Accounting software is a generic term used to describe a suite of computer applications and programs that aim to automate accounting activities, reducing cost and the possibility of error, and enhance reporting and financial decision-making. Typically such programs are structured in a modular fashion, with separate suites for General Ledger, Balance Sheet, Accounts, Receivable, Accounts Payable, Fixed Assets and the like. Accounting software systems vary in complexity, from simple single and double entry systems aimed at freelance accountants and small business owners, to multi-level and multi-facetted enterprise software designed with large corporations in mind.
Accounting software can be desktop or on-line based, accessible through the internet, and it can also be stored in the cloud. Due to its varying complexity, the cost of such software differs widely, depending on its use, application, and factors such as the number of users. Although a number of organisations have developed their own in-house systems, most companies and individual users employ one of the commercially available software products on the market.
Best Accounting Software Products on the Market
FreshBooks is a software product aimed at small businesses, and facilitates the management of a number of accounts processes, as well as time-tracking, management of expenses, and subscription management.
FreshBooks is very simple and easy to use and, as the system is cloud-based, there is no software that needs to be installed on local computers, whilst, compared to many other accounting applications, it has a number of fully-functioning mobile apps and add-ons for use on Android and iOS devices.
A major benefit of FreshBooks is the ability for even the most basic of users to generate professional-looking invoices quickly, and they offer very good back-up support for users. There are a variety of pricing plans available for small and medium-sized businesses, and they also offer a free trial which gives users all the features and functionality that they would get with the paid version of the software.
Xero is a New Zealand-based company that produces cloud-based accounting software for small and medium-sized businesses. Xero is compatible with any device with internet access and the latest versions of popular browsers such as Chrome, Internet Explorer or Safari. It also offers an accounting app for Android and iOS.
The set-up process is simple but can take time due to the volume of information that needs to be imported, such as contacts, previous bank statements etc. However, Xero comes with a pre-set Chart of Accounts that requires only some minor changes to suit the needs of most businesses.
One of the best features of Xero is the dashboard which prompts users to complete various set-up routines and tasks. This dashboard also gives a quick view of the company’s financial health, and is visually appealing with a range of graphs and applications which can be customised to show key performance indicators such as bank accounts, invoices outstanding, and the breakdown of expenses. It also offers an extensive range of reports – although a number of these are specific to payroll.
Customer service is available 24/7, although the company does not offer phone support, primarily using email to deal with user queries. The company promises to respond within 24 hours, although customer feedback suggests response times are usually considerably faster than this.
Xero comes with 5 scalable pricing plans, with each plan offering unlimited users and 1GB of online storage (there is an option for unlimited storage but this does affect the speed of operations).
QuickBooks Online is developed and marketed by Intuit. There are a range of QuickBook products available, which have been designed with specific industries in mind, but all offer core functionality, and the ability to monitor expenses, create invoices and reports, and manage inventory, vendors and employees.
QuickBooks is very easy to use and has been designed with the non-specialist accountant in mind. There is a free demo version available and a range of pricing options, which include one-off multi-user licences and annual subscriptions. 4.3 million businesses already use QuickBooks, and the number keeps growing.
How to choose the Best Accounting Software
When deciding what accounting software is best for your business, there are a number of factors that should be taken into account.
Your accounting needs will vary with the size of your business. If you have a small business with a handful of transactions a week, a simple spreadsheet or a basic accounting package may be enough for your needs. But if your business expands, there will be the need for an upgraded package which can then handle payroll processing, billing and more advanced financial reporting.
It is always worthwhile to perform a cost-benefit analysis to make sure you are not over, or under-paying, for accounting software based on what it does and can do for you. Most vendors offer free trials and tiered pricing, allowing customers to experiment with the software, and then scale-up as their needs grow. However, it is mistake to deliberately under invest in accounting software, as accounting mistakes and errors in reporting can have a serious impact on a business.
It is important to determine which accounting modules come with a package and whether these meet your needs. Whilst some need only basic functionality, others will have the need for advanced features, such as online bank interfaces, inventory management and customised invoicing. Try to future proof any system you are contemplating buying by making sure it covers all areas you anticipate you might need going forward.
Integration with Existing Systems
The need for an accounting system to integrate with existing programs and applications may also be a consideration – for example, the time management and billing system in a law firm. If this is a factor, then compatibility and integration cost becomes an issue to be considered.
What resources are there to support users of the accounting software? For example, does the vendor provide phone, email and chat support as well as on-line help? Are there local consultants like accountants and bookkeepers you could call on if you were having a problem with the software, and is the product supported locally?
Types of Accounting Software
There are 4 main types of accounting software which, at the most basic level, consists of spreadsheets which are often used by small business to maintain their accounts. They, however, are prone to error in that it relies on the inputter not to make mistakes, and they are not usually integrated with other systems, so there is a lot of manual work involved in maintaining accounts this way. This means they are only suitable for businesses with relatively few transactions.
The main type of software is commercial off-the-shelf products such as QuickBooks, FreshBooks and Xero. They are generic in that they are designed to meet the needs of most businesses, and come in modular form with standardised reports – although the premium products allow for a good deal of customisation when it comes to report designing. Commercial software may require the services of a consultant to install, as well as local staff to maintain, or could require a user to log-in to the vendor’s website.
Enterprise Resource Management Software – also known as ERP – integrates information from across all parts of a business into a single database. ERP suites include standard reports and financial tools, as well as billing, purchasing and customer relationship management (CRM). SAP, Oracle and PeopleSoft are probably the best known of such ERP systems, which can be industry specific – for example, construction or manufacturing. A common feature of all such systems is that they are expensive and time consuming to both install and maintain, and, as such, they are suitable only for the largest and most complex organisations.
The final category is Custom Accounting Software, developed by an organisation whose needs are so special that neither an off the shelf product or an ERP system can adequately meet them. However, such software is rarely used because it takes a lot of work to develop and maintain them, which makes them resource intensive.
Accounting Software – Examples
FreshBooks is cloud-based accounting software which primarily caters to small and medium businesses. Not only does it cover most basic accounting functions, but it also allows for streamlined customer invoicing and the ability to collect subscriptions online.
QuickBooks has been one of the most popular accounting software packages for many years, geared mainly towards small and medium-sized businesses, and aimed specifically at those with little or no formal accounting knowledge.
PeopleSoft provide complex ERP solutions, including Financial Management, Supply Chain, CRM and Enterprise Performance.
Sage is subscription-based business management software with a variety of products, from the one man business at the bottom end of the spectrum, to large multi-nationals at the top.
SAP is one of the largest ERP enterprise systems enabling customers to run their business processes, including accounts, finance, production, HR and sales.
Xero is an online accounting app for small businesses, enabling them to manage their cash flow and stay on top of their finances,
There are numerous accounting software systems available on the market which vary considerably in terms of size, complexity and cost. When deciding which product is suitable for you or your busy, then you need to consider your needs, both present and future, your budget, the desired functionality and features, and what level of support you need and can expect to receive.
All of the leading products offer free trials and demonstrations, and it is recommended that prospective users take full advantage of these to learn all they can about prospective systems before they commit to buy.