What is Accounting Software? (Spoiler: It’s the Gateway to More $)
Bookkeeping Bliss: Modern accounting software simplifies bookkeeping, automating tasks and reducing errors. It's like having an accountant who never sleeps, freeing up your time to focus on growing your business.
Master Money Manager: This software offers real-time financial insights, tracking income, expenses, and managing accounts payable and receivable, empowering businesses to make informed financial decisions.
From Manual to Magical: Accounting software has digitized financial processes, enhancing accuracy and productivity. Surveys indicate most small to large businesses now embrace these solutions.
Future-Proof Finances: Advanced features like AI, ML, and blockchain are increasingly integrated, evolving accounting software from basic tools to sophisticated robo-advisors for businesses.
Feature-Packed Finance Friend: With general ledger capabilities, automated invoice processing, and cash management tools, among others, accounting software ensures comprehensive financial management and compliance.
Modern accounting software solutions have become indispensable tools for businesses of all sizes. From streamlining bookkeeping to automating payroll management, this software has transformed the way organizations handle their financial data.
Or, in less jargon-y terms: accounting software is what's saving you from hiring someone to handle your books — and that right there is worth its weight in gold.
What is Accounting Software?
Accounting software is a tool designed to help businesses manage their financial data, track transactions, and generate reports. It automates key accounting tasks such as invoicing, tracking expenses, reconciling accounts, and preparing financial statements. Instead of requiring you to manually record every transaction, accounting software streamlines these processes, saving time and reducing the risk of human error.
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It’s especially useful for business owners because it offers real-time insights into financial performance. By using accounting software, you can:
- Track income and expenses.
- Manage accounts payable (bills) and receivable (invoices).
- Generate reports like profit and loss statements, balance sheets, and cash flow statements.
- Simplify tax preparation by organizing all financial data in one place.
At this point, many tools extend beyond accounting — integrated accounting software pulls in data from other programs like payroll systems, inventory management, and CRM (customer relationship management) software, making it easier to keep everything aligned.
The Best Accounting Software in 2024
We’re software geeks. I’d apologize for that buuuuut it’s actually pretty helpful. We went to work analyzing the accounting software market, and determined these to be the 10 best accounting solutions out there:
The Evolution of Accounting Software Solutions
Historically, accounting processes were manual and time-consuming — if you're just starting to look into these tools, chances are you're dealing with that time consumption right now.
With the advent of accounting software solutions, businesses gained the ability to digitize their financial operations, leading to increased accuracy, efficiency, and productivity. Surveys from the last 3-5 years say anywhere from 64% to 78% of small businesses are using accounting software, and that range feels accurate to me as well. For large enterprises, the number is closer to 100%.
More advanced accounting software is working on integrating advanced technologies such as artificial intelligence (AI), machine learning (ML), and blockchain. Why, you ask? They want to step accounting tools up from low-level employees to robo-executives, thus making themselves indispensible to you.
Key Features of Modern Accounting Software Solutions
I know, I know. Saying "your books are handled" isn't enough of a reason to dish out cash for a solution. To be more specific, accounting software's most common features are:
General Ledger and Subledger Capabilities
Modern accounting software solutions include robust general ledger modules and subledgers, providing detailed insights into specific accounts or departments. These features enable businesses to maintain accurate financial records and generate comprehensive financial reports.
Accounts Payable and Receivable Management
Efficient management of accounts payable and accounts receivable is a fundamental feature of accounting software solutions, enabling businesses to optimize cash flow and track outstanding invoices. Automated invoice processing and payment reminders help streamline these processes.
PS: there are specific AR and AP tools out there, too.
Cash and Asset Management Tools
Accounting software solutions offer tools for monitoring cash flow, tracking assets, and managing investments, providing valuable insights into the financial health of the business. Real-time reporting and analytics capabilities enable businesses to make informed financial decisions.
Risk Management and Compliance Integration
Modern accounting software solutions integrate risk management and compliance functionalities, helping businesses adhere to regulatory requirements and mitigate financial risks. These features ensure that financial processes align with industry standards and legal obligations.
Automated Journal Entries
If you have to enter every data point yourself, managing your accounting system will be quite time-consuming. Instead, look for programs that automate data entry tasks. Some features to look for include:
- Options for connecting credit card and bank accounts so data can be imported to ensure the accuracy of entries
- Automated abilities for reversing journal entries to make double-entry accounting easier
- Entry of payments for invoices or other expenses that can be automatically approved within certain thresholds
Bank Reconciliation
The ability to link your bank accounts to your financial software for automated reconciliation reduces work for your bookkeeping staff and helps ensure accuracy. It’s also a must-have for organizations that work out of multiple accounts.
Financial Report Creation
From expense tracking to income statements and balance sheets, the ability to generate financial reports in real time is a huge benefit of good accounting systems.
Budgeting
The Small Business Administration looked at why businesses fail and came up with 10 common reasons. At least half of those reasons are directly related to money management and accounting. Having a software solution in place that makes it easy to create and manage a budget can help you avoid many of these common business pitfalls.
Types of Accounting Software
If someone asked you to describe shoes, you'd think of the last pair of shoes that stood out to you — but of course, they aren't the only ones to exist. Just as tennis shoes are worn for a different purpose than high heels, there are distinct types of accounting software out there.
Here are the broad categories:
Spreadsheet-Based Solutions
Basic (or free) accounting software solutions often include spreadsheet-based tools for simple bookkeeping and financial tracking. While these solutions are cost-effective, they usually lack advanced features and scalability.
Commercial Accounting Software Solutions
Commercial accounting software caters to the needs of small to mid-sized businesses, offering a comprehensive suite of features for financial management. These solutions often provide user-friendly interfaces and pre-built templates for common accounting tasks.
Enterprise-Grade Accounting Software Solutions
Designed for larger organizations, enterprise-grade accounting software solutions provide advanced capabilities, scalability, and customization options to meet complex accounting needs. These solutions often include features such as multi-entity consolidation, advanced budgeting and forecasting, and integration with other enterprise systems.
Custom and Cloud-Based Accounting Software Solutions
Custom and cloud-based accounting software solutions offer tailored features and the flexibility of cloud-based accessibility, enabling seamless collaboration and data management. These solutions are ideal for businesses with unique accounting requirements or those seeking the benefits of cloud computing.
Benefits of Implementing Accounting Software Solutions
Accounting software makes things faster, easier, and more accurate — period. If that isn't specific enough for you, here are some of the most impactful benefits of accounting software:
Automatic Financial Report Generation
Many software programs for accounting let you generate reports and tax documents with the click of a button. This helps you keep track of financial health and cash flow and, if your books close at the end of the year, helps save you from that New Years accounting hangover. IYKYK.
Automated Workflows
With the right software, you can automate many tedious accounting tasks, like double-entry ledger management, reducing how much labor it takes to keep the books.
Automated workflows go beyond financial reporting, too. For example, you might set up a workflow that automatically processes and pays invoices from approved vendors under a $500 threshold and routes invoices over the threshold for human approval.
Streamlined Financial Processes
For the more complex financial processes — which can't be automated away — accounting software streamlines things, automating repetitive tasks and reducing the margin for error.
This automation leads to improved accuracy and efficiency, allowing you and your people to focus on strategic financial decision-making.
Increased Accuracy
Because you aren’t entering every data point manually, the opportunity for error is reduced. Your books are cleaner and you spend less time searching for the errant entry or typo that’s thrown them out of balance. All of a sudden, accounting accuracy feels easy. Nice, right?
Easy Access to Financial Data
Many software solutions for accounting are cloud-based, which means you have access to data for forecasts anywhere you have an internet connection. Remote access to accounting modules helps you maintain the books and keep an eye on overall business health, wherever you are.
Enhanced Accuracy and Compliance
By automating calculations and ensuring data accuracy, accounting software solutions help businesses maintain compliance with accounting standards and regulations. These solutions often include built-in controls and audit trails to facilitate compliance and mitigate financial risks.
Selecting the Right Accounting Software Solution
To find the right accounting solution, consider your business needs in light of the components and features highlighted above, as well as any unique business process you have. You’ll also need to consider the costs and whether a solution is realistically within your budget.
Key Considerations
When selecting accounting software solutions, businesses should consider factors such as scalability, user-friendliness, and integration capabilities with existing systems. It is essential to evaluate the specific needs of the organization and ensure that the chosen solution aligns with those requirements.
Customization and Integration Capabilities
The ability to customize and integrate accounting software solutions with other business applications is crucial for aligning financial processes with specific organizational needs. Look for solutions that offer robust APIs and integration options to facilitate seamless data exchange and process automation.
Look at Features
Create a list of all features you’d like in an accounting system, then start evaluating contenders. Look for solutions that check all the required accounting feature boxes on your list and as many of the “nice-to-haves” as possible.
Remember to account for how and when people plan to work on these tasks. For example, if you need to access accounting functions remotely, you may want a solution that includes a mobile app.
Consider the Cost
Finally, create a budget for your accounting software and look for solutions that keep you within it. Small business owners and solopreneurs might be able to start with free accounting apps, but most businesses will need to spend at least a little on these solutions.
Make sure you understand how the software is billed before you buy.
Billing Structures
Common options include:
- Price per user per month for SaaS solutions
- Price per user per year SaaS solutions
- Price per month or year for up to a certain number of transactions or data for SaaS solutions
- Complete license for on-premises solutions with more limited updates and support
Average Software Costs
While every solution comes with a different price, here’s a quick ballpark range:
- Start-up (under 50 people): You might pay $0 to $20 per month per user
- Growth stage (50-100 people): You might pay $10 to $100 per month per month
- Established business (100+ people): Complex accounting systems can cost $100 per user per month or more, though there are plenty of options at lower price points
Security and Data Protection
Robust security features and data protection measures are essential considerations when choosing accounting software solutions to safeguard sensitive financial information. Ensure that the selected solution employs encryption, access controls, and regular security updates to protect against data breaches and unauthorized access.
Future Trends in Accounting Software Solutions
As technology continues to advance, accounting software solutions are poised to incorporate AI and machine learning enhancements, revolutionizing data analysis and decision-making processes. These technologies enable automated anomaly detection, predictive analytics, and intelligent financial forecasting.
Additionally, the integration of blockchain technology holds the potential to enhance the security and transparency of financial transactions. Blockchain-based accounting systems are expected to provide immutable and tamper-proof records, increasing trust and reducing the risk of fraud.
Need expert help selecting the right Accounting Software?
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Commonly Used vs. Biggest Advantages
Should you choose the most popular accounting software on the market? Going with a big name like Intuit or NetSuite definitely offers some peace of mind, as these are tried-and-true solutions.
Or, should you find the software that offers the biggest advantages and most flexibility for your business? Established SaaS vendors as well as many up-and-comers offer unique solutions that can help minimize spending while maximizing efficiency.
Bad news: I can't tell you — you have to do what’s right for your business and team.
Good news: we have a ton of articles, designed to help you figure out exactly what that is.
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