Importance of accounting software

Before understanding the significance of accounting software in a business, the first thing to learn is what accounting management is. It is strategic planning, direction, organization, and control of financial procedures within a company. Any enterprise needs to ensure a secure and steady cash flow.Accounting software is a type of application software that documents and manages accounting transactions, accounts receivable, accounts payable, general Ledger, Journal trial, balance, and payroll.The use of transaction journals is a traditional way of performing financial tasks. Currently, enterprises are switching to accounting systems. This software allows professionals to keep a record of financial transactions and create financial reports instantly.

Benefits of using accounting software. (1)

Accounting software is one of the valuable assets of a company that improves the working of the finance department. Some more benefits of accounting software are as follows

  1. Accounting software automates the crucial calculations and other administrative procedures. Since it takes control of the revenue framework, so costs are saved by avoiding outsourcing of financial supervision to another party. It also reduces the cost of printing and document distribution by digitally storing all the data in a monitored and safe location.
  2. Regardless of the owner’s expertise in accounting, it allows him to control the business’ finances automatically by using mobile devices or computers.
  3. It improves the decision-making abilities of the professionals. Sometimes an owner faces difficulty in understanding the business’s financial condition. Through accounting software, he can figure out where to increase investment and where to reduce expenses.
  4. It improves data accuracy by reducing the human error that normally occurs during data entry and calculations. Inaccurate financial data have a great impact on the company’s life span.
  5. The financial data of a company is confidential information, and protection of it is highly necessary. Accounting software ensures its safety by storing it in a centralized system.

Key Features of accounting software

  1. Access control

Although it is not the actual function of accounting software, yet it provides varying security levels and grants access via data encryption, single-sign-on capabilities, and user-based permissions.

  1. Accounts receivable/ payable

Electronic management, accounting solution, and tracking of accounts payable and accounts receivable is a part of the finance department.

  • Accounts payable features

It includes the tracking of payments to suppliers, vendors, and financial outlays.

  • Accounts receivable features

It includes invoicing/billing and payment collection.

  1. Asset management

The most expensive assets of any company include its machinery, production, transport means, and other forms of PP&E ( property, plant, and equipment). The major function of accounting software is to electronically track and depreciate the cost of expensive assets of the company.

  1. Bank reconciliation

Automatic calculations and financial processing is done by directly connecting the finance department to the software. This allows the reconciliation of transactions recorded with the bank’s record. Most of the systems have pre-built reports for year-end closing as well as month-end closing.

  1. Sales and purchasing management

Good accounting software is integrated with sales and purchasing management. It allows the management of transactions and creates different documents such as sale and purchase orders, credit, and debit notes receipts quotations.

 

Types of accounting software (2)

Before selecting any software package, it is significant to know about the various types of accounting software. The accounting software is generally classified as

  • Commercially available software

One of the predominant types of accounting software is commercial off-the-shelf (COTS) software. It is a multi-layered error detector and reduces the chance of incorrect data entry. It generates standard reports that are configured to the accounting requirements of the company. Installation of COTS is a lengthy process and requires the consultants’ services and on-site staff for software maintenance. COTS can also be served online. In the latter approach, the user accesses the software by logging in to the vendor’s site.

  • Spreadsheets

An electronic spreadsheet is a good choice for small businesses. This is inexpensive and the system can be set up in any way. However, there are more chances of error using spreadsheets. Sometimes data may be entered incorrectly in the wrong place or not entered at all, which results in false financial statements.

  • Custom accounting software

It is customized software for an organization. It is typically used by those companies whose requirements are so specific that cannot be met by other software packages.This approach is rarely taken by the companies as it requires extra maintenance than other available packages.

  • Enterprise resource planning software (ERP)

This software unites information from all parts of the finance department into an exclusive database. Sharing information from department-specific software is a big problem, which is eliminated by ERP. It normally requires more than a year for installation and is highly expensive, so it is needed by the most complex and largest organizations.

Top Companies and providers of accounting software.  (3)

  1. Freshbooks

It is the number one Software Company, established in 2003. It helps self-employed professionals and small businesses in their accounting tasks. It facilitates the owner with cloud-based finance and software with easy-to-use tools.

  1. NetSuite ERP

It is a global vendor of cloud-based management solutions.Their software is an expandable application that simplifies financial procedures. Generally, this vendor has a partnership with other companies that help in ERP/financials, E-Commerce, and other inventory tasks.

  1. Tipalti

This software uses innovative and strategic ways to help companies in improving and enhancing their accounting operations. It offers cloud-based accounting programsthat modify the way a company handles vendor onboarding, invoice management, tax compliance, and funds disbursement.

  1. Plooto

It is accounts payable software that is specialized in online payment management. This approach offers a variety of solutions for customers, users, suppliers, and accountants. It has bank-grade security for secure and safe transactions.

  1. QuickBooks Online

This vendor targets independent firms, small businesses, and freelancers. It combines all necessary accounting tools in a unique platform and provides robust tools to aid small businesses. It simplifies time-consuming and tedious accounting and financial tasks. Tax calculations, expense tracking, automated data collection, invoice management, sales monitoring, balance sheet reporting, and bill management are some of its features.

References

  1. https://www.hashmicro.com/blog/accounting-software-benefits/
  2. https://www.accountingtools.com/articles/types-of-accounting-software.html4
  3. https://financesonline.com/list-accounting-software-companies/