When you choose accounting software for your business, make sure you understand your needs and know what features to look for before you start. The market is full of different accounting apps with different capabilities, and selecting a system for your business can be overwhelming. It helps to prioritize the features you want, based on your accounting needs, usability, and pricing. This guide compiles some of the important features in accounting software to help you choose the best system for your business.
Factors to consider when choosing accounting software
Accounts receivable and accounts payable
Every good accounting system allows you to record both accounts receivable, or the money that your customers owe you, and accounts payable, or the money that you owe your vendors. Accounting software should help you manage your receivables more efficiently, which includes creating professional invoices, sending payment reminders, and using payment gateways to collect online payments. You should also be able to tell which customers have yet to pay you and how much. Your software should help you keep tabs on your payables, such as vendor bills and operating expenses, and offer reminders to make sure that you pay them on time.
Cash-based and accrual-based accounting
There are two methods you can use to do accounting for your business: the cash method and the accrual method. If you are a small business, and mainly record transactions based on cash inflows and outflows, the cash accounting method will suit you better. If you are a large business that buys and sells on credit, and records accounts receivable and payable, the accrual method will suit your needs. Many companies start out accounting with the cash method, and switch to the accrual method as the business grows bigger. Your accounting software should provide your business the option to choose between the two methods, and also make it easy to switch from cash to accrual if you wish to do so. Look for an accounting system that offers you both methods and the flexibility to choose.
Payment gateways provide your customers a safe and secure means of paying you online. By integrating with payment gateways, you can offer multiple convenient payment options including credit cards, debit cards, and online bank transfers. As soon as a payment is completed through the gateway, the status of the corresponding invoice will be updated automatically in your system. There is a wide variety of payment gateways out there, and they all charge different transaction fees for your transactions. Once you’ve found your preferred gateway, make sure that the accounting software you’re considering connects to that payment gateway.
Projects and time tracking
When you run a business that undertakes projects for clients, you’ll need accounting software that can handle project-based billing. You can bill your clients based on the hours actually spent on project tasks, or by setting a fixed cost for each project. If you bill on the basis of time, look for software that lets you track the time you spend on individual tasks and convert those timesheets into invoices. To prevent incorrect billing, make sure the system also lets you approve time records before you create invoices from them.
Bank reconciliation is a vital part of your accounting. Look for accounting software that fetches your bank statements automatically. It should also let you set up custom criteria and bank rules that automatically categorize and match your imported bank transactions. This will allow you to reconcile accounts quickly and keep your business audit-ready.
Being tax-ready is one of the many benefits of having good accounting software. Your accounting software needs to be able to calculate your tax liability, work with multiple tax rates, and generate tax reports to help you comply with the tax rules laid out by your government.
Automation is one of the most valuable features of accounting software, because it helps you accomplish more in less time. At the invoicing and billing level, you can automate recurring transactions, send out payment reminders to customers automatically, and auto-charge customers’ credit cards for recurring payments. Auto-scan is another feature of accounting software automation—it helps you capture data from receipts and turn it into transactions with minimal effort. Concentrate more on your core accounting by choosing accounting software that automates tedious processes and reduces manual intervention.
Integrations make your accounting software more flexible. They allow you to work with different apps without leaving your accounting platform. Changes you make in an integrated application are automatically updated in your accounting platform, removing the need for repeated data entry. For example, integrating CRM software with your accounting will link your customers’ information to your accounting system, and any update made in CRM will be reflected in your accounting app, so all your teams are on the same page. The accounting software you choose should be capable of integration with third-party services including CRMs, project management tools, and inventory management systems.
Monitoring the health of your business is vital. To keep track of your business’ performance, choose software that is capable of generating financial statement reports such as balance sheets, income statements, and cash flow statements. The software you pick should also help you generate reports for different accounting departments like accounts payable and receivable, inventory, projects, and taxes. These reports will tell you how you are performing in specific areas of your business, where you are doing consistently well, and which areas need improvement.
Accounting procedures are not easy, and not everyone is skilled at working with numbers. The software you choose should provide an environment that makes working with your financial data simpler. A neat and uncluttered user interface that helps you spot important aspects of your accounting, and built-in functions to do your accounting calculations automatically, will go a long way in making life easy for you or the staff who handle your accounts. The software you pick should also be easy to navigate, and enable you to complete tasks quickly.
Financial data is very sensitive. The accounting software you choose must provide high levels of security to safeguard your data. Choose apps from well-known vendors that provide Two-Factor Authentication, secure communication, and encryption, and educate yourself about their security mechanisms before you start using them.
Mobile versions of cloud-based apps allow flexible and easy access to your numbers. You can run your entire business accounting process instantly, even when you’re not at your workplace. If your work demands frequent traveling, choosing software with mobile versions lets you accomplish your accounting just as easily on your mobile device as on your desktop.
Certain areas of your accounting have to be kept secured from unauthorized access, and as the admin, you must decide who gets access to what. The best accounting apps on the market allow you to give your employees role-based access to specific accounting modules. For example, you can designate employees exclusively as timesheet staff to give them access to timesheets so that they can log time for their tasks, but exclude them from all other areas of your business. When you’re choosing accounting software, make sure it provides selective access so you can limit your data to authorized personnel.
Most accounting solutions come with multiple packages with different price points based on the features that they include. Look for an overall plan that includes any maintenance fees, multiple user fees, and support fees, and doesn’t charge users extra for any of the functions you need.
The software you pick should provide a free trial. The free trial gives you an idea of how the software works and lets you make sure that all your requirements are met by the system before purchasing.
Begin your accounting the right way
Accounting involves keeping track of vital business processes like invoicing and billing, accounts receivable and payable, bank reconciliation, tax compliance, and reporting. It can be difficult to get everything right, but good accounting is indispensable for the growth and success of your business. When you begin your accounting, the first steps are usually the most important, and choosing the right software is key. Evaluate your accounting needs thoroughly, prioritize features based on those needs, and choose accounting software that offers the features you require for the best accounting experience.