Accounting Software – Make the Smart Choice For Your Business

Accounting programs are both vital and easily accessible for most businesses. This is because accounting software provides your computer with the ability to handle basic book keeping tasks such as invoicing, payroll and cash flow monitoring. Moreover, many pieces of accounting software are available online in basic or demo forms for businesses to utilize for free!

However, free accounting programs will primarily only be useful for small businesses. Larger corporations that handle complex business transactions on a daily basis will need accounting software with more functionality, which often means a slightly higher price tag. This should not be a cause to panic, because plenty of more complex pieces of software exist that are capable of performing fully integrated automation and organization management features.

So, what type of accounting software will best benefit your business? The types and uses of various programs are:

1) Free Software: This type of software often provides basic features with limited functionality. Small businesses will benefit from invoice management, bill pay, cash receipts, account reconciliation, and budgeting features contained in these types of accounting software. Generally, only one employee at a time will be able to manipulate data in these free programs, and these programs are often only able to process cash based income flows. Support for these free programs is limited, if available at all, and some of these free programs are merely watered down versions of more expensive, premium accounting programs.

2) Micro Business Software: This type of software usually sells for under $100 and includes the benefits of basic accounting software, with additional features and technical support. Generally, this type of accounting program can handle inventory management, CRM functions, project tracking and development, and more. This type of software is great for transportation companies or real estate companies that consistently deal with defined data and customer sets.

3) Small Business Software: Software for this type of business can range anywhere from hundreds to thousands of dollars, depending on the type and functionality of the program. Often, this type of accounting software allows multiple employees to utilize the software simultaneously while provided added features and great technical support. This level of accounting software can often be customized for a specific type of business, and is capable of handling large amounts of data such as inventory flows from a warehouse or storage facility.

4) Mid-Market Software: This type of software can range from thousands to half a million dollars. This software type provides extremely flexible levels of functionality, and software providers will often be willing and able to tailor the software to a specific type of business.

5) Large Business: Generally, mid-market software exceeding half a million dollars can be upgraded to support multinational corporations. Technical support is generally all inclusive and an ongoing relationship exists between the software provider and the multinational company.

While there are numerous options available and multiple factors to consider when choosing the appropriate accounting software for your business, keep in mind that you want to balance the most cost effective option with the potential to expand in the future. In other words, do not simply get a free program just because that is all your business may need at the moment, but consider that your company may need more functionality within a few months. In other words, purchase the most affordable software that meets your needs, but leave room to expand in the future.

Accounting Software Can Be Sophisticated Or Simple But Rarely Both

Accounting software is a system of recording financial transactions on a computer across a full range of accounting options almost invariably dependent upon the size of business being catered for. Financial software can vary from a several million pound solution for major public companies to simple managed lists of income and expenses.

The requirements from accounts software are diverse with the most complex and comprehensive financial accounting packages incorporating financial reporting information and managed by teams of qualified accountants supported by accounts clerks, bookkeepers and substantial input from automated data sources. At the other end of the scale a self employed sole trader might use accounting software themselves and produce a set of financial accounts for the year in an afternoon.

Different accounting standards are required from the software packages dependent upon the fitness for purpose and client needs. Double entry bookkeeping automated through a database system and probably arranged in financial modules would normally be the choice of the majority of public companies. Single entry bookkeeping would not be an acceptable accounting solution for a limited company due to audit requirements and statutory obligations.

Single entry bookkeeping does however have its place in the market place for the smaller less complex businesses who maintain financial control through a close intimate knowledge of every financial transaction. The main objective of a sole trader is more likely to be the production of the tax accounts and complete the periodic and annual tax return forms.

The most sophisticated level of financial software in the largest companies mirrors the accounting functions in those organisations with various modules for accounts receivable, accounts payable, stock control, general ledger and fixed assets. These accounting modules may also be integrated with other business functions such as production and dispatch functions and also divided into separate modules within the finance function.

In larger companies the sales daybook and data entry of sales turnover would often be the responsibility of one department while the accounts receivable function might be split with a specialist credit control function within that accounting module. A further division may also include sales administration and customer records. Similarly the accounts payable function might be split between the purchasing department, accounts purchase invoice department and a legal function for overdue payments.

Accounting software for smaller companies and organisations is commonly a system of data entry of prime transactions which include sales income, purchase expenses and cash and bank transactions. The entry of these prime documents being to a database which automates the double entry bookkeeping principles and produces both accounts receivable, accounts payable and general ledger databases.

Some accounting knowledge is usually required to operate a database accounting software system and that financial knowledge is usually available within the company as most companies that use database accounting software also employ a bookkeeper or accounts clerks to input data and in slightly larger small companies also qualified accountants to manage the accounting function.

The need for accounting knowledge in a database system is partially to understand the data entry principles and the relevancy of the rules that need to be followed but essentially understanding of accounting principles is required to understand what is happening ton the information after input. And most important, a qualified accountant has the financial knowledge, training and experience to know what the system should be producing and how to query the database to retrieve that information.

In addition to inputting the prime income and expenditure details the most benefit of a database system is the level of control the information it contains can provide the company management and financial directorship. The accounting function also has the security of producing trial balances, periodic profit and loss accounts, balance sheets and other financial and statements for tax and control purposes.

Small business accounting packages requiring little or no accounting knowledge are available.

Small limited companies must obtain accounting software based upon double entry bookkeeping principles as in addition to producing a profit and loss account and a trial balance to demonstrate accuracy and integrity of the financial records plus a balance sheet is required for reporting purposes. Accounting standards require the limited company to have a system of financial control and accounting software is an essential tool in achieving this.

Some accounting knowledge either from the management or outsourcing the bookkeeping services is usually required with even the simplest database accounting solutions even if this requires the understanding of what accounts receivable ledgers, accounts payable ledger and control accounts mean.

There are other possibilities and those businesses with a minimum of accounting knowledge can consider spreadsheet based accounting software. Spreadsheet accounts are less flexible and often do not have the range of options a database system has due to the lack of database queries available. These disadvantages of flexibility being compensated by the fact that all entries are visible, transparent and changes can be made more easily.

Financially at the sole trader and self employed end of the business spectrum then the requirements from accounting software may be completely different. Gone are the sophistication of control accounts, trial balances and many aspects of financial control. The most important aspect of self employed accounting is often to produce a set of accounts for tax purposes.

Self employed small business that do not require a balance sheet can use accounting software based upon single entry bookkeeping rather than double entry and with the reduced requirement for financial control then less financial queries to the system are required. In these respects the simpler an accounting solution the better and in this market an accounting solution written on spreadsheets that can produce the net taxable profit would meet the requirements.

Why Computer Accounting Software is Important to You

The universe of mainstream financial management has been completely transformed by the addition of computer accounting software. The greatest benefits of computer accounting software is that these applications bring about a much higher degree of accuracy and speed than was ever seen before. Combine this with the new capability to watch where a company stands and their production, all in real time, and computer accounting software is unsurpassed.

Even the most old school accountants have been very easily swayed towards these new methods once they’ve interacted with computer accounting softwares, never returning to the pen and paper methods that they’d been using all of their lives.

Usually, a computer accounting software system includes a few basic things:

– A sales ledger which automatically updates customer accounts

– Sales invoices which can be generated and printed form an on-screen display

– Automatic generation of payroll

– Easy, complete integration between your existing database and the accounting software

– Automatic updating of your general ledger

– Capture of bank receipts

– Automatic updating of the purchase ledger to reflect suppliers accounts

A majority of computer accounting softwares will also be enabled to send faxes and mail relevant documents (such as invoices and receipts), all natively within the software. These programs also allow you to instantly have access to edit management reports, adjusting information like:

– Analysis of payroll

– Budget analysis and variance analysis

– Reports of stock valuation

– Accounts for loss and trading, and balance sheets

– A display of overdue amounts on the accounts of your clients

Modern computer accounting software will also be easy to use and ergonomic, and include features like a clear and easy to understand input screen. These computer accounting software systems also have the benefit of enabling you to enter your transactions only once into the system, as opposed to multiple entries in multiple locations – which pen and paper systems often require.

The following is a list of how computer accounting software can benefit you.

– Automatic creation of documents: This includes payroll, purchase orders, printing statements, credit notes and invoices.

– Information in real time: You can see customer accounts and accounting records as they change and are updated.

– Quick retrieval of information: The accounting software will have fast access to all of the data that you need, and can share this data with users in multiple locations.

– Efficient management of information: It should be easy to generate reports with accounting software, so you can effectively manage and monitor your business.

Ultimately, you should switch to a computer accountings software as soon as possible if you find your business still operating with a pen and paper accounting system.