One of the painful tasks of every small business owner has been managing their accounts and keeping track of invoices. Accounting software is a solution that collects and processes all accounting data, and these days it has become a necessity for every business. Some accounting software may do little more than book-keeping and others handle all the financial cash flow of big corporations. It is important for business owners to understand the various types of accounting software, what each one does and why, above all, your small business needs one.
What is Accounting Software?
Accounting software is programs and computer software that help manage all your financial transactions- incorporated with functional modules including accounts receivable, accounts payable, payroll, ledger, journal, inventory management, etc. All in all, they aim to overcome all accounting challenges small businesses face. Certain systems also allow auto-generated reports on financial activity. Accounting software may be cloud-based, where it is accessible from any system, or desktop based. The use of such software helps companies use their accountants efficiently and reduce the time spent on book-keeping and analyzing business performance.
What Accounting Software Do:
Depending on the type of your small business, and its objectives, accounting software can be optimized for your business. The following are the features an accounting software can do, and be used for your business:
Accounting: The basic and most important feature should be accounting. Accounting means a ledger of your finances including assets, accounts receivable, accounts payable, etc. While these are the most basic features in any accounting software, you can include and remove any components of a general ledger that you may see fit depending on the type of accounting software you use. Freshbooks is an example of one such software.
Budgeting: The second most important feature of accounting software is budgeting; planning and calculating the financial requirements for the time period ahead and estimate the required budget. Businesses can use this to predict the cash flow and sales ahead and take pre-emptive financial decisions such as seeking any business loan if required. Xero is an example of budgeting software.
Billing and Invoicing: Most businesses choose to invest in accounting software that helps only with billing and invoicing, but in several other systems this is one of the many features. This allows preparation of invoices for clients as well as reminds business owners when invoices are due and maintaining the ledger accordingly. Stripe and FastBill are software that can help with this.
Payroll Management: Several accounting systems are there to remind businesses of their financial obligations, such as paying their employees. These will handle the checks and amounts owed to each employee of the business and respond to legal and tax responsibilities, without delay. Check Quickbooks.
Project and Fund Accounting: Industries like construction and transportation may have varying overhead costs. Accounting software can predict and calculate the overhead costs for a business, and the funds each project may require. This feature can be added along with the standard accounting system. Current RMS is a project management software.
What to Consider When Choosing an Accounting Software:
Ease of Use: Accounting is one of the most difficult challenges for business owners, so it only makes sense that accounting software should ease the job for business owners. All functions and modules should be on one dashboard to complete operations with ease and navigate through reports.
Customization: The accounting functions a business will need varies from business to business. Your accounting software should be customizable according to your needs- the accounting calculations your business runs and the set of rules to which it adheres. Though it is rare if you aren’t able to find accounting software that fits your business model, choose a flexible program that aligns with your business.
Security and Privacy: Accounting software handles the most sensitive data of any business. Purchase your accounting software from a reputable vendor and go through all security mechanisms in advance.
Pricing: The more functions and modules a software has, the more it will cost. Most small businesses may not be able to afford high-end accounting software, but keep in mind the time this software can cut down. Most paid packages generally cost $10-$60 a month. Also, most quality accounting software can be purchased for free.
Why Your Small Business Needs an Accounting Software:
Small business owners have busy lives. Every day is a shuffle between meeting customers, suppliers, vendors, investors, managing the business, and handling finances. Accounting is a task that needs to be done every day, and accounting software can help you understand your small business needs and meet them; without having to spend too much time. Business accounting has become more regulated than ever, and not staying on top of your finances can result in huge losses of money. Up until now, all finances had been done manually, which was both time-consuming and led to several errors.
On a final note, accounting software allows businesses to keep track of all financial transactions, and receive immediate financial analysis and reports. Whether you’d like to address the pain points of your business or attract an investor-an accounting software can help your business with all its needs and much more.