How To Choose the Right Accounting Software for Your Business
It Isn't Just You: Choosing the right accounting software is challenging and requires thorough research.
Make Sure You're Focused on YOU: The best tool for someone else might suck for you. Read into testimonials after you know what you need.
Your Team Matters: The best accounting software works WITH your team, not against them. Involve them in the decision.
Consider Your Future: Switching software is no fun. Make sure your chosen tool can expand with your business.
Knowing how to choose the right accounting software for your business is tricky, and requires research. With thousands of tools available online, including top accounting software solutions like Quickbooks, Freshbooks, Zoho Books, and Xero, it can be overwhelming to assess and select one that fits your needs.
In this guide, I walk through the main considerations you need to take a stance on, in order to choose the right accounting system.
1. Feature Set
A feature set that covers all your accounting needs is a primary requirement — I’ve seen companies choose accounting software just because everyone else is using it. The result? They end up spending extra on add-ons or other tools to supplement the lack of functionality.
Feature sets greatly vary among accounting tools (and subscription tiers — be sure you’re looking at the correct list of features for your plan).
Here are some examples of features you should look for when purchasing accounting software:
- Core accounting features: Core accounting features make maintaining day-to-day financial records easier. Look for features like automated bank account feeds, accounts receivable and payable management, bank reconciliation, expense tracking, and invoicing.
- Financial reporting features: Most accounting software automatically prepares financial statements in real time. But you may also have reporting needs beyond financial statements, such as budgets, forecasts, and tax reporting.
- Forecasting: Accounting software already has most of the financial data needed to forecast your financial metrics, including income, expenses, and cash flow. Built-in forecasting makes it easy to view trends and stay on guard about potential financial challenges, like cash flow problems, that may come your way.
- Security features: Your accounting tool doesn’t just handle your data, it also processes and stores customer data. That’s why encryption, backup and recovery options, and role-based access control are non-negotiable.
- Audit trail: An audit trail is a chronological record of all activities in the accounting software. All transactions, edits, updates, and user activities (logins, data entries, and approvals) are logged in an audit trail. If an auditor finds an inconsistency and wants to know who recorded or modified a transaction, an audit trail will help you answer.
- Tax management: Tax preparation can be a pain when your entire workflow is manual. Top accounting software solutions help automate tax calculations, tax reports, and tax credit tracking. They also allow you to track deductible expenses, calculate tax on foreign currency transactions, and create depreciation schedules that you can use for tax deductions.
2. User-Friendliness
The best accounting software is one that your team knows how to use. User-friendly solutions generally have high adoption rates. Don’t take my word for it — according to a study, an average user interacts with only 40% of the features in software applications they’re required to use, leading to 60% of the fees paid for licensing and subscriptions generating little to no ROI.
An intuitive user interface minimizes the time your team spends on learning how to use the tool and perform day-to-day accounting tasks. Ease of use also reduces the probability of human error. This means you spend less on training and your employees are more likely to adopt and consistently use the software.
In addition to a gentle learning curve, prioritize solutions that offer a mobile app. Being able to access the accounting software from your phone lets you run the accounting process even when you’re not at your desk. This is especially important if you travel for work — you can report expenses, upload invoices, and modify transactions on the move.
Testing User-Friendliness
The best way to test software before locking into a plan? Ask your employees for help.
Once you’ve settled on an accounting solution based on other criteria, sign up for a demo and request a free trial. Ask your employees to use the software and seek feedback at the end of the trial to see if it’s a solution your employees like and don’t find overwhelming.
3. Cloud-Based or On-Site
Most of the popular accounting software solutions available today are cloud-based. Choosing cloud-based accounting software is a no-brainer for most companies — they allow you to access data remotely, store data in a secure environment, integrate with other cloud-based solutions, and automatically sync data across locations.
But cloud-based solutions are sometimes not the best option. Here are some cases where an on-site solution (or desktop software) could be a smarter choice:
- You need full control over data: If you prefer to retain full control of your financial data or have stringent security requirements or custom security protocols that are easier to manage on-site, an offline solution is your only choice.
- Poor internet access or high data transfer costs: On-site software is ideal if you have poor internet access or a slow internet connection, although internet access is hardly a problem for most companies. On the other hand, if you also have operations in another country where internet data costs are significantly higher than in your home country, you might consider an on-site solution.
- Compliance: Laws in some countries require you to store financial data within the country. Also, some industry-specific regulations may require you to handle financial data in a certain way. In such cases, on-site solutions ensure you can stay compliant.
- Compatibility with existing systems: If your tech stack is largely composed of legacy systems that integrate more easily with an on-site solution, that’s what you should go with. Moving to a cloud-based solution could be a time-consuming and expensive endeavor, and it’s also unfruitful if you’re unable to integrate it with current legacy systems. Speaking of integrations…
4. Integrations
Integrations are the foundation of modern automated workflows. They enable data to move seamlessly between systems to facilitate automation — in accounting, this means your accounting software can pull data from your ecommerce store, CRM, and ERP to auto-generate invoices or update inventory after each sale.
Cloud-based solutions also integrate with payment gateways. This allows you to offer your customers multiple payment options, including debit and credit cards and bank transfers. Once the customer pays via the payment gateway, the accounting software automatically marks the invoice as paid and updates the cash balance in your books.
Integrating your accounting software with modern tools can be a game-changer. Lately, I’ve seen more business accounting software solutions offer integrations for solutions that use cutting-edge tech. Take intelligent document processing (IDP) for example — IDP software converts a picture of your invoice into computer-readable text. Your accounting software can pull information from IDP software and record expenses without involving the bookkeeper.
5. Budget
How much are you willing to invest in accounting software? To come up with a budget, consider your needs, the benefits you expect from the accounting software, and the complexity of transactions. If budget is not a constraint, focus on value for money.
When thinking about the price, consider the total cost of using the software. Factor in the upfront cost (purchase price and the cost of setup), monthly or annual fees for add-ons, the cost of updates (most common with on-site systems), and the cost of training your team to use the software.
Training costs are greater than they appear; in addition to any fees you may have to pay the vendor, you need to account for the opportunity cost associated with your staff spending their time on training, rather than operations. Be sure to factor that into your total cost.
6. Scalability
Changing accounting software is tedious and expensive. Make sure you choose a scalable solution so you’re not compelled to switch your accounting application over time to support a greater volume of, or more complex, transactions.
Here are some parameters that can help you test an application’s scalability:
- Modularity and integrations: Software that integrates with key systems is more scalable because the marginal effort required for each growing transaction is lower, thanks to its ability to automatically move information and execute actions based on triggers. Similarly, applications that allow adding modules like payroll, inventory management, and advanced reporting are a great way to keep costs under control — startups and small business owners can sign up for basic functionality while retaining the option to add capabilities as business needs evolve.
- User licenses and role management: Your team size will likely grow with your business. Make sure the accounting software you choose gives you the option to add more users and check the number of users you can add under your current plan. Some applications may charge more per user for bigger teams, so consider this when budgeting for accounting software. Also, look for role and permission management options to accommodate a growing team with varying responsibilities.
- Performance implications: Evaluate the application’s ability to handle large volumes of transactions without performance degradation. Consider testing the software’s response times under heavy usage conditions during the trial period to see how well it performs. If you experience lags or slow processing, the application could end up becoming a bottleneck in an otherwise efficient accounting workflow.
7. Support
How fast does help come when you need it? You can’t hit pause on business when software malfunctions, so a reliable customer support team must be available when you need help.
Before you sign up, verify the reliability of the support team. Look for reviews on independent websites like Software Select and read testimonials on the accounting software provider’s website (taken with a grain of salt, of course).
Take a quick tour of the provider’s support resources, such as FAQs, video tutorials, and community forums. Also, go through the service level agreements (SLAs) and look for response times and support hours.
The Best Accounting Software We’ve Found
Our team of software analysts have looked through all modern accounting software options available, and deduced that these are the best options on the market:
Onto the RFP
Use the criteria in this guide as a compass when navigating your options — make sure you choose a solution only after completing all due diligence. If you haven’t found the right option through your own research, you can also use the parameters in this guide to make your case when preparing an RFP for accounting software.
Looking for more hands-on tips on accounting and finance? Subscribe to our free newsletter and receive expert advice, guides, and weekly insights from finance experts shaping the tech industry.
