All Types of Accounting Software in 2024 (& How to Choose Yours)
With so many types of accounting software out there, it's only natural to feel a little overwhelmed.
Maybe you need a program that's best for standard small business operations… or perhaps a program that’s ideal for companies with big growth plans.
Here's what you need to know to cut through the marketing talk & choose the tool that will fit your technical skills, business goals, and preferred operating methods.
Need expert help selecting the right tool?
With one-on-one help, we guide you to your top software options. Narrow down your software search & make a confident choice.
Understanding Accounting Software
Accounting software refers to any kind of tool that can be used to track financial business activities and manage account ledgers.
The actual functionality can vary but these programs generally:
- Are designed specifically for business accounting functions
- Offer basic general ledger, accounts receivable, and accounts payable management options
- Can handle things such as inventory management, pricing, billing, and collections
- Offer financial report template generation options
- Can comply with various accounting rules and regulations, such as GAAP and IFRS
- Can assist with tax preparation, such as by compiling information to be reported on tax forms
- Can automate accounting tasks, such as payroll and billing
Some businesses may use other data entry tools for accounting software, such as Microsoft Excel or Google Sheets. While it's true that a brand new company, or one that will always have limited operations, can utilize spreadsheets for tracking cashflows, these products aren't technically considered accounting software.
Side note: if anyone tries convincing you to use their services but also consider Sheets or Excel to be accounting software… run the other way.
Types of Accounting Software
Not all programs have the same areas of focus.
Before jumping into the selection process, figure out the accounting software type that's best suited for your business. Such as:
General Accounting Software
General accounting software is the most basic option out there and is intended to cover the needs of most standard businesses. Some of these needs include:
- Income and expense tracking, including accounts receivable and payable
- Basic reporting options, including financial statements and analytical tools
- Cash management, including bank account balances, bank reconciliation, cash flows, credit cards, and currencies
- Inventory management and pricing tracking
- Transaction management
- Error-checkers to ensure numbers are balanced and in line
For anyone who wants a basic accounting program to get the job done, general accounting software is usually the right place to start. However, these programs are often regarded as one-size-fits-all solutions. When making a selection, carefully consider the strengths of each individual program, such as budgeting and forecasting versus invoicing and billing, to ensure it meets your needs.
General accounting software is generally available in two forms: cloud-based and on-premise.
Online/Cloud-Based Accounting Software
Online accounting software requires purchasing a subscription for access to the software; at no point do you outright own the tool.
But, among cloud accounting software's many benefits, flexibility stands out the most:
- Employees can log in on myriad devices, from any location
- Storage can expand and new licenses can be added as needed, as the business grows
- New features can be rolled out in real-time, as the vendor adds them
While upfront investment is much lower than on-premise software, the total cost over time will be more expensive, as you're paying for the tool vendor's updates and maintenance as well.
Benefits:
- Log in from anywhere.
- Share data online, securely.
- Access from any device.
- Real-time updates to the software.
Best Suited For:
- Most businesses — this is the most popular type of accounting software available
Best Online Accounting Software Available
My team and I have reviewed the online accounting tools available, and landed on these as the best on the market:
On-Premise Accounting Software
On-premise accounting software refers to accounting tools that are purchased upfront, installed on local servers, and maintained by the customer.
This type of software is less common nowadays, as most companies prefer a cloud-based software service. However, if you're restricted by data regulations or require extensive customization, this is a good option.
Benefits:
- One-and-done purchase.
- Full control over data.
- Extensive customizability.
Best Suited For:
- Large companies with dedicated servers, or companies operating in highly-regulated industries (such as healthcare)
Examples:
- Quickbooks
- Odoo
- Xero
* all of these tools have an on-premise offering in addition to their more popular cloud-based offerings.
Billing and Invoicing Software
Billing and invoicing software automates the process of creating, sending, and tracking invoices for services rendered or products sold. It's considered a type of accounting software because it handles financial transactions, streamlines the accounts receivable process, and integrates with other financial systems to maintain accurate records.
A more specific product than most accounting software, this is a good tool for companies that don't need the full kit and caboodle (or just need extra billing support).
Benefits:
- Automates invoice generation and payment reminders.
- Reduces human errors in invoicing.
- Provides real-time tracking of invoice status and payments.
Best Suited For:
- Small businesses who only need specific functionality, or e-commerce companies that need additional help in this area.
Billing & Invoicing Software Options
We did the same thing for billing software. Check it out:
Accounting Software for Freelancers
Similar to general accounting software, but for individuals.
These programs are often more simplistic, and they usually aren't particularly good for growth or a more formalized business. Due to the simplicity involved, you can usually get away with using free accounting software.
If you decide to start hiring people under you and taking on new kinds of work, you'll eventually hit a ceiling and need to switch to a new program or upgrade to a paid plan.
Nonprofit Accounting Software
The nonprofit and government accounting space can be extremely particular, at least from the perspective of accounting processes.
In general, nonprofit organizations (NPOs) use a process called fund accounting, which is quite different from simply maintaining a general ledger or tracking cash in an account. As such, programs specifically targeting nonprofits are the best choice.
The learning curve for accounting processes for nonprofits can be a lot steeper than a private company, meaning it's best if someone on your team has training or an outside consultant is brought in.
Best Nonprofit Accounting Software
You guessed it — we’ve covered this too. Here are our frontrunners:
Enterprise Accounting Software
Enterprise accounting software is a comprehensive solution designed to manage a large organization's entire financial operations. It integrates various business processes, such as accounting, finance, procurement, project management, and human resources, into a single system.
Benefits:
- Centralizes data from multiple departments.
- Tailors features to specific business needs.
- Can handle a large volume of transactions
- Provides in-depth financial analysis and reporting.
Best Suited For:
- You guessed it — large enterprises. Whether operating in one country or across the globe, most businesses using this type of software have multiple locations and/or business units.
Examples:
- Tally
- SAP
- Oracle Netsuite
Invoicing Software
Invoicing software is intended to fill a singular role: generating, sending, and collecting money from invoices.
If a larger accounting program with comprehensive invoicing functionality exceeds your budget or business needs, specialized invoicing software can be a plus.
On the other hand, for those with low to moderate invoicing needs, such as tracking online payments and purchase orders, investing in a standalone program versus what basic accounting features can do is likely overkill.
Best Invoicing Software
Okay, last one — here are your best options for invoicing software:
Accounting Software Benefits
For any company with growth on the horizon or that simply wants to make sure financial records are complete, accurate, and organized, the best accounting software is a must-have. The benefits are numerous. Through the use of accounting software, you can:
- Manage accounts payable, accounts receivable, cash, and inventory tracking based on industry needs
- Generate financial statements for both financial reporting and business analysis
- Prevent errors with reconciliation
- Address unique business needs, such as fund accounting for NGOs
- Save time through automation, such as by generating invoices or organizing payroll
- Grow business activities quickly and easily with the option for cloud-based platforms
In addition, specialized software products can focus on key niche needs that businesses may have, such as robust payroll processing and invoice management, without including holistic accounting solutions and the associated price tag increase — a win for any business.
Key Features of Accounting Software
Not all types of accounting software solutions are made equal, but most offer the same basic functions — to a point.
Here's everything you're likely to see:
- Records & Reports Management
- Financial Analysis
- Automated Tax Filing
- Billing & Invoicing
- Payroll Management
Records & Reports Management
Records and reports management can be an important part of bookkeeping operations and is fairly standard among accounting software.
Any good software option will ensure clean, accurate record-keeping, and the ability to generate standard business reports, such as invoice statements and balance sheets. However, the extent to which reporting can be customized can vary from software to software.
Financial Analysis & Decision Making
The ability to use financial data to guide decision-making is key for running a good business. However, the extent to which analytics are available can vary.
Some programs make it easy to build out custom forecasting dashboards, track specific pain points, and build on-demand report templates, while others don't. If this is a priority, look into the most interesting tools' offerings before you buy.
Automated Tax Filing
Business taxes, particularly as a business grows and expands, can be anything but easy. As such, accounting software that can help you is a big benefit.
That said, this isn't necessarily a common feature of basic products, especially for businesses with complicated tax requirements.
Whilst many accounting systems cover tax management, such as estimating tax liabilities or calculating tax on things such as payroll, goods sold, and sales tax, they don't always include tax filing.
If you want an accounting program designed to minimize time commitments and walk you through A-Z at tax time, make sure this is a specific part of your search.
Electronic Billing & Invoicing
Billing and invoicing are usually key components of operations; therefore accounting software that can handle them reigns supreme.
Even companies that only have a few regular invoices to send may still be able to save time and energy with tools that can help organize inbound and outbound cash flows, as well as expected financial receipts and commitments.
Most offer general tools in this area - at minimum generating invoices to prepare to be sent - but not all can do the real work, such as distributing those invoices and/or tracking collections.
Payroll Management
Payroll management software can be a desired feature for many companies because automatically calculating payroll taxes and withholdings and generating paystubs can mean the elimination of a lot of manual work.
If you've ever dreamed of a day where you didn't hand-sign checks on Friday mornings, this can be a great opportunity for streamlining a business.
While this is a common feature for most accounting programs, many only offer basic support, such as domestic paychecks and time tracking.
If you have employees in other countries or currencies, for example, you may need software specifically designed to handle more intricate payroll and tax requirements.
How to Choose Accounting Software
Whether you own a bakery or a rapidly growing e-commerce start-up, there's a perfect accounting solution out there to streamline your business needs. Figuring out which one is simple:
- Identify your company's primary objectives.
- Determine what core functionality you require to meet those objectives.
- Determine if specialized services or more general software is needed.
- Evaluate the options on the market.
- Make your decision.
- Figure out the best ways to use the software.
Factors to Consider
If you're not sure where to start, consider what you need across the following dimensions:
- Business Size and Needs: Match software features to your business scale and specific accounting requirements.
- Scalability: Ensure the software can grow with your business.
- Integration: Check compatibility with existing systems (CRM, ERP, etc.).
- User-Friendliness: Assess ease of use and learning curve.
- Cost: Evaluate total cost, including subscriptions, licenses, and maintenance.
- Security: Ensure data protection and compliance with regulations.
- Support and Training: Look for available customer support and training resources.
- Customizability: Consider if the software can be tailored to your business processes.
- Cloud vs. On-premise: Decide based on your need for accessibility and IT infrastructure.
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