The accounting software you use matters more than you may think. The right software will help you track critical financial data in your business, stay on top of your taxes and pay your employees on time.
Choosing the wrong software can set you back and limit your long-term growth. Whether you handle the bookkeeping yourself or employ someone to do it for you, you need a flexible solution to grow alongside your business.
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Accounting software is a program that helps business owners, bookkeepers and accountants manage a company’s financial transactions. The right software makes it easier to track, organize and analyze financial data.
The features and level of customization depend on your business and the type of software you choose. Freelancers and small businesses may be able to use generic, one-size-fits-all solutions, whereas enterprise organizations will likely need a more complex system.
Accounting software provides key insights about your company’s financial data and helps you avoid common business accounting mistakes. The level of complexity you need will depend on the size of your business.
With so many options available on the market, it’s hard to know what software is the best choice for your business. Here are some tips to help you find the right solution:
As you explore different accounting software types, you’ll quickly realize there is no “best” solution. But certain types of accounting software will be better suited to your business than others.
Starts at $30 per month
Starts at $17 per month
Starts at $20 per month
Custom pricing only
Starts at $15 per month
Any software you use should include basic accounting features like a general ledger, account reconciliation, accounts payable and accounts receivable. Let’s look at some of the other features you can expect from accounting software.
Invoicing is a staple for most businesses, so it’s a feature most accounting software offers. A basic invoice should outline customer information, the amount owed and the due date.
In addition, some software will offer the following advanced invoicing features:
Your accounting software should provide an easy way for customers to pay online. Most invoices allow customers to pay by either scanning a QR code or clicking a button.
There should be an option for you to set up recurring payments on a weekly or monthly basis for ongoing customers. After the customer has paid, your software should automatically track and reconcile this payment.
Plus, the software should make it easy for you to view detailed reports about customer payments. These reports will help you understand how your customers prefer to pay and other payment trends.
When it comes to running payroll, companies’ needs depend on how many employees they have and the types of benefits they provide. In general, the software you use should calculate what you owe your employees, whether you have hourly workers, salaried employees or a combination of the two.
The software should manage varying pay schedules, compensation and benefits. Most employees prefer to have their checks automatically deposited into their bank account, so any software you choose should handle direct deposits for your employees.
The software should also calculate taxes and print relevant forms. For instance, freelancers who earn more than $600 annually will need to receive a 1099 form at the end of the year. And you’ll need a W-4 on file for full-time employees, since this will tell you how much to deduct from their paychecks.
As a business owner, you need to keep track of your expenses and how much your business owes vendors and suppliers. The right accounting software will help you do that with billing features, purchase orders and the ability to pay vendor invoices.
Enterprise resource planning (ERP) is a feature that helps companies collect and organize information so they can operate more efficiently. This software provides support for accounting, manufacturing, marketing and HR operations.
ERP provides a unified solution to managing different departments and processes in your business. This feature helps larger companies break down silos between departments and increase transparency.
If your business sells goods and products, you need to keep track of your inventory. An inventory tracking feature can monitor inventory levels and tell you when to reorder certain items.
Accounting software can also track relevant information about each of your products. This includes SKUs, product images, prices and quantity.
You can also use accounting software to create custom pricing lists. For instance, you may want to offer a discount to customers who order your products in bulk.
The monthly or annual pricing for your accounting software will depend on your business’s size, the number of users who need access and the customization level required. For instance, if you’re a solopreneur or small business owner, accounting software can cost less than $10 per month. You might also benefit from software that offers a free version with limited functionality.
On the other hand, larger companies with more complex accounting needs can expect to pay more for implementation and licensing fees.
You’ll also have to pay for any additional users you put on your account. And since accounting software is helpful only if your employees know how to use it, you may need to pay an additional fee to train your employees.
Your accounting software will track your business’s financial performance, so choose carefully. Here are a few things to keep in mind.
Before you invest in accounting software, make sure it integrates with your bank. If the software is compatible with your bank account, it will automatically download new transactions, saving you time.
When you’re evaluating accounting software, consider your business needs first. A freelancer with no employees will have different requirements than a multimillion-dollar business, so take your business’s size into consideration.
Look for software that’s geared toward your specific industry as well. For instance, our review of FreshBooks found that it is an excellent option for freelancers because of its advanced invoicing features. Some software is also tailored to companies in the manufacturing, retail and restaurant industries.
Consider how much you can afford to pay for accounting software. Fortunately, many solutions, particularly cloud-based ones (see below), are affordable and can accommodate nearly every budget. Many packages come with a free trial so you can get a sense of whether or not it’s the right fit for your business.
It’s a good idea to go with cloud-based accounting software. Cloud-based software can be accessed from any location and has built-in protections to prevent data loss. Plus, cloud-based software tends to be less expensive, since you don’t have to pay for licensing or additional servers to house your data.
If you hire a bookkeeper or accountant to manage your business finances, ease of use may not be as important to you. But if you’re handling the bookkeeping on your own, you’ll want accounting software that is intuitive and easy to use.
Of course, there may be a learning curve in the beginning, so look for companies that offer additional training and support. For instance, our QuickBooks review found that it offers dozens of articles and video tutorials on how to use its software.
Free or low-cost accounting software may work well for your company if you have limited business needs at the moment. But it’s important to take a long-term view of your business when selecting accounting software.
Instead of choosing the cheapest software, look for a scalable option. For instance, QuickBooks provides pricing plans for businesses of all sizes. That way, you can start small and add additional features as your business continues to grow.
When choosing the best accounting software for your business, consider your company size, industry, specific business needs, ease of use and scalability.
The right accounting software can simplify business processes and prepare you for tax season. If you’re not sure whether your business needs accounting software, here’s what it can do:
Here are some essential factors to consider when evaluating accounting software.
There are upsides and downsides to weigh when choosing accounting software, just like with anything else. However, accounting software can improve your business’s financial accuracy and visibility, and it can free up your time for more creative and profitable pursuits.