Glossary Hub / Accounting software: Understanding and choosing the best solution

Accounting software: Understanding and choosing the best solution

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Move aside manual bookkeeping — accounting software is here to bring ease and efficiency to business operations. In this article, we’ll break down what accounting software is, the benefits of using it, and how to choose the right solution for your business.

What is accounting software?

Accounting software is a digital system that manages day-to-day transactions, automates accounting tasks, and creates records and reports. Businesses can use it to handle payroll and invoicing and organize their financial information so they’re prepared for tax season.

Definition of "Accounting software" A tool that helps businesses record, manage, and analyze their financial transactions and processes, such as invoicing, payroll, and reporting.

Types of accounting software

Depending on the size and needs of your business, you may want a certain type of accounting software.

Basic accounting software

This software assists with the most essential financial needs and may be a good solution for small businesses. Basic accounting software usually will include expense and income tracking, reporting features, inventory, and transaction management, along with tools that check for errors to keep things running smoothly.

Advanced accounting software

Basic solutions probably won’t cut it for large enterprises. Advanced accounting software not only hosts accounting and financial features, but acts as a project manager as well. This software gives in-depth financial reporting and can manage a larger quantity of transactions.

Cloud-based accounting software

Cloud-based accounting software is hosted online, meaning users can access it from anywhere. This option offers a lot of flexibility and is great for remote companies or those with multiple office locations. 

A cloud-based solution often comes with enhanced security features, such as encryption and multi-factor authentication, safeguarding your important financial data. It also saves information automatically as changes are made.

Custom accounting software

Some businesses may want a customized solution to fit their unique needs. This is typically a more expensive option. Unlike most accounting software, when building a custom solution businesses can pick and choose what features they want as a part of their solution.

Benefits of using accounting software

Say goodbye to paper and print costs and hello to ease of use and cost efficiency. Let’s dive into some of the benefits of accounting software.

Streamlining financial processes

Accounting software delivers information with speed, accuracy, and efficiency. There’s no need to spend time printing or money on ink — simply hit send once you review your financial statements.

Enhancing accuracy in transactions

People make mistakes from time to time, even when it comes to important financial information. Accounting software automates processes and reduces the chance of human error, allowing your team to focus on strategic work rather than manual tasks.

Real-time financial monitoring

With an accounting software solution, businesses can easily view all their financial numbers in one place and see any updates in real time. This can help you plan ahead and better manage company expenses and monitor cash flow.

Key features to look for in accounting software

There are lots of accounting software options to choose from, so make sure to consider and decide on what is most important for your business needs.

Invoicing and billing

Accounting software automates many manual processes associated with invoicing and billing, which allows for quicker payments, better insights, and simplified processes.

Payroll management

Employee salaries, benefits, and other payroll aspects vary from employee to employee. Accounting software can automate payroll calculations such as net and gross pay, tax withholdings, and retirement and health benefits, so it doesn’t have to be done by hand.

Financial reporting

Accurate financial reports are integral to understanding business performance and ensuring compliance. The best solutions can generate real-time insights and reports customized to your company’s needs.

Expense tracking

Tracking and understanding business expenses is critical to managing your budget. Accounting software can automatically organize and track expenses, helping you see where your money is going so you can make smart financial decisions.

Integration with other systems

Businesses have many systems to manage different operations, such as a customer relationship management (CRM) platform. An accounting software solution that integrates with your other business applications links financial data across platforms, increasing efficiency and reducing the chance for errors.

Choosing the right accounting software for your business

Your business size and industry can impact which solution best fits your needs and goals.

Understand your business needs

Analyze your business goals and what features are most essential to achieving them. How much support does your company need? Which features are the most essential to your business goals? Consider your specific needs to keep operations running smoothly.

Compare different software options

With many options on the market, think about which features each solution offers, the scalability of the software, the ease of using and training team members on the software, and how well it will integrate with the systems you already have in place.

Consider your budget

A major factor in choosing the right software for your company will be the cost. While free or low-cost solutions may work for some businesses, others require more advanced features, which come at a higher price. The right solution for your business may be a more expensive one that can save you money down the road thanks to automation features that increase efficiency and become cost effective.

How accounting software enhances business growth

They say time is money, and a good accounting software solution can save your team both time and money. 

Simplifying tax preparation

Tax season is a stressful time for most businesses, but accounting software makes the tax process easier and more accurate by automating calculations, generating reports, and more. 

Improving cash flow management

Managing cash flow effectively is key to business operations and growth. Accounting software enables companies to monitor cash flow with real-time insights, helping businesses avoid financial pitfalls and make better decisions.

Enabling financial forecasting

Accurate financial forecasting is critical to effective future planning. Accounting software offers businesses the tools they need to use financial data to create forecasts and be better prepared for unexpected ups and downs in the market.

Cost of accounting software

The right accounting software is well worth the investment, but there are different considerations for different businesses. Depending on your company’s current financial health and how you want to allocate your budget, you’ll need to decide if a subscription-based service works best or if you’d prefer a one-time purchase solution.

There are also hidden costs to watch out for, including integration, startup fees, customer service, cancellation fees, and more. The basic price of an accounting software solution may change based on how many people need to use the platform, what features are enabled, or other reasons. 

Common mistakes to avoid when choosing accounting software

Look out for the following common mistakes when choosing an accounting solution.

Overcomplicating your needs

The most advanced accounting software has nearly everything you could need to manage company finances, but it may not be necessary for your business at the moment. Don’t overspend when a different solution may cover your company’s needs.

Ignoring scalability

At first glance, a solution may look like it’s perfect for your accounting needs, but if your business is quickly growing, will the software solution evolve with it? Consider how well the solution can adapt to growth and scale with your business before you purchase it.

Disregarding customer support

Reliable customer support is essential, especially when implementing new software. Research support resources, speak to experts, and read reviews to make an informed decision. 

The future of accounting software

Like other types of software, accounting solutions are evolving quickly. In particular, AI and machine learning integrations are enabling businesses to automate repetitive tasks and use predictive analytics for financial planning. 

AI and machine learning are technological game-changers, and they’re revolutionizing accounting software with task automation, predictive insights, and other tools to streamline processes and improve business operations. 

The best software allows teams to focus on business relationships rather than tedious manual processes, such as data entry and bank reconciliation. It also generates more data and facilitates faster processing, helping your business precisely plan for the future.

Security considerations for accounting software

Cybersecurity is always a top priority for any business, and it’s crucial that you proactively protect sensitive financial data.

Data encryption

Data encryption is vital for safeguarding sensitive financial information from unauthorized users.

Two-factor authentication

Two-factor authentication (2FA) adds an additional layer of security by requiring two forms of authentication — for example, via an email, a text message, or app verification.

Cloud vs. on-premise security

Cloud-based security gives your team constant, centralized access to your systems. On-premise security involves manual intervention when it comes to security testing. On-premise solutions offer customization options, but cloud-based solutions can offer greater scalability.

Accounting software implementation

Use these steps to integrate accounting software into your business processes.

Step-by-step guide to a smooth transition

Choose the right software: Decide which features are most essential to your business goals. Choose the solution that fits your company’s budget, can scale with you, and allows your teams more time to build customer relationships.

Migrate your data: Now that you’ve found your solution, transfer all the data needed to create reports, invoices, and any other accounting documents you want the system to help manage. 

Train your team: Your software provider should inform you of what to expect when implementing the solution. Look at any available resources, such as manuals, and create internal cheat sheets based on the information found to make it a smoother transition. Your team needs to be properly trained to maximize the benefits of your new software.

Monitor the transition: Once everyone has a good understanding of how to use the software, follow up and check-in with team members. Regular updates and ongoing maintenance and support are necessary to keep your software running smoothly.

Get an automation guide to help implement your software

Modern accounting solutions are specifically designed to meet the needs of modern businesses. With automation and other technological tools, accounting software can help minimize manual processes, reduce risk, increase efficiency, and more. 

To keep up with the rapid pace of change in today’s business world, your accounting team will need greater levels of automation and more agile technology that is purpose built for modern revenue recognition. Learn more about how to research, evaluate, and select the right revenue automation software for your company in Zuora’s Revenue Automation Software Buyer’s Guide.

FAQs

Is cloud-based accounting software safe?

Yes, cloud-based accounting software typically offers security features such as encryption and multi-factor authentication that make it safe for businesses to use.

Can accounting software replace a full-time accountant?

While it can handle many manual tasks, accounting software cannot replace the expertise and strategic insights of an experienced professional accountant.

How much does accounting software typically cost?

Pricing varies, and subscription-based accounting software solutions can range from $10 to $1500 per month, depending on the features or number of users. Enterprise accounting software will have a higher cost. 

What are the top trends in accounting software?

Some of the top trends in accounting software are AI and machine learning integrations, accounting automation of repetitive tasks, and predictive analytics.