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Table of Contents

• What is Accounting Software?
• What are the key features of Accounting Software?
• What are the types of Accounting Software?
• What are the benefits of Accounting Software?
• How much does Accounting Software cost?
• How to choose Accounting Software

What is Accounting Software?

Accounting software is used by businesses and accounting firms to track cash flow, bank accounts, purchase orders, and other financial statements.

The tool helps automate financial management by eliminating paper-based accounting with digital balance sheets and ledgers. Accounting documents are stored electronically and can be accessed in real time.

Accounting tools also include reporting and analytics that enable real-time analysis of the company’s financial status. Track and monitor the factors affecting the company’s financial health such as earned profits, declined revenue, or budget utilization.

What are the key features of Accounting Software?

• Bank reconciliation statement: Prepare a summarized statement of all financial activities of the business. This information includes deposits, withdrawals, payments, receivables, and other financial data that affect the business’s funds. Compare the cash balance on the company’s balance sheet to the bank statement. Utilize the statement to detect errors in recording financial data, cash manipulations, or fraud.
• Financial reporting: Document all financial transactions to prepare performance reports. The reports reflect your profit earnings against the expenses and your future earning/spending capacity. Utilize the reports to create a summarized financial statement and performance review for company audits. Store and share all current and previous reports in a centralized location to allow organization-wide access.
• General ledger: Validate the company’s debit and credit records using trial balance. The financial entries include account payables, account receivables, cash management, fixed assets, purchasing, and projects. Prepare a trial-balance sheet to check if all the financial statements are correct. Any gaps in the balance sheet and financial reports are considered errors or manipulation.
• Billing and invoicing: Automate the process of generating bills and invoices for clients/customers against the service provided by the company. Store and manage a copy of all the raised invoices and bills in a centralized location. Utilize these documents to create bank reconciliation statements or performance reports for audits. Set up recurring payments to eliminate delays and misses. Also, send personalized reminders to clients and customers for upcoming or missed payment dates.
• Budgeting and forecasting: Plan the company’s financial resources in terms of current and future generation and utilization. Estimate the future revenue and expenses for different departments within the company. Create financial reports with customized metrics and data visualization tools such as graphs and charts. Utilize the reports to gather the required funds and then allocate them to different departments based on the approved amount against the requirement.
• Expense tracking: Automate capturing and recording day-to-day company expenses. Document the reports in the desired format (PDF or excel) to raise for approvals and reimbursements. Allow employees to directly scan and upload on-paper purchase receipts and eliminate manual data entry. Use the GPS tracker to record the on-road time for field workers and calculate the on-road expenses such as fuel utilization.
• Payroll management: Maintain a financial record of employee accounts including monthly salary, reimbursements, tax calculations, deductions, and more. Upload pay slips for employees to access and download. Allow employees to print forms for claims, reimbursements, and taxes and upload them for submission.

What are the types of Accounting Software?

The following are some common types of accounting software categorized based on business operations. The tools are available as an integrated feature of the accounting software or as a standalone software solution.

• Billing and invoicing accounting software: The tool helps automate the process of generating recurring invoices for company accounts management and bills to share with customers or clients. Billing and invoicing can either be an integrated feature of the accounting tool or a stand-alone software, which can be integrated through API. Besides generating bills and invoices, the tool can be used to set reminders for customers or clients to make payments on time. Some billing and invoicing software also allow accepting online payments. The tool either offers a built-in payment system or allows integration with third-party payment platforms and online wallets.
• Payroll management accounting software: The tool helps streamline managing employee payments including salary, claims, bonuses, and reimbursements. You can use the tool to calculate employee salaries, upload payslips, update reimbursements, and claim approvals. The tool also offers a self-service portal for employees to download and print payslips and forms. They can also digitally sign the documents for submission or approval.
• General ledger accounting software: The tool assists with tracking all day-to-day financial transactions such as spending, and payments received. The leger summarizes all company accounts and can be used to generate the company’s financial statements including income statements and balance sheets for audits. General ledger accounting software helps streamline the company’s financial reporting from preparing reports to controlling financial periods, assets, and liabilities. You can organize all your financial reports at a centralized location and group them based on values such as year or month.

Further, the types of accounting software can be categorized based on industry.

• Commercial accounting software: The tool is the most predominant accounting system that can be used by an individual or a small-business owner. Commercial accounting software is available on the market on a subscription-based pricing model. The software provider offers different subscription plans with varied features. You need to pick one that best aligns with your small business accounting needs. Commercial accounting software offers all accounting features such as creating financial statements, expense tracking, or budgeting and forecasting. Furthermore, you can integrate the tool with third-party solutions such as billing and invoicing software, based on your requirements.
• Enterprise accounting software: The tool is most suitable for large companies and offers a variety of features such as asset and inventory management, or workflow planning, in addition to the basic accounting system. Also known as enterprise resource planning (ERP), the tool offers a single dashboard to access all accounting and planning activities. You can create comprehensive performance reports, highlighting all aspects of your business including marketing, finance, human resources, inventory, assets, and more. Insights from the reports help make quick and efficient business decisions and optimize your operations to boost growth.
• Custom accounting software: As the name suggests, the tool allows you to customize a software solution with features specific to your business operations and the type of industry. You can discuss the requirements with the software provider to design an accounting solution with specific features. For instance, if you need software that tracks your daily expenses, prepares a ledger and balance sheet, and raises bills and invoices. In addition, you may also want to create budgeting, forecasting, and performance reports with customized metrics and represent them via charts or graphs. You can also exclude a specific feature, such as payroll management, if you have a different solution that caters to the requirement.

What are the benefits of Accounting Software?

• Reduced errors in reporting financial transactions: The tool automatically tracks and records financial transactions. This process eliminates errors such as missing entries, duplicate entries, or incorrect calculations. Further, if you change a single record, all the related financial statements are automatically updated. Having accurate financial reports assists with quick and efficient decision making.
• Enhanced data security: From cloud storage to role-based access, the tool ensures that your financial data is protected from unauthorized access or accidental deletion. In addition, you can set up multi-factor authentication or a single sign-on system to enhance security. Further, the tool complies with all data security requirements and follows a strong protocol to act when a security breach occurs.
• Better data accessibility: The tool’s cloud storage stores and manages all the financial documents including balance sheets, forecast reports, budget estimations, and more. Having centralized storage allows the finance team members to securely access the document anytime and anywhere.
• Improved financial compliance: The tool helps check and validate the compliance of your financial management activities with the set rules of the financial enforcement services such as the Financial Crime Enforcement Network (FinCEN).
• Better data visualization: The tool allows you to present your financial reports with better visuals such as bar graphs, pie charts, line charts, and more. Visualization helps better understand the information over simple text or numbers.

How much does Accounting Software cost?

Most products in the accounting software market are priced on a “per-month” basis and can be divided into three pricing tiers based on their starting price.

Price ranges*:

• $14 - $87
• $87 - $299
• $299+

*The pricing included is for the entry-level/lowest-priced offerings found on vendor websites as of October 11, 2022. These ranges correspond to the 25th, 75th, and 100th percentiles of pricing information gathered from vendor websites of sample products.

The above list includes pricing for the base plans of most accounting software products. An enterprise or premium product that is priced higher may include additional features such as payroll management, billing and invoicing, workflow planning, document management, and project management.

How to choose Accounting Software

• Assess the data visualization tools: Check if the tool allows you to use charts or graphs to present your financial data. Look for pre-designed templates and confirm if you can edit the elements such as font type, size, and color. Preparing financial reports such as budgets or forecasting with detailed visualization helps the audience better understand the information.
• Check the features specific to your industry: Accounting requirements can vary for every business type and industry. For instance, a B2B business will need to maintain bank reconciliation and cash flow statements. On the other hand, a B2C business will need billing and invoicing along with the general accounting management. Look for software solutions with features that match your business type and industry to make an informed decision.
• Analyze the financial compliance: Check if the tool has the ability to assess your financial management activities based on the general rules and guidelines within the financial service sector. Complying with the financial services ensure that your business is free from any accounting malpractices. Further, ensuring financial compliance helps build trust among investors, clients, and customers for the money they have invested.

What are the common questions to ask Accounting Software vendors?

• Can you customize the tool features for your business needs? Some accounting software providers customize the tool based on specific features. The customization may increase or decrease the price of the solution or may not affect it at all. Learn about the customization service offered by your selected software provider. Prepare a list of the required accounting features for your business and ask them to share a quote for you to analyze based on your budget.
• Does the tool offer a built-in payments platform? Accounting tools that can raise a bill or invoice may require an integrated platform to accept online payments from customers and clients. Ask your selected software provider about the feature, whether it is built in or requires third-party integration. Also, check the security measures adopted by the provider as the tool will have access to yours as well as the customers' bank information such as bank account number and debit or credit card details.
• Does the tool offer a mobile application for employee payroll management? Most payroll management systems offer a self-service portal for employees to check or update their information. This process helps save time as the employees do not have to depend on the human resource team to get information about their salaries such as deductions or bonuses. Check if the portal is accessible on smartphones and other mobile devices to access details on the go.
• Is there a cap on the number of users accessing the tool? Check if your selected accounting solution restricts the number of users accessing a document or financial dashboard. If yes, then ask about the permitted count and the process to increase the number of users. Also, check if the software provider charges for every user.
• Does the tool allow integration with third-party applications? Accounting software solutions are available as a suite, or a standalone version based on the business's use. Assess your business requirements and then look for a tool that offers all the features. For any missing features, ask if it allows integration with a third-party application or can customize the solution to match your business needs.