for your accounting software. Also, think about upgrades. Depending on the software you have chosen and the specifics of the implementation, this upgrade can be simple with minimal impact on the organization or may be expensive with very high impact.
- Scalability: Estimate the expected growth of your company and then see how scalable your accounting solution must be in order to keep up with the company`s growth.
- Support: It is recommended to read about other users experiences with customer support of your possible accounting software. Explore different types of support and choose the one suitable for your needs.
Top Accounting Software
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Top Free Accounting Software
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Top Open Source Accounting Software
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Is Free Accounting Software Worthwhile?
Accounting Software has many features and can do a lot to help your business to succeed by tracking book keeping, but it can be expensive. There are plenty of free Accounting Software available. There are two categories of Accounting Software based on licensed model: Open Source Accounting Software and Proprietary Accounting Software.
Based on Installation type, there are On Premise Accounting Software and Cloud based Accounting Software and selection of the installation type depends on your business and organization requirements.
You can find limited free versions and full-fledged free trials in both the licensing models.
You could try Free Open Source Accounting Software if you have a development team available in your company and time available to set it up and running. As these are mostly community supported, the support available also depends on the usage basis of the product.
You could try a limited version of Proprietary Accounting Software to check how it fits to your business before making a big investment. These software comes with limitations and you need to buy the features using the up-selling vendors offers to make it useful. A free limited version from a proprietary product company will make it easier to upgrade in the long run and also help you determine if that company’s solution is what you want.
There are also many drawbacks to Free Limited version of Proprietary Accounting Software. These limited version do not have nearly as many features available in a fully functional paid version, and there are limits such as number of features and functionality, modules, storage limits, number of reports, limited data integration options, and also on the number of users you can have. The free versions also have limited support options.
Based on your functionality requirements and business fit, you can always choose a free trial and experience the system with your data before buying and migrating to a full-fledged solution.
Is there a one size fits all Accounting Software: Unfortunately there are no one size fits all solution as each of the products has its own core strengths in functionality, industry focus, integration capability and core features.
We recommend determining how the software fits to your business in terms of features, functionality, and business process with a free trial.