Accountancy Software

In-depth Guide to Accountancy Software

by ComparisonX Editorial Feb 02, 2019

Today almost every company uses some form of accountancy software.  In this article we take an in-depth look at the modern features of accountancy programs and the considerations you need to make when choosing a vendor.  We give an overview of the main solutions from Xero, Quickbooks, Oracle Netsuite, Zoho and Freshbooks.

What is accounting software?

In its simplest form, accounting programs are semi-automated systems that allow accountants and business owners to digitally complete the bookkeeping processes that would before have been completed by hand. An accounting program will be able to assist the user with functions such as accounts payable, accounts receivable, journal entries, payroll, and trial balances. In other words, an accounting program is a vital tool in the management of a company’s finances.

Why You Need Accounting Software

Now that you have learned a little bit more about accounting programs and what they are, you might be wondering why you might need one. As you might expect, there is a multitude of ways that accounting and finance software can make your life easier, such as:

Reduce Costs

Hiring an accountant to handle every aspect of your company’s financial management can be a expensive proposition. As such, you will be pleased to learn that you can save quite a bit of money by using an accounting program to automate many of the tasks that you would otherwise need to hire an accountant for. Additionally, utilizing an accounting program will allow you to reduce smaller administrative costs such as printing, distribution, and data storage.

Fewer Errors

When accounting work is done manually, it becomes likely that mistakes or miscalculations will occur. Yet, when you make use of an accounting program, every entry can be tracked and all calculations are completed automatically. This makes it much easier to find and remedy any errors that may occur during the bookkeeping process. This ensures that your company will have access to cleaner and more accurate financial reports.

Increased Productivity

When carried out by hand basic accounting processes such as payroll, accounts receivable, and accounts payable can take a long time to complete. Yet, when you use an accounting program, these procedures can be taken care of in a fraction of the time through automation. This, in turn, will allow you to spend more time on other aspects of your business that might require your expertise.

Automatic Tax Compliance

As a business owner, you most likely do not have time to keep up with the latest revisions to federal, state, or local tax laws. After all, you have a company to run. Luckily, your accounting program will be able to stay on top of tax regulations for you. By automatically monitoring for any changes to tax rates or laws, your software will ensure that your payroll and other process are always tax compliant.

Better Business Planning

When running a business, you must regularly make tough financial decisions. Should you buy that new delivery van? Should you hire that new employee? Without a clear picture of your current financial standing, it can be difficult or impossible to make the right decision. However, by utilizing the right accounting programs, you will have quick and easy access to the financial reports you need in order to make the tough calls.

Better Customer Relations

At first glance, it might seem that an accounting program would have little to do with your company’s relationship with its customers. However, an accounting program can help to ensure that you bill your client exactly how and when they want. So, if your customer wants to be billed twice a month and needs you to include a certain PO number on the invoice each time, your software can help to ensure that this all happens automatically. Your customer gets exactly what they want, and you get to enjoy a stronger business relationship.

Improved Security

When operating a business, the last thing you would ever want to see is your financial data falling into the wrong hands. Luckily, most modern accounting systems come with some cutting-edge security systems to ensure that this does not occur. In many cases, you can even back-up your data to a separate location or build a custom security solution to suit your needs. Put simply, when you use an accounting program, you won’t ever need to worry about the security of your financial information.

Types Of Accounting Software

There are lots of different accounting programs available on the market today, and they each specialize in certain specific tasks. Generally speaking, accounting programs can be broken down into four main categories:Accountancy software solutions

Payroll Systems

A number of prevalent accounting systems focus on assisting the user with payroll processing and management. These systems can usually track employee information and tax withholdings as well as automatically calculate federal, state, and local tax deductions. Most systems will allow the user to deposit the employee’s salary directly into their bank account without the need to cut a physical check. A good payroll management system will also allow you to extract detailed reports – so you can keep a close eye on your company’s payroll costs and obligations. Some of the biggest systems in this category are Xero and AccountEdge.

Expense and Time Management Systems

Employing an expense and time management accounting system will allow you to bill your clients in a more timely and efficient manner. For customers that are billed at an hourly rate, these systems can track how long you spent on their projects and have it added to their latest bill or invoice. Such a system is also quite useful internally as it enables you to keep an eye on how much time your employees are spending on their various tasks. For assistance with expense and time management, many business owners turn to Zoho Expense or FreshBooks.

Invoicing Systems

One of the best ways to ensure that you get paid on time for your work is to use a billing or invoicing program. These systems allow you to create formal invoices, send them to your customers, and then follow up with helpful reminders if they have not yet paid their bills. Your clients will appreciate your professional approach to billing and will be more likely to remit payment on time. Internally, you can use your invoicing system to track your financial activity and pull vital sales reports for shareholder meetings or presentations. When it comes to invoicing systems, Zoho Books and FreshBooks are some of the best options on the market today.

Enterprise Resource Planning Systems

For companies that sell a physical product, enterprise resource planning (ERP) systems can be a lifesaver. These programs allow you to plan the purchasing of new materials, manage your existing inventory, and even keep an eye on your distribution. On the financial side, most ERP programs will also allow the user to pull accounting and financing reports. Many companies choose to work with programs such as Odoo or Brightpearl for their enterprise resource planning needs.

The Key Benefits Of An Accounting Program

Though each type of accounting system is a little different than the last, they all offer many benefits to the user. Most systems offer at least a few of the following helpful features:

Expense Management

From payroll to manufacturing expenses and everything in between, most accounting programs will allow you to keep a very close eye on your company’s expenses. Through accurate categorization and regular reviewing of reports, you will be able to see which areas of the company are costing too much. This, in turn, will allow you to make any necessary adjustments moving forward.

Billing and Invoicing

No matter what type of business you are running, you won’t keep your doors open for very long if you don’t get paid. As such, many accounting systems offer help with billing and invoicing. Often you can even automate a great deal of the accounts receivable process. This allows you to focus your energies on other aspects of running your company.

Budgeting and Planning

They say that if you fail to plan, you plan to fail. This is one of the main reasons why so many accounting programs include budgeting and planning tools. These functions allow the user to pull historic reports, build detailed forecasts, and create realistic targets for the future. This helps to provide the company with a road-map of where it needs to go and how it can get there.

Inventory Management

Whether you are running a restaurant or an auto repair shop, you almost certainly need to keep track of your company’s inventory stocks. It is for this very reason that so many accounting systems include inventory management toolkits. Through the effective management of your inventory, you will be able to ensure that none of your products or parts are ever overstocked or understocked again.

Fixed Asset Management

If your company owns any fixed assets, such as buildings, vehicles, or expensive machinery, you will be pleased to note that many accounting systems can assist you with their management. A fixed asset management tool allows you to store past audits and appraisals, manage your resource allocation, and even calculate any depreciation on the asset. When it comes time to calculate your year-end taxes, this tool can truly become a lifesaver.

Day-To-Day Accounting

Though it is always nice to have a good selection of tools in your accounting system, the main benefit offered by these programs is simplified day-to-day accounting. Basic bookkeeping functionalities such as accounts payable, accounts receivable, general ledgers, and bank reconciliations are all tied together in one easy-to-use platform. Whether you are an experienced accountant or a relative newbie, working with a good accounting program will make the bookkeeping process much easier and more straightforward.

Considerations To Make Before Getting An Accounting Program

Since each accounting system specializes in different things, it is important to carefully consider your options before rushing into anything. In particular, you will want to consider the following criteria before making any commitments:

Simplicity

When trying to decide which accounting program is right for you, you should look closely at how intuitive or easy-to-use each option is. Try to find a solution that allows you to easily carry out the tasks that are central to the running of your business. If you need to find workarounds and bypasses to carry out your work, that particular system may not be the right one for you. Many systems offer free trial periods that will allow you to get a feel for the program before you commit – so be sure to take full advantage of these offers.

System Security

Since your new accounting program will be home to all of your company’s most sensitive data, it is vital that you consider the security of each system before making your final decision. You can check through each offering’s security credentials, look through reviews online, or even hire a computer security firm to give you their opinion how safe your data will be in each system. Though security checks can often be a bit tedious, it is worth it to keep your private information protected.

Reliability Of Support

No matter how sophisticated your new accounting system may be, you will eventually run into one of two issues that require the help of a dedicated support team. As such, you will want to do some research on the strength and reliability of your platform’s customer service representatives before making any commitments. In order to find out how good they are, you can check online for reviews or you can even give them a call yourself and test their knowledge out ahead of time.

Customization

In an ideal world, you would want to find finance software that does everything you need it to do straight out of the box. However, in reality, no system will be designed with your specific use-case in mind. You will need to consider the customization options of each program before making your final choice. Instead of searching for a non-existent perfect product, try to find one that you can bend and edit to suit your needs.

Mobile Usability

In the 21st century, less and less work is being done on desktop computers. Instead, entrepreneurs and business owners are opting to do their work on their phones and tablets. With this in mind, you should pay close attention to your accounting program’s mobile usability before you commit to it. Does it have an easy-to-use app? Are there functions that you cannot carry out from your phone? Try to find a system that offers a good user experience on both desktop and mobile. That way you can access your financial information wherever you may be.

Pricing

As you would keep a close eye on the costs of purchasing any other items for your business, you should consider the price of each accounting system. This does not mean that you should choose the cheapest option on the market. Instead, try to find a program that offers a good balance between quality and price. You don’t need to spend a fortune, but you shouldn’t cheap-out on your accounting system either.

Pitfalls To Avoid When Getting An Accounting System

If you are new to the scene, the world of accounting programs can be a little complicated. If you are not careful, you might end up purchasing a system that is completely wrong for your situation. When you are shopping for a new accounting program, you should be sure to avoid the following potential pitfalls:

Integration Issues

In most businesses, the accounting system isn’t the only software that is used by management and employees. When you are purchasing an accounting program you will need to make sure that it can integrate with the systems that are already in place . If you purchase software that will not integrate well, you might find yourself needing to manually enter data that could otherwise have been exported between two systems.

Lack Of Scalability

When you are searching for your company’s next accounting program, you should avoid trying to find a system that does the job for now. Instead, try to find software that has the ability to grow with you. Such systems usually offer a large number of customization options that you can utilize as your company expands. If you choose a program that doesn’t offer these options, you will likely find yourself trying to switch over to a new platform a few years down the line.

Too General

Generally speaking, most accounting platforms will fall into one of two categories. First, there are broad-based programs that are designed to be useful across a wide variety of industries. Alternatively, there are a number of accounting systems that have been developed with one specific industry in mind. If the latter exists for your industry, you should almost always choose it over a generalized program. This is because industry-specific software will have most of the features and tools that a company in your industry needs. No need to spend days jerry-rigging other systems to do what you need them to do.

Who are the main players in the accounting system market?

Now that you have learned a little bit more about the various types of accounting programs and how they can help your company you may be wondering what your best options are when it comes time to buy. Though there are plenty of smaller systems available, the biggest and most widely used systems are:

Xero

Xero logoXero is an award-winning online accounting system that has been specifically designed with small businesses and their accountants in mind. This system has been around since 2006 and can handle tasks such as accounts payable, accounts receivable, payroll management, bank reconciliations, expense tracking, tax management, and project accounting. Pricing for Xero begins at just $9.00 per month, and users can take advantage of their free trial to try it out before they make any commitments. Of course, just like any other piece of software on the market, Xero has its benefits and drawbacks:

Pros

  • Offers a clean and easy-to-use interface
  • Can be used on just about any computer or device that has an internet connection
  • Has the ability to update company finances and cash flow in real time
  • Integrates with more than 600 third-party software systems
  • Offers support for multiple different global currencies
  • Allows users to easily share files and reports with their accountant and business partners
  • Receives regular automatic updates
  • Offers excellent customer support services

Cons

  • Can sometimes be a little slow if your internet speeds aren’t hyper-fast or if you are processing a large volume of sales
  • Does not offer support for ETPs (exchange-traded products)
  • Does not offer a built-in debtor-chasing system. This means that you will need to manually remind your clients to pay their bills on time

Read our detailed review of Xero

Zoho Books

Zoho LogoZoho Books is an online accounting system that allows users to easily keep track of the money that flows in and out of their business. Used primarily by small and medium business, Zoho Books has the ability to perform basic accounting tasks such as accounts payable, accounts receivable, bank reconciliations, expense tracking, project accounting, and purchase order management. The program’s starting price is just $9.00 per month, but businesses can make use of the 14-day free trial if they would like to learn more about the service before they commit to it. To help you decide if Zoho Books is the right product for you, let’s take a look at some of its pros and cons:

Pros

  • Offers automated payment reminders – no need to follow up with your customers manually to remind them to pay their bills
  • Offers an easy-to-use and intuitive interface
  • Integrates with Stripe to make bank reconciliations a breeze
  • Can be integrated with other Zoho products, such as Zoho CRM
  • Can be used on a desktop or on a mobile device – with a dedicated app
  • Available in many languages – English, Spanish, French, German, Dutch, Italian, Portuguese, Chinese, Swedish, and Japanese
  • Comes with excellent customer support services
  • Offers international invoicing capabilities

Cons

  • Not suitable for all enterprise level businesses
  • Lack of built-in payroll system means that you may need to find another program to supplement it
  • Does not offer as many third-party integrations as some other accounting systems
  • Is not easy to customize if your needs aren’t covered out of the box

QuickBooks

Quickbooks_logoQuickBooks is the most used accounting program among small and medium businesses across the globe. Created by financial services giant Intuit, Quickbooks allows its users to carry out accounting tasks such as accounts receivable, accounts payable, bank reconciliations, customer invoicing, expense tracking, and payroll management. Businesses can try QuickBooks for free for up to 30 days. If they decide that they like it, pricing for the Simple Start plan begins at just $10 per month. Before you dive right into your free trial of QuickBooks, let’s take a brief look at some of the program’s pros and cons:

Pros

  • Offers an easy-to-use and intuitive interface that is perfect for beginners and professionals alike
  • Provides a number of excellent security options to keep financial data protected at all times
  • Knowledgeable and attentive customer service staff
  • Offers an auto-syncing feature that will allow a business and its accountant to review any financial changes in real-time
  • Offers easy access to financial reporting via desktop or mobile device. Reports can then be shared with business partners or accountants
  • Allows clients to pay their bills immediately through the system – no need to wait for the check to arrive in the mail

Cons

  • May not suitable for larger businesses
  • Does not offer very many industry-specific features. Focuses on a company’s more general accounting and bookkeeping needs
  • Somewhat limited inventory management system. Companies with large or complex inventories may need to find another system to supplement QuickBooks

Oracle NetSuite

Netsuite LogoWhile systems such as QuickBooks, Xero, and Zoho Books are aimed at small and medium businesses, Oracle NetSuite is more suited to assisting large corporations. NetSuite is a cloud-based program and it allows its users to manage fixed assets, manage tax liabilities, process payroll, track expenses, as well as handling accounts payable and accounts receivable. Businesses can request a free demonstration of the product at a time that suits them. Pricing for the program will depend on the user’s specific needs, and exact figures can be discussed during the demo. Before you decide if Oracle NetSuite is the right solution for your company, let’s take a look at some of its pros and cons:

Pros

  • Offers a detailed dashboard and real-time metrics that can help management to improve company performance
  • Provides built-in auditing techniques that help to ensure each user is accountable for their actions
  • Offers a built-in automated billing management tool that can help to speed up bill-settlement
  • Helps to streamline processes such as CRM, inventory management, and e-commerce
  • Offers built-in tools that are designed to reduce and eliminate business inefficiency and waste
  • Supports multiple languages and currencies
  • Automatically makes taxation updates to ensure ongoing compliance
  • Can combine subsidiaries or entities into one single account

Cons

  • Suitable for large corporations. Small and medium enterprises are likely to find the program to be too large and costly
  • Does not offer a free trial – only a free demonstration
  • Due to its size and complexity, the product can be a little tricky to use for beginners
  • When difficult issues arise, it can sometimes be difficult to get clear direction from customer support

FreshBooks

FreshWorks LogoFreshbooks is an easy-to-use cloud-based accounting program that is designed for self-employed individuals. It offers many of the same tools and features that one might find in QuickBooks or Xero, such as bank reconciliations, accounts receivable, billing and invoicing, and expense tracking. For anyone who would like to try FreshBooks out, there is both a free trial and a free version available. Premium versions of the software begin at $15.00 per month, and users can receive a 10% discount when they buy an annual plan. Before you decide if FreshBooks is the right accounting system for you, let’s take a look at some of its pros and cons:

Pros

  • Offers a very straightforward and easy-to-use interface – perfect for beginners and self-employed individuals
  • Allows the user to easily run reports showing cash flow, profit and loss, and earnings forecasts. Users can then quickly share this information with their accountant
  • Can be used on a desktop or on a mobile device using a dedicated app
  • Offers easy expense management tools such as the ability to take pictures of receipts
  • Allows users to set up automated billing schedules – ensuring that they get paid on time every time
  • Offers many different ways for clients to pay, such as credit card payments and bank deposits
  • Includes an invoice tracking system that shows the user when a client has received and opened their invoice
  • Regularly received updates with new features and tools

Cons

  • Lacks relatively basic features such as accounts payable
  • Does not offer tax management or planning assistance
  • May not be a scalable accounting solution if/when a business begins to grow and expand

 

Glossary Of Accounting System Terms

Before you can make any knowledgeable decisions on which accounting program is right for your company, you will need to better understand some of the key terms that are used to describe them. As such, you may wish to refer to the following glossary for guidance:

ASP: An acronym for “Application Service Provider” – the company that provides you with your accounting system

Audit: An independent examination of financial statements, usually resulting in a report

Balance Sheet: A statement of a company’s assets, liabilities, and ownership interest

Cash Flow Statement: A report which details changes in a company’s financial position

CRM: An acronym for “Customer Relationship Management” – a tool that is included in some accounting programs

Depreciation: The reduction in assessed value of a fixed asset over a period of time

ERP: An acronym for “Enterprise Resource Planning” – a type of accounting system

IAS: An acronym for “International Accounting Standards” – a global language for financial affairs

Integrated Systems: The systems have the ability to transfer data between each other without the need for manual entry or re-entry.

Inventory: The physical goods or materials that a company has on hand. Sometimes referred to as “stock”

KPI: An acronym for “Key Performance Indicators” – A method of measuring the success or failure of a business

Management Accounting: The reporting of financial information for the use of internal company management only

PP: An acronym for “Production Planning” – the process of scheduling production and ordering materials just-in-time

SCM: An acronym for “Supply Chain Management” – a tool provided by some accounting systems

SME: An acronym for “Small to Medium Enterprises”

Working Capital: The cash that a company has available for regular day-to-day expenditures

ComparisonX Editorial

ComparisonX articles are written by a panel of independent experts. If you would like to join an expert panel or submit an article for consideration, drop us a line at hello@comparisonx.com. We welcome users with a range of experience. Key for our readers is having people who actually use the products we are reviewing on a daily basis.

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