Buyers Guide

Our Guide To Accounting Software

With so many different financial management applications and accounting software solutions on the market, understanding which package is best suited to the requirements of your business might seem like a daunting task – but it doesn’t have to be.In this article, we’ll take a look at what accounting software can do, which packages are best suited to certain business types and how to identify the right product for your organisation.

Accounting software: what is it?

Accounting software is used to keep a track of any incoming or outgoing transactions within a business. Most entry-level packages will offer the following basic functionality:

• General ledger – the main accounting record, keeping track of ins and outs.
• Accounts receivable – a record of money currently owed to the business by debtors.
• Accounts payable – a record of money currently owed by the business to creditors.
• Payroll – a record of current employees and the wages they are due to be paid/have been paid.
• Reporting – the ability to produce balance sheets, statements of cash flows, income statements and stockholder equity information.

Oftentimes these accounting packages will be tailored to particular business types or industries - an example of this would be a package offering fund accounting for non-profit organisations or government agencies.

Because such specialisations are critical to business processes, they are often an important component of the resource planning systems used by the organisation.

The benefits of accounting software

If you’ve never implemented accounting software into your business practices in the past, chances are you’ll wonder how you managed without it once you get to grips with your system of choice.

The main benefits are crystal clear – accounting packages provide your entire company with much greater insight and visibility into costs and expenditures, which ultimately means making more fiscally responsible decisions. In addition to this, most accounts software can generate reports in a variety of different formats to provide concise summaries for relevant audiences, as and when required.

For example, a small business might generate a report highlighting company growth to display to a potential investor or lender, providing the business with a means to create and maintain trust, and promoting growth and inward investment.

Such reports are also beneficial when it comes to reporting to HMRC, and can make end-of-year tax or VAT returns a much less painful task.

Things to consider when selecting an accounting solution

As a starting point, an entry-level package is likely to be sufficient for most small to medium enterprises.

However, purchasers in certain industries will need trade-specific modules either included in the package they select or added as an optional ‘bolt-on’. For example, construction and engineering companies will need a system with project accounting modules in order to keep track of materials costs and so on.

One other consideration is the rate of growth of the company. A rapidly advancing company might fast outgrow an accounts package within six months to a year, and investing in a package that doesn’t meet the future needs of the business can be something of a false economy, especially when training and software implementation costs are considered.

Accounting options: where does your business sit?

Before committing to a purchase, it’s important to understand which category your business fits into to ensure you make the right accounts software choice.

• Small businesses with growth potential

If your business is growing year on year, a basic system might not cut the mustard a year or two down the line. If you suspect that you may need increased data storage, forecasting features or industry-specific functionality in the near future, it may make more sense to implement it now.

• Enterprises

If your organisation requires subsidiary company functionality or the ability to deal in more than one currency, it may benefit from a full enterprise resource planning package. These systems are feature rich but can be an unnecessary expense for smaller companies.

• Function-specific businesses

If your business is a non-profit or government based, you will require software capable of performing fund accounting to provide grant providers or recipients with reports on how funding amounts are allocated and put to use.

Higher education establishments, in particular, can benefit from these sorts of features, to keep track of financial aid disbursements and to break down cost.

Accounting software trends you should be aware of

• Mobile accounting apps

The cloud is allowing us to increasingly take our payment and accounting options on the road. For example, in the past, a self-employed gas engineer might perform work at the premises of a client, return home, generate an invoice and put it in the post. With mobile technology, the same engineer can today generate an invoice via a mobile account app on a smartphone or tablet, email it to the customer and receive faster payment.

• Business intelligence

Big data is a phrase you may have come across, and with good reason – substantial amounts of consumer data can be harnessed into reports which can identify areas of potential business improvement. For example, a fast-food takeaway might look at reports and realise they aren’t selling many pizzas on Monday evenings, prompting them to create a “half-price on Monday” offer. The business intelligence offered by the accounting report allows the company to identify a gap in their market and plug it.

• Industry specialisation

Business is becoming more complex and software interfaces are becoming simplified, allowing companies to demand industry-specific features in their accounting packages. Before committing to a piece of software, it’s good practice to do a little investigation to find out whether it can be tailored or moulded to the particular needs or niche of your company. Some providers can offer tailor-made solutions, whereas others offer out-of-the-box customisable platforms which can be manually manipulated to suit your requirements.

• Software-as-a-Service

Purchasers have started to realise that low upfront costs coupled with faster implementation time make sense. Some accounts package providers offer “software as a service”, whereby software is licensed as part of a subscription as opposed to purchased outright. The software or service can be accessed via a dedicated app or simply via a web browser.