Accounting software is a fundamental part of any business. It doesn’t matter if a company sells shoes or motors, accounting and bookkeeping are key to understanding a company’s performance and ensuring it stays aligned with its goals.
Thanks to recent advances in technology , businesses of all sizes can take advantage of specialized digital tools designed to automate and improve financial data entry. Keep reading to find out everything you need to know about accounting software.
What is accounting software?
Accounting software is software, now digital, created to simplify the tasks of accountants and bookkeepers. Software designed for these purposes can be adopted by businesses in all industries and of all sizes.
What is accounting software used for?
Accounting software is an effective tool for managing a company’s financial data . Businesses can implement this software to process banking transactions, manage accounts, store financial data, and restructure critical business operations. The new functionalities of cloud computing systems are very interesting and make it possible to gain in efficiency.
Benefits of using accounting software
The benefits of using accounting software are many:
- Win time
- Automatic generation of financial reports
- Synchronized financial data
- More accurate financial reports
- High quality financial statements
- Streamlined payroll process
- Detailed information on financial data
- Copy of supporting documents integrated into the application
- Improved inventory management
Accounting software optimizes all of a company’s financial operations. Properly implemented digital accounting solutions can turn tedious manual processes into automated ones and dramatically reduce the time it takes to complete certain tasks.
For example, downloading CSV files from your credit or bank accounts becomes a thing of the past when you use online accounting software. The software is able to automatically access this data and provide a view of all transactions made.
Automatic generation of financial reports
By using older generation software such as Sage50, Acomba or Advantages, you have to wait until the end of the month for the accounting team to prepare the monthly reports. Consultation is not easy for the uninitiated and means that entrepreneurs are not able to take the daily pulse of their company’s finances.
In contrast, cloud accounting software financial reports are accessible on demand and are automatically updated as transactions are entered to display information at any time. Even the uninitiated, depending on the access assigned to them, can enter transactions.
Synchronized financial data
Most of the time, companies keep their data stored on various platforms, such as local servers, cloud directories like OneDrive, Google Drive. Instead of going through the time-consuming process of transferring data from one platform to another to research and identify various transaction details, accounting professionals can take advantage of software’s automatic capabilities to have all financial data perfectly synchronized in the same place.
More accurate financial reports
Reports such as income statement, balance sheet, cash flow statements and many more can be easily viewed. Data can be segmented on a monthly, quarterly, or annual basis, making it easy to identify trends in a company’s financial transactions. If a more specific approach is needed, the software can be customized to filter the results or compare periods between them .
Easily accessible financial statements
When dealing with potential investors or bankers, showing professional detailed reports can be the difference between closing a deal or walking away empty-handed. Cloud accounting software helps reduce the preparation and/or validation time of interim financial statements because the information can easily be shared between the actors involved, entrepreneurs, accountants, auditors. When a company needs a document, it can be downloaded in a standardized format. In addition, requests for information from third parties can be easily handled.
Detailed information on financial data
Properly configured business accounting software can keep tabs on the financial transactions of departments, projects, and any other area of a business. Creating documents that give a clear picture of financial data can help a business with bank reconciliation and strategic planning. This is called management accounting. A good, well-structured chart of accounts makes it possible to present several indicators of a company’s financial performance.
Simplified tax return
Tracking expenses, filing tax returns, and calculating available tax credits become much easier when all financial data is efficiently cataloged .
Depending on your accounting solution , the software publisher that provides it may have an API information transfer feature. This feature can help accountants create specific tax reports.
Improved inventory management
Your accounting software platform of choice may contain inventory tracking and management tools to improve access to product availability, sales, and replenishment information. Unlike manual data entry, automated inventory management solutions are not as prone to human error , controls are more easily set up and stock level alerts can be added.
What are the types of accounting software?
The most common types of accounting software are:
- Excel spreadsheets or Google sheet
- Accounting software Zoho Books, Quicjbooks, Sage 50, Acomba
- Enterprise Resource Planning (ERP) software ZohoOne, Dynamics
- Custom accounting solutions
It is the most basic form of accounting software, with spreadsheet applications like Microsoft Excel and Google Sheet being widely known to the general public. Spreadsheet software is an easy entry point into digital accounting, but it’s hampered by a variety of issues.
Mishandling of this software is a common occurrence so inaccuracies often occur. Misplaced values, double-entry bookkeeping, missing information, and other issues can be caused by negligence. Spreadsheet software is best suited for businesses with very low transaction volumes and no sales tax remittance.
Commercially available accounting software applications are commonly used by businesses around the world to manage accounting operations. This type of software, depending on the solutions, can be customized according to customer specifications.
Different software packages exist to cater to the particularities of different industries so customers can add or remove features depending on their effectiveness in a particular area. The deployment and maintenance of digital software is simple because it is the responsibility of the software publisher. Many offer technical support to their customers, through reference guides or through partners.
Enterprise Resource Planning (ERP) Software
An ERP solution works by implementing different modules to manage the critical processes of a business. A centralized approach works best when adapted to different departments, where information might otherwise be lost due to a lack of communication between software applications and especially avoid double entry.
ERP software may require a greater investment of time and resources from the company that wants to use it . Initial deployment costs can be high, but the benefits can be felt quickly as the business grows. Support through this transformation project is recommended.
Custom accounting solutions
Sometimes a company decides that the best course of action is to create proprietary software to handle accounting operations. Building software from scratch is a daunting task, and IT professionals have to spend a considerable amount of their time keeping the platform in good standing.
A business should not consider using a custom accounting solution unless it is critical to its operation. The accounting needs of most organizations can be met by software available on the market, especially since nowadays several specialized software can be connected to accounting systems via API.
Key Accounting Software Features
Intuitive user experience
Good accounting software should be easy to use for all users, no matter if they are beginners. Adopting an accounting solution with an intuitive interface is very important, as it significantly reduces the barrier of entry for new users.
Analytical and reporting capabilities
A substantial amount of time and energy can be saved by automating reporting and data analysis , as it transforms laborious manual tasks into instant digital processes.
Scalability and updates
Technology improves over time, and the best digital solutions offer their customers the opportunity to grow alongside them. Users of online accounting software can expect to receive updates to the software as it is developed.
Invoicing and payment processing
Accounting software is often used as payment and invoicing software. The software can connect to a payment platform and directly apply the payment when the invoice is issued, whether it is scheduled automatically or manually. All relevant customer information will also be stored by the software, which will further facilitate future payments.
Software adapted to mobile devices
Many accounting software solutions are mobile-friendly so that users can access the software remotely through the use of devices such as smart phones and tablets . Depending on the mobile app, features may include expense tracking and bill preparation options.
Maintain data security
Data security is important to all businesses. Storing sensitive financial data is a predominant necessity; this is why accounting solutions include security measures in the system infrastructure.
Customer and supplier accounts
Accounts Receivable and Accounts Payable transactions can be performed automatically. Automatic payments can be scheduled and customized to include specific details.
How much does accounting software cost?
Costs for accounting software vary depending on the type of software purchased . Some accounting solutions offer subscriptions for as little as $40 per month, while others cost thousands of dollars.
How to choose the right accounting software for your business
The varied offerings and different types of software available in the market can create confusion in terms of what will work best for a business. The best way to choose the right solution for your business is to receive expert advice. Cofinia has a team of accounting experts ready to provide advice and support if you are looking to digitize your business .
If accounting is a very daunting task for your business or if you want to exploit the many benefits of accounting software, working alongside experts in the field can help you reap the greatest benefits. You can trust Cofinia to improve your accounting operations.
In addition to helping you select accounting software, we can share best practices with you for keeping your accounts up to date and having useful management information for decision-making.