The accounting software you use matters more than you may think. The right software will help you track critical financial data in your business, stay on top of your taxes, and pay your employees on time.
Choosing the wrong software can set you back and limit your long-term growth. Whether you handle the bookkeeping yourself or employ someone to do it for you, you need a flexible solution to grow alongside your business.
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What is accounting software?
Accounting software is a program that helps business owners, bookkeepers and accountants manage a company’s financial transactions. The right software makes it easier to track, organize and analyze financial data.
The features and level of customization depend on your business and the type of software you choose. Freelancers and small businesses may be able to use generic, one-size-fits-all solutions, while enterprise organizations will likely need a more complex system.
Enterprise resource planning (ERP) is a feature that helps companies collect and organize information so they can operate more efficiently. This software provides support for accounting, manufacturing, marketing plans and HR operations.
ERP provides a unified solution to managing different departments and processes in your business. This feature helps larger companies break down silos between departments and increase transparency.
Inventory management
If your business sells goods and products, you need to keep track of your inventory. An inventory tracking feature can monitor inventory levels and tell you when to reorder certain items.
Accounting software can also track relevant information about each of your products. This includes SKUs, product images, prices and quantity.
You can also use accounting software to create custom pricing lists. For instance, you may want to offer a discount to customers who order your products in bulk.
How much does accounting software cost?
The monthly or annual pricing for your accounting software will depend on your business’s size, the number of users who need access, and the customization level required. For instance, if you’re a solopreneur or small business owner, accounting software can cost less than $10 a month. You might also benefit from software that offers a free version with limited functionality.
On the other hand, larger companies with more complex accounting needs can expect to pay more for implementation and licensing fees.
You’ll also have to pay for any additional users you put on your account. And since accounting software is only helpful if your employees know how to use it, you may need to pay an additional fee to train your employees.
How to choose the right accounting software for your business
Your accounting software will track your business’s financial performance, so choose carefully. Here are a few things to keep in mind.
Bank integration
Before you invest in accounting software, make sure it integrates with your payment systems and bank. If the software is compatible with your bank account, it will automatically download new transactions, saving you time.
Your business needs
When you’re evaluating accounting software, consider your business needs first. A freelancer with no employees will have different requirements than a multimillion-dollar business, so take your business’s size into consideration.
Look for software that’s geared toward your specific industry as well. For instance, our review of Refrens found that it is an excellent option for freelancers because of its advanced feature of creating invoices. Some software is also tailored to companies in the manufacturing, retail or restaurant industries.
Your budget
Consider how much you can afford to pay for accounting software. Fortunately, many solutions, particularly cloud-based ones (see below), are affordable and can accommodate nearly every budget. Many packages come with a free trial so you can get a sense of whether or not it’s the right fit for your business.
Cloud-based software
It’s a good idea to go with cloud-based accounting software. Cloud-based software can be accessed from any location and has built-in protections to prevent data loss. Plus, cloud-based software tends to be less expensive, since you don’t have to pay for licensing or additional servers to house your data.
Ease of use
If you hire a bookkeeper or accountant to manage your business finances, ease of use may not be as important to you. But if you’re handling the bookkeeping on your own, you’ll want accounting software that is intuitive and easy to use.
Of course, there may be a learning curve in the beginning, so look for companies that offer additional training and support. For instance, our QuickBooks review found that it offers dozens of articles and video tutorials on how to use its software.
Scalability
Free or low-cost accounting software may work well for your company if you have limited business needs at the moment. But it’s important to take a long-term view of your business when selecting accounting software.
Instead of choosing the cheapest software possible, look for a scalable option. For instance, QuickBooks provides pricing plans for businesses of all sizes. That way, you can start small and add additional features as your business continues to grow.
Pros and cons of accounting software
Here are some essential factors to consider when evaluating accounting software.
ProsAccuracy: Anytime you rely on manual data entry, there’s the possibility of human error. Accounting software will connect to your bank and will usually categorize your transactions automatically. This helps ensure accuracy in your financial records.
Automation: One of the most significant advantages of accounting software is that it lets you automate your finances. By leveraging artificial intelligence, the software can record and reconcile transactions and generate financial reports. It eliminates repetitive tasks so you’re free to focus on other aspects of your business.
Relatively low cost: Hiring a bookkeeper or accountant can be expensive, but most accounting software is affordable. In some cases, a free solution like Wave may meet your needs. If you need a low-cost way to track your business finances, finding the right accounting software is an excellent place to start. Learn more in our complete review of Wave.
Streamlined invoicing: If you rely heavily on invoicing clients, the right accounting software can save tons of time. For instance, software like FreshBooks lets you create invoices within minutes and even set up automatic payment reminders.
Collaboration: Most accounting programs let you grant outside access to your accountant. This can save time come tax season and makes it easier for you to pay your quarterly taxes throughout the year.
ConsTechnical problems: For most people, the biggest downside to dealing with computer programs is the occasional technical issue. That’s why it’s a good idea to use cloud-based software you can access from anywhere. Then, even if there’s a problem with your desktop computer, you can still access your financial information.
Potential for fraud: Cloud-based software has many advantages, but it also provides more opportunities for hackers. If you’re not careful, hackers may get a chance to access your business’s financial data. Employees with access could also steal sensitive information or money before you realize it.
There are upsides and downsides to weigh when choosing accounting software, just like with anything else. However, accounting software can improve your business’s financial accuracy and visibility, and it can free up your time for more creative and profitable pursuits.
