Accounting software is a fundamental part of any business. It doesn’t matter if a company sells shoes or engines, accounting and bookkeeping are essential to understand the success of a business and ensure that it follows the law.
Thanks to recent technological developments, businesses of all sizes can take advantage of specialized digital tools designed to automate and improve financial data. Keep reading to find out everything you need to know about accounting software.
What Is Accounting Software?
Accounting software is a digital solution created to simplify tasks of accounting professionals and bookkeepers. Software designed for this purpose can be adopted by businesses of all industries and sizes
What Is Accounting Software Used For?
Accounting software is an efficient tool to manage the financial data of a business. Companies can implement these software to process bank transactions, manage accounts, store financial data and restructure critical business operations.
Benefits of Using Accounting Software
Benefits of using accounting software :
- Save 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
- Simplified tax reporting
- Improved inventory management
Accounting software can optimize the overall financial operations of a business. Properly implemented digital accounting solutions can turn tedious manual processes into automated ones and dramatically reduce the time required to complete certain tasks.
For example, downloading CSV files from your credit or bank accounts becomes something 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
Entrepreneurs who unsubscribe from the software have to wait until the end of the month for their assistants to produce their monthly reports. This is inconvenient and leaves entrepreneurs out of touch with the day-to-day fluctuations in their company’s finances.
On the other hand, financial reports from accounting software are available on demand and are automatically updated to show the most accurate information.
Synchronized Financial Data
Most of the time, companies keep their data stored on various platforms, such as bank accounts or payroll services. Instead of going through the time-consuming process of switching between platforms to search and identify various bits of data, accounting professionals can take advantage of the automatic features of software to have all financial data perfectly synchronized under one roof.
Improved Financial Reporting
Profit and loss (P&L) reports, balance sheets, cash flow statements and other documents 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 required, the software can be customized to filter results.
High Quality Financial Statements
When dealing with potential investors, showing professional, detailed reports can make the difference between closing a deal or leaving empty-handed. Accounting software can produce well-formatted, accurate and visually appealing financial statements. When a company needs a document, it can be uploaded in a standardized format. Also, requests for information from third parties can be easily handled.
Streamlined Payroll Process
For small businesses, using an accounting system is more cost effective than purchasing specialized payroll software alone. This becomes more viable as the business grows and can invest in deployment costs. This makes digital accounting solutions an asset that a business should acquire early in its development.
Detailed Information on Financial Data
Properly configured business accounting software can keep track of departmental, project, and any other financial transactions in a company. Creating documents that give a clear picture of financial data can help a company with bank reconciliation and strategic planning.
Simplified Tax Return
Tracking expenses, filing tax returns and calculating available tax credits becomes much easier when all financial data is efficiently cataloged.
Depending on your accounting solution, the software vendor may have specific tax reporting functionality. This functionality can help accountants create specific tax reports, including sales tax and payroll reports.
Improved Inventory Management
The accounting software platform of your choice can 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 susceptible to human error.
What Are the Types of Accounting Software?
The most common types of accounting software are :
- Business software
- Enterprise Resource Planning (ERP) software
- Customized accounting solutions
This is the most basic form of accounting software, with spreadsheet applications like Microsoft’s Excel and Apple’s Numbers being widely known to the general public. Spreadsheet software is an easy entry point into digital accounting, but it is hampered by a variety of issues.
Improper handling of this software is a common phenomenon so inaccuracies often occur. Misplaced values, double-entry bookkeeping, missing information and other problems can be caused by carelessness. Spreadsheet software is best suited for businesses with very low transaction volumes.
Commercial available accounting software apps are commonly used by businesses around the world to manage accounting operations. This type of software can be customized according to the client’s specifications.
Different COTS software packages exist to meet the requirements of specific industries so customers can add or remove features based on their effectiveness in a particular area. Deployment and maintenance of COTS software can depend on a company’s IT team, but some software vendors also offer technical support to their customers.
Some COTS solutions are available in an online, cloud-based ecosystem. The software can be accessed and used by logging into a portal, usually owned by the vendor. These solutions are paid for on a subscription basis, rather than a single purchase of a software package. Online software also has the advantage of being automatically updated and maintained by the vendor who owns it.
Enterprise Resource Planning (ERP) Software
An ERP solution works by implementing a single database for all of a company’s critical business information. A centralized approach works best when tailored to different departments, where information might otherwise be lost due to a lack of communication between software apps.
ERP software requires a considerable investment of time and resources from the company. Initial deployment costs can be high. Since they require the purchase, installation and optimization of the infrastructure to support it. Installing and troubleshooting ERP software can take months.
Customized Accounting Solutions
Sometimes a company decides that the best course of action is to create proprietary software to manage accounting operations. Creating software from scratch is a daunting task, and IT professionals must spend a considerable amount of time keeping the platform in order.
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 COTS or ERP software.
Key Features of Accounting Software
Intuitive User Experience
Accounting software is easy to use for all customers, no matter how novice they are. Adopting an accounting solution with an intuitive interface is very important, as it greatly reduces the barrier of entry for new users.
Analysis and Reporting Abilities
A substantial amount of time and energy can be saved by automating reporting and data analysis, as it turns laborious manual tasks into instant digital processes.
Evolution and Upgrades
Technology improves over time, and the best digital solutions offer their customers the opportunity to grow with them. Users of online accounting software can expect to receive updates as the software develops.
Billing and Payment Handling
Accounting software is often used as payment and billing software. The software can analyze the amounts due and create invoices ready to print or email. All relevant customer information will also be stored by the software, which will further facilitate future payments.
Software for Mobile Devices
Many accounting software solutions are mobile-friendly so that users can access the software remotely via their smartphones and tablets. Depending on the mobile app, features may include expense tracking and invoice development options.
Maintain Data Security
Data security is important to all businesses. The storage of critical financial data is an overriding necessity, which is why accounting solutions include security measures in the system infrastructure.
Accounts Receivable and Payable
Transactions for accounts receivable and accounts payable can be made automatically. Automatic payments can be scheduled and customized to include specific details.
Financial progress of a company is easy to review and understand with accounting software. Transparent access to information allows a company to identify errors in the way it is managed, which leads to the development of better strategies.
How Much Does Accounting Software Cost?
Accounting software costs vary depending on the type of software purchased. Some accounting solutions offer subscriptions for as little as $100 per month, while others cost thousands of dollars.
How to Choose the Right Accounting Software for Your Business?
The various offers and types of software available on the market can create confusion in terms of what will work best for your business. The best way to choose the right solution for your business is to get advice from a specialist. Cofinia has a team of accounting experts to help you with advice and support if you are looking to digitize your business.
If accounting is a daunting task for your business or if you want to take advantage of the many benefits of accounting software, working alongside experts in the field can help you get the most out of it. You can trust Cofinia to improve your accounting operations.