11 min read

Accounting Software Basics: The #1 Way to Boost Your Team’s Productivity

QUICK SUMMARY

Whether you’re hiring for bookkeeping positions or seeking accounting work in a small business or larger enterprise, it’s not enough to consider finance-specific skills. Today, individuals involved in any aspect of business accounting or finance must also demonstrate technology skills to be successful, including an understanding of accounting software basics. In fact, a survey of […]

In fact, a survey of accountants from 2020 already found that the following three skills were necessary for success in this arena:

57% said technology skills were a must
46% said relationship-building skills were critical
44% said business advisory skills were essential

If that was what people thought in 2020, imagine how many people believe technological fluency is critical today.

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Taken together, these three skills lead to an important conclusion about accounting work. Modern accounting requires a human-led approach that makes use of benefits such as automation to get the work done quickly, correctly, and with an eye on business goals and the needs of customers.

You’re here because you’re ready to learn about accounting software, such as the different types of software out there, and find that balance in your career or business. So, let’s get started.

What Is Accounting Software?

The term accounting software refers to programs that help you manage day-to-day financial and accounting tasks, such as recording journal entries, creating financial statements such as balance sheets, managing your payables and receivables, and processing expense reports and invoices.

Today’s accounting tools go well beyond old-school spreadsheets, which require intense manual data entry and management processes. Instead, they rely on automated workflows and other technological features to make the daily tasks of accounting as easy as possible.

Some examples of accounting software tools include:

QuickBooks
Sage
NetSuite
FreshBooks
SAP
Zoho Books
Wave
Oracle

While all accounting programs offer basic accounting features, each program may offer unique benefits and user experiences. It’s important to understand your options for accounting programs so you can choose the right fit for your business. This guide covers accounting technology essentials and what you should consider when selecting accounting software to help you find the right product.

Some Benefits of Using Accounting Software

Old-school accounting practices brought pencil, paper, calculator, and spreadsheet to the table. While you can arrive at the end result with these tools, it takes time, and any error can lead to tedious backtracking to ensure the books balance.

Today’s accounting clerks and bookkeeping staff don’t have to rely on such heavily manual processes. The right software offers numerous benefits for accounting, including:

Efficiency and time savings. With the right software, you can automate many tedious accounting tasks, including double-entry ledger management, reducing how much labor it takes to keep the books. You can also streamline processes with automated workflows. 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.
Automatic generation of reports. 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 reduces some of the work required in various accounting seasons.
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.
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 business owners, CFOs, and others maintain the books and keep an eye on overall business health wherever they are.

What Are the Key Components of Accounting Software?

Accounting software helps with accounting practices for firms and businesses, but it’s typically not the only technical solution you might need. In some cases, business leaders opt for ERP and other solutions that have built-in accounting modules or options for integrations. This lets them implement a single solution for multiple business needs.

Whether you go that route or are just looking for a solid standalone accounting program to implement, ensure these key components are covered.

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

Cloud-Based Storage

An accounting system based in the cloud offers the convenience of access anywhere. You can choose to run accounting processes with remote teams or keep an eye on the books even when you’re away from the office.

Cloud-based storage also provides a benefit for business continuity. When your financial data is on the cloud, you can build redundancies that ensure information is safe, even in the face of a natural disaster or another issue that impacts your office or local computer systems.

User-Friendliness

The best accounting software is user-friendly, ensuring staff can easily onboard to it. Some factors to consider when evaluating solutions include:

Menus that make sense so staff can quickly find and navigate to critical functions
Processes that involve the fewest clicks and keystrokes possible
Visually pleasing interfaces that reduce eye fatigue for team members that work with the system for long periods of time
Intuitive workflows and interfaces that are easy for staff to learn and work with

Integrations

The solution that supports your basic accounting needs may not cover all the processes required to make your company run. It’s important to consider whether your accounting solution will integrate with your ERP, CRM, or order management systems. For example, an e-commerce business needs an accounting program that integrates with back-end website functions to help manage payments and available inventory.

You might also want to consider whether you need add-ons to the accounting system you’re purchasing. For example, some accounting programs are offered in Software-as-a-Service (SaaS) models, wherein you select the modules that are right for you. A retail store might need to add a sales tax module while a nonprofit may need different options.

Security

Security is obviously a must for any system that contains financial information. Some security features to look for include:

Encryption options when saving data to the cloud or transmitting it to others
Two-factor authentication for user logins
The ability to manage individual- and role-based access for users
Support for any necessary industry compliance for your business, such as PCI or HIPAA

Essential Functions of Accounting Software

When shopping for accounting systems, start by narrowing your selection to the solutions that have all the necessary components above. Then consider accounting features that are important for your small business, firm, or enterprise.

I’ve summarized some common features you’ll likely need. Meet with staff that will work with your financial software to find out what they need to handle day-to-day tasks. Add those functions to this list to create a comprehensive checklist you can use when evaluating potential solutions.

General Ledger

Recording transactions and double-entry accounting is a must for most organizations. Look for solutions that make it as easy as possible to record and manage debits and credits, balance the books, and draw on ledger entries to help with financial reporting.

Accounts Payable

Your accounting solution should include workflows that support handling financial obligations, including invoices, payroll, expense reports, and other payment processing. Extra points if your solution offers automated options for purchase orders and other payable requests.

Accounts Receivable

At a minimum, accounting programs should help you understand your total accounts receivable and how it’s aged so you can manage your collections processes. Software that includes automated invoicing, payment processing, and processes for easily handling bad debt is also helpful.

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.

Invoicing

Whether you’re running a solo enterprise, small business, or large corporation, invoicing is essential to bottom-line financial health. Look for accounting programs that include data-gathering functions that drive accurate, efficient invoicing. For example, legal firms may want time-tracking components, which let you assign labor to various projects or jobs and invoice for billable hours.

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.

How to Choose the Right Accounting Software for Your Business

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.

Consider Your Needs

Gather subject-matter experts within your organization and ask them about business accounting needs. One way to do this is to create a process flow chart that documents the way accounting tasks are managed today. Then ask your team if they’d like to see any changes or improvements when a new system is implemented.

Tweak the process document to account for the improvements. Create a list of functions and features required to support those needs. You may want to divide the list into “need to have” vs “nice to have” to make it easier to evaluate potential software purchases.

Don’t forget to account for growing business needs. You need a system that is customizable and scales with your business.

Look at Features

Once you have a list of all features you’d like in an accounting system, 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. 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

While every solution comes with a different price, here’s a quick ballpark range to consider:

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

Need expert help selecting the right Accounting Software?

We’ve joined up with Crozdesk.com to give all our readers (yes, you!) access to Crozdesk’s software advisors. Just use the form below to share your needs, and they will contact you at no cost or commitment. You will then be matched and connected to a shortlist of vendors that best fit your company, and you can access exclusive software discounts!

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.

Ultimately, you have to do what’s right for your business and team. If you have an accounting system you love, tell me about it in the comments. Our readers are also interested in the challenges you’ve had with accounting systems and what changes you made to overcome them or how you pivoted away from them.