How to choose accounting software for small businesses?

The question of whether your business should use accounting software is not even a question anymore. The real question that companies should ask themselves today is which accounting tool should they use? With so many businesses that provide accounting software, how do you select the right one for your organization?


That is precisely what this article is going to cover and help you make the best possible choice. You will find out some of the major factors to look out for, features that you need, usability aspects, questions you need to ask yourself and analyze from the perspective of your business, and some of the best accounting systems out there to choose from.

Importance of accounting software

The most fundamental aim of any accounting software provider is to help your business record and better manage the flow of money so that you can analyze your financial state. 


Accounting software benefits your organization by helping your finance team save time on manual data entry and reduce the chance of errors significantly. They also help you create reports, bill your customers, and keep track of account balances. Most free accounting programs on the market do this flawlessly.


When you decide to invest in a better and more robust business accounting software, then you also get access to advanced functionalities. This includes automation of certain tasks that an accountant would otherwise have to sit and do manually such as regular data transfers, sending out recurring invoices, and reconciliation through integrations with your inventory management system.

Factors to consider when choosing accounting software for your small business

Affordability

Probably one of the most crucial factors while choosing an accounting tool, can you afford it? Although you can find free accounting software, they’ll have limited features to use.


On the other hand, when you opt for paid solutions, many service providers might have a one-time payment for you to install and use on your local hardware while other services have created cloud-based accounting software, meaning they can be used by you on a SaaS model from month to month by paying a subscription fee. 


Companies often prefer using a SaaS accounting product as they have to pay a small monthly fee instead of a hefty payment. This also gives you the time to experiment and see whether the accounting software is suitable for your organization. If not, you can always stop the subscription and choose another platform.

Features

The accounting software you choose should encompass all the most basic accounting activities that your business deals with. Once you know that it meets all these requirements, then you can look for advanced features like automation. 


Another important facet depending on the type of business you run should be to look for integrations capabilities with HRM or inventory management systems. Also, if you decide to use a cloud-based service, also consider how secure is it? You need to ensure that it follows all industry protocols since you’ll be dealing with sensitive business information that you don’t want to lose to hackers.

User-friendliness

How easy it is to use the accounting system should also be considered. You want to make the job for your finance team easy, not difficult. So definitely consult with them and then make a decision regarding the software, since they are the ones who are going to use it. 


Another part of user-friendliness is the aspect of customer support. What kind of service does the company provide for using their product? Do they have a customer rep who you can contact whenever you face an issue? All of these will add up to make a good accounting system for finance team and hence be a part of making the decision when you choose an accounting program.

What are features of accounting software?

Easy to use dashboard

This might not feel like a priority, but as soon as you start using the software, you will realize that the easier to use a product is, the more efficient it’ll make the entire process. The software should be easy to navigate and all the features should be arranged in a way that anyone viewing the dashboard can access them easily.

Quick invoicing & billing

Invoicing and billing your customers is a tedious task for finance teams. An accounting system that can easily create and send invoices helps to receive quicker payments. More advanced billing software also comes with the ability to send periodic payment reminders to your clients. So instead of you constantly sending follow-ups emails, the software takes care of this.

Core features

The features to never compromise are all the necessities in accounting that include being able to record business transactions and categorize them as revenue, expenses, assets, liabilities, equity, and any other subcategories you might have. To record all of these the software should have common standards of data entry such as the company ledger, AP, AR, chart of accounts, and more.

Financial reporting

There are many types of financial reports that can be created to check the financial health of a business. The accounting tool you choose must have the option to help you generate financial reports like balance sheets, P&L statements, and cash flow statements. Advanced tools also provide you with AI capabilities that show trends and patterns through your accounts to help you identify how to better utilize your money.

Integrations

When one business system can work in sync with another, it leads to greater efficiency for the organization. For example, accounting software with payroll is an integration that will make it easier for the finance team to disburse salaries and at the same time record them in accounting statements. Another useful integration would be with an inventory management system where the accounting software will get access to inventory data to match with purchase orders and automate the reconciliation process.

Automated reconciliation

For businesses that have a daily inflow and outflow of cash, reconciliation becomes a very important task to make sure that all transactions are verified and legitimate. Matching bank statements with your company ledger to catch any discrepancies is crucial to ensure that you’re not paying more than what you purchase. This process can be lengthy and prone to human error. Modern accounting software has smart tech that can automate the reconciliation process and spot errors much faster than a human.

What usability factors should you look for in accounting software?

Apart from the features listed above, below are some usability factors you should keep in mind when choosing an accounting software:

Tax planning

A great feature to have within your accounting tool is the income tax feature which helps in automatically calculating the tax amount based on your statements.

Multi user accessibility

How many people can use the software? How many can use them at the same time? Depending on the size of your business and the number of accountants you have, you’ll want to make sure that each one of them can work on it simultaneously.

Multiple-business support

If you are an entrepreneur running more than one business, having the ability to create separate accounts within the software for your businesses with the same user account would be a great bonus. This way you won’t have to purchase separate accounts on the accounting software.

Cloud-based software and mobile access

It would be very beneficial if the system you choose is cloud-based accounting software and also has a mobile application. If an employee wants to claim an expense reimbursement, they could directly attach the image of the receipt through the app, tag it to the relevant expense, and submit the claim. This would remove the hassle of submitting expense reports at the end of the month and make life simpler for the employees and the finance team.

Simplify and automate your reconciliation process

8 things to look for in accounting software for your small business

1
Can this software help me remain compliant?

Most accounting software providers make sure that they incorporate legal rules for utmost compliance of financial statements so you won’t have to worry about separately calculating taxes.

2
What are the software’s integration capabilities?

You should take a look at all the available integrations that you can carry out. If you can’t find the integrations you were looking for, make sure to reach out to the service provider and ask them whether they are open to executing custom integrations. 


3
Is there a reliable customer support system?

When opting for accounting software, make sure that the service has a good customer support system to help you navigate, understand the platform, and successfully onboard your employees to use it. Since you’re paying for such a service, there should be a customer rep or associate who helps you with all these aspects.

4
What is overall ROI potential?

How much money are you investing to use business tracking software? How much easier is the process for the finance team to complete their work? Is it helping you make quicker financial decisions? When you ask yourself and answer all these questions, you will get an answer to what the return on investment is to use the software.

5
How will the accounting software solution improve my existing practices?

The solution should make it easier for your finance team to carry out the necessary tasks. Faster invoice billing, accurate reconciliations, and comprehensive financial reports for increased efficiency. If tech software doesn’t help you do that and instead makes things more complicated, please don’t use it.

6
What works and doesn’t work about my current accounting process?

If it ain’t broke, don’t fix it. Understand your current accounting system and see whether there are any aspects of it that seem inefficient. If there are, then try to find a solution that solves that particular first before looking for anything else. The problem you have is the basis for the accounting software you select.

7
What does our ideal environment look like?

After you have finished identifying what the problems are with your current accounting process, you must then understand what the ideal solution or working environment should be when it comes to handling company accounts. Some considerations could include possible integrations that you would like your accounting system to have, maybe better financial reporting features, a more cohesive accounting experience, and so on.

8
Do we want to keep our system on-premise or move to the cloud?

Using an accounting tool on your local hardware might seem like a better option, but if you think about it, cloud-based accounting software has come a long way. Using a cloud-based service, you’ll save on maintenance costs, have access to it from any device using the internet without complex hardware requirements, and they are secure too as they follow strict security protocols.

5 best accounting software for small business

QuickBooks

QuickBooks is the best buddy of many small businesses. There is a reason why this accounting software is trusted by more than 3 million users worldwide. Because it's easy to use and much easier to maintain, it's an excellent collaboration tool for financial managers and accountants.


One of the key advantages is its capacity to integrate with payment gateways. It keeps track of transactions as they happen and works with some of the biggest systems, like Stripe and PayPal. Instead of waiting for a lag in a bank update, business transactions are put directly into QuickBooks.

QuickBooks

FreshBooks

The simple and intuitive dashboard makes it easy for small businesses to create, send, and track invoices along with all the basic accounting functions. It is a great option for companies handling tons of transactions every day and comes equipped with automatic tax calculations.


Charts that summarise spending, income streams, profit and loss, and invoices are displayed on the main screen. Additionally, FreshBooks includes a mobile app for iOS and Android that allows users to access the software's fundamental functionality and track time and miles.

FreshBooks

Xero

Xero is a very robust platform and is arguably one of the most well-known accounting automation alternatives. The impact of automation on accounting provided by Xero is unrivaled. Accountants and financial administrators can choose from a variety of operational solutions. It provides a single location where you can store and process all of your accounting data while simultaneously functioning as a cloud storage solution.


There are numerous alternatives for reporting and data recovery. Xero creates accounting reports for you, ranging from straightforward conclusions to intricate forecasts. The simultaneous occurrence of everything promotes more efficient teamwork.


Related page: Eliminate manual data entry challenges with automation

Xero

Deskera

Deskera provides a special, expandable solution for your company. It can meet the needs of small, medium, and large organizations alike because it is an ERP solution by nature. Users who are trying to streamline a few corporate procedures, as well as technically savvy people, can both use its interface.


One of its capabilities is the centralization of numerous administrative procedures linked to cost savings and more efficient operations. Some of the capabilities it provides in addition to accounting operations include stock management, quality control, sales forecasting, and delivery management.

deskera

Sage

Sage has smart tech features that allow businesses to create comprehensive reports with deep insights. The software also uses this data to help create budget forecasts and plan the financial requirements.


You may access your dashboard after logging into your account and registering for Sage Accounting. The summary tab, which offers a snapshot of important financial data including sales, expenses, and cash flow, will be your primary dashboard view. You can access every account using the navigation bar at the top of your dashboard.

sage

Simplify your accounting with Volopay

Volopay is not an accounting software tools, but rather an expense management solution that integrates with your accounting tools like Xero or QuickBooks. Our solution makes it a breeze for businesses to manage all their accounts payable and simply sync it to your ledger for easier accounting. You can track, assign, spend, and control company budgets through our Volopay, which then can automatically be synced with your accounting system.

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