Benefits of using accounting software

Accounting software is a tool small business owners use to accurately track and report the company’s finances. Most accounting software helps you process financial transactions, track expenses and automate basic bookkeeping tasks with the possibility of a decreased need for hiring accounting personnelto complete these tasks. Accountingsoftware is often user-friendly and efficient, which can help small business owners complete basic accounting tasks, then have time available for other big-picture items.

The benefits of using in-house accounting software include:

• Set up the software quickly and easily:Accounting software often has a quick setup process that walks users through adding a company name, logo and financial information. The software usually directs users to enter basic information to understand which features you need.
• Reduce the need for re-entering data:The software automatically stores inputted data. For example, when you enter vendor information, the software saves it for a more efficient data entry process that eliminates repetitive tasks.
• Understand unfamiliar accounting terminology more easily:Because accounting software is designed for small business owners unfamiliar with accounting jargon, it breaks down instructions and guides into simple verbiage, making it easier to understand and navigate.
• Use the available templates to create invoices and handle bills:You have access to forms like sales receipts, financial statements and purchase orders that accurately represent the traditional paper documents. Since it’s digital, this platform offers templates that let you easily fill in the blanks and even autocompletes forms if the information is already in the software’s database.
• Connect to your financial accounts:Remain aware of your financial status and activity with easy access to your bank account and credit card activity. Most accounting software connects to your financial accounts to track and input this information directly from the platform.
• Access available templates to build reports:Report templates help you understand the results your company brings in. Insert your business’ financial information to view charts and graphs displaying your performance data.

What should small businesses look for in accounting software?

Evaluate the features your business needs to successfully track and report your financial data. Look for accounting software with tools to help you easily accomplish these tasks. Small businesses should look for accounting software that has:

Unlimited invoicing

If you conduct businesses for numerous clients, you’ll typically spend significant time invoicing customers. Look for accounting software with unlimited or a reasonable amount of invoicing available. Make sure the software has a user-friendly invoicing tool for quickly creating and sending invoices throughout the day, so you can return to other tasks.

A user-friendly and customizable platform

If you haven’t hired an accountant for basic accounting tasks, find user-friendly software. An effective platform should use simple terminology to provide step-by-step instructions on how to complete accounting tasks. It should also ask you questions to determine which features your business needs.

For example, it may ask if you’d like to track your inventory. If your business is service-based and doesn’t have inventory, you won’t see this feature on your platform. This keeps you from feeling overwhelmed with excessive and unnecessary functionalities.

Affordable pricing

The cost to complete basic accounting tasks on this software should be less than hiring an accountant for these tasks. Carefully evaluate your business’ accounting needs and the features each software comes with. Only purchase accounting software that offers many features your business needs and fits within your budget.

Related:How to Hire an Accounting Assistant

Automated bookkeeping and other accounting tasks

Your accounting software should have templates that allow you to input and save your data then automatically insert it when you authorize this feature. Other accounting tasks most software includes are:

• Suggesting transaction match for certain accounts
• Automatically sending recurring invoices to regular customers
• Sending past-due notifications to clients automatically
• Quickly converting estimates or quotes into invoices
• Automatically creating purchase orders for certain inventory items

Basic accounting features

Your accounting needs vary according to your industry and the functions of your company. Some businesses require more advanced features that increase costs and aren’t available on all platforms. Most accounting software should offer basic features that most businesses need to successfully track and report their financial information. These basic features include:

• Inventory tracking
• Expense and income tracking
• Customer management tools
• Finance reports generator
• Vendor management
• Purchase ordering assistance

Tax tracking and preparation

Some accounting software simplifies your taxes by using tax-related features that automatically calculate and report your taxes. They also help determine many of your tax rates. If you hire an accountant to handle your tax information, this streamlines the process for them. Most platforms allow you to grant your accountant access to this section. The software may also compile and email your tax information and other tax-related files directly to your accountant.

Add-ons and third-party integrations

Some accounting software comes with add-ons that usually cost extra but are effective in maintaining your finances, like payroll services or payment processing. These services don’t initially come with the accounting software’s basic tools but are typically included with the additional fee.

Third-party integrations are separate programs that work with the accounting software to pull relevant data from your current programs to help streamline your accounting process. This includes integrations like payment processing, POS systems, advanced inventory management, email marketing platforms and customer relationship management software. Some software charges extra for integrations. It’s still a beneficial feature since existing data is shared with your accounting software to avoid re-inserting data.

Time tracking

If your business completes projects for clients and receives payments by the hour, consider an accounting software with a time tracking feature. Turn it on as you work and watch the time input into your invoicing to accurately bill clients’ according to the time spent completing the project. Some accounting software even allows you to input how much you charge per hour, then it automatically calculates how much to charge as soon as you clock out.

Basic financial statements

A strong accounting software has basic financial statements for you to easily build and view when needed. These are important statements that help you better understand your business’ financial status. They include:

• Profit and loss generation and reports
• Balance sheet
• Cash flow reports

Accounting software available for small businesses

Look for accounting software with all the features your business needs at a price that fits your budget. Here are some popularaccounting software options for your business to consider:

QuickBooks Online

This option is most effective for small businesses. It’s user-friendly with a simple system that allows you to share financial data with your accountant or tax professional. It contains basic features like sales and expenses tracking, simple invoice creation and tracking, unlimited storage of customer and vendor data and access to basic financial statements. As your business grows, there are more add-ons and features for purchase to more accurately track and report your business’ finances.

QuickBooks Online also offers a company snapshot screen to understand how much your company is making and spending each day. It also compares your company’s current performance to previous years. This is a completely web-based system, so you don’t have to spend time downloading complex software. It’s also mobile-friendly and can be accessed anywhere you go.

QuickBooks Online regularly updates their system, which means you may have to constantly re-learn how to use different features. If you use the QuickBooks Point of Sales system, you aren’t able to integrate it with QuickBooks Online.

Cost per month:

• Essentials:$12.50
• Plus:$35
• Advanced:$75

Related:How to Hire an Accounting Manager

Xero

This software is a more affordable option for small businesses. It allows unlimited users to access it and contains several add-ons and integration options, like GoCardless, Stripe and PayPal. The interface is user-friendly and streamlined so you can quickly complete basic accounting tasks.

Easily set up and manage recurring invoices. It also integrates with Everhour, which is a simple time tracking system you can input into your invoices for accurate client billing. It organizes your clients and vendors by placing them both into one file labeled “contracts,” so it’s easy to add clients who are also vendors.

Cost per month:

• Early:$9
• Growing:$30
• Established:$60

GoDaddy

GoDaddy Online Bookkeeping is a great option for retail business owners. You can link your Etsy, Amazon, eBay, PayPal or any other account you sell your products on. It’ll automatically import sales data to the system. It also has a mobile application that you can access from anywhere using your mobile device. You can accept payments directly from your smartphone or tablet either in your store or at vendor events and trade shows. There are time tracking tools built into the system to accurately track time and send invoices to any of your clients.

This software only allows one user to access the account, making it challenging for your other employees, business partner or accountant to access it separately. Some of its features have limited capabilities as well. While this software has basic functions like tax preparation, invoicing and importing transactions, they lack project management, currency and customer management capabilities.

Cost per month:

• Get paid:$4.99
• Essentials:$9.99
• Premium:$14.99

Wave Accounting

This software is primarily for service-based businesses, so it doesn’t track inventory. It offers basic accounting features for free like receipt scanning and invoicing, while other features like payment processing and payroll are available in their monthly payment plans. You can also run multiple businesses from one account within the Wave platform.

It generates reports that are easily customizable and simple to understand. You can connect your financial accounts like your credit cards and PayPal account to automatically input client charges. It also automatically creates your sales tax reports and balance sheets, so you’ll remain aware of your finances. It’s important to note that the payroll system isn’t available if you’re completing transactions with people outside of the U.S.

Cost per month:

• Accounting:Free
• Self service states:$20 base fee
• Tax service states:$35 base fee

Frequently asked questions about accounting software

What is the most common accounting software?

QuickBooks is the most common in the industry. It was also one of the first accounting software programs available when it was released in 1998. It holds a significant amount of client data, which is one of the primary features that attracts businesses.

What software do accountants use?

Most accountants use basic software like QuickBooks and Xero. This also varies depending on the business’ size, industry and needs. Accountants typically use more advanced versions of these platforms to make more complex calculations and develop financial strategies.

Is there free accounting software?

All of these businesses offer free versions of their software:

• Wave
• Zipbooks
• CloudBooks
• Zoho Invoice
• SlickPie

Make sure you review what’s included in the free version, as the feature your business needs may only be available if you purchase the premium version.

Evaluate your business’ financial needs and budget before selecting the best accounting software for your business. Some software offers free trials, so you can run a test to see if it’s the most worthwhile investment for your company. By carefully reviewing the features of each, you’ll find the best and most reliable software for your business.