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.
What Is Considered Accounting Software?
Accounting software refers to any kind of software 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 does consider Sheets or Excel to be accounting software… run the other way.
Common Features of Accounting Software
Not all types of accounting software solutions are made equal, but most offer the same basic functions — to a point.
I've put together a list of everything you need to know about the available accounting tools, including both general and specific options, and how they may vary from program to program.
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, for example, can vary from software to software.
Businesses that operate in a unique space, such as nonprofit organizations, may have more expansive records and reporting needs a basic core accounting program can't meet.
Financial Analysis & Decision Making
While running a successful business, the ability to use financial data to guide decision-making can be key. However, robust financial analysis tools, such as budgeting and forecasting, aren't always available in the most basic accounting software options.
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 for your company, be sure to consider the available options before making a choice.
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.
If your needs are more complex in this area, it may be worthwhile specifically looking into billing software.
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.
Different Types of Accounting Software
Accounting software - generally - covers many of the core key functions of managing a ledger and tracking revenue and expenses, but not all programs have the same areas of focus.
Before jumping into the selection process, double-check that your business doesn't require something a little more specific, such as accounting systems specialized for nonprofits or government agencies. Let's review some of the key kinds of accounting software.
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: standalone and cloud-based.
Standalone Accounting Software
Standalone accounting software is a single-time purchase that provides a full suite of accounting tools at your fingertips without an annual subscription or web-based hosting. Each purchase usually comes with several licenses, meaning you can install the program across multiple devices.
From a maintenance perspective, standalone software for bookkeeping is fast and easy. There's no monthly payment or the potential for increased charges — a boon for businesses with tight budgets. However, this can mean a lack of flexibility, and updates can be more challenging.
Online/Cloud-Based Accounting Software
Unlike standalone accounting software, online accounting software, such as Intuit QuickBooks Online or FreshBooks, requires purchasing a subscription to a cloud-based.
Flexibility is the main advantage of this model, allowing employees to log in on desktops and mobile apps alike. Storage can expand naturally as the business grows and new licenses can be added on an as-needed basis.
Updates often roll out in real time, meaning accounting features and add-ons are always cutting-edge.
However, this model can be more expensive, with the potential for monthly payment increases at almost any time. Further, cloud storage can be an added cost, particularly as more licenses are added.
Accounting Software for Freelancers
For freelancers, such as independent contractors who manage their own books, accounting software can be a great way to track income and expenses, create invoices, and track things such as estimated tax payments.
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 may eventually hit a ceiling and need to switch to a new program.
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.
Enterprise Resource Planning (ERP) Software
Enterprise Resource Planning, or ERP, software, is a product that attempts to tackle all aspects of company project management, from HR tools and accounting processes to customer relationship management (CRM).
With all resources under one roof, it's easy to cross-reference data, train employees across multiple functions, and keep information consolidated.
For larger companies, ERP software can be the best possible choice, with all-in-one capabilities that unite business workflows seamlessly. However, these tools are typically best for soon-to-be or currently large companies.
Smaller companies that don't need suites of tools designed to manage lots of employees, organize data from thousands of customers, or tackle challenges, such as international operations, likely won't need this range. For these kinds of companies, basic accounting systems will suffice.
Payroll Software
As the name implies, payroll software has one key purpose: ensuring employees are paid properly and promptly. This means handling items such as time tracking, taxes, withholdings, and disbursements.
These software tools are best for companies where other financial requirements are simple and easily managed, but the existing accounting infrastructure in place doesn't have a robust payroll tool.
In many cases, a standalone payroll software product won't be necessary, and many accounting programs have this function built in. But for companies with more complex needs, such as workers across many countries and currencies, a specific tool for payroll may be necessary.
Invoicing Software
Similar to payroll 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.
Benefits of Accounting Software
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.
Which Accounting Software Is Right for You?
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 and let me know how it goes!
Ready to put your accounting software to work? Check out our article on double-entry accounting to make the most of your financial tools.
Need expert help selecting the right Accounting Software?
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