A computer program or a collection of applications called accounting software is made to manage the financial transactions of a business. It assists organizations in managing and automating their payroll, general ledger, accounts payable, and accounts receivable procedures. Invoicing, tracking expenses, reporting, and financial statement analysis are just a few of the features offered by accounting software.
Additional business tools that the software can link with include point-of-sale programs, time-tracking applications, and payment processors. Accounting software’s functions include streamlining accounting procedures, supplying real-time financial information and insights, and assisting in the making of well-informed decisions.
Why is Accounting Software Important for Business?
With Technology Innovation, there are a lot of Finance Apps for startups available in the market which are helpful to boost their Business growth. With continuous growth, these Fintech Applications bring more opportunities for Accounting Software. Therefore, Accounting Software plays a vital role in Business providing them with an all-round support for the various aspects of finance management. Let’s understand the value adding features and benefits of using an Accounting Software.
Depending on the main features and objectives of the accounting software, your company may benefit in many ways. Basic invoicing to complex tax reporting are just a few of the extras offered that are not even conceivable without accounting systems.
The following are some of the features of accounting software:
1. Basic Accounting
The element that businesses should prioritize when looking for a sturdy solution is accounting because it is the foundation of every system. Accounting examples include fixed assets, payables and receivables, general ledgers, and bank reconciliation. Though complex systems offer their users much more, they remain the most elementary and important.
2. Billing and Invoice Development
Even though some accounting systems are entirely focused on billing and invoicing, a majority consider them as a crucial part of every financial transaction. Most businesses nowadays opt for cloud based ERP solutions that not only generates invoices but also handles a complete range of financial and accounting tasks. And satisfy tax compliance requirements, even if it may be beneficial to only some businesses.
3. Payroll Administration
Payroll processing can be done using the payroll administration tool. It won’t be difficult for you to create and print their checks, and you won’t have any issues responding to legal requests or tax requirements. Businesses without the widely used payroll administration module might eventually add it as an add-on module.
4. Creating Budgets and Projecting Results
The majority of accounting software packages include this feature as part of their core functionality. It is a packaged feature of accounting software. With the help of this category, you can compute and comprehend the financial performance for the existing year as well as predict the budget for the upcoming year using the data trend from the prior year. Using this application, businesses may create estimations and define realistic yet ambitious sales goals.
5. Inventory Control
Depending on the supplied information, accounting systems can provide stock control solutions. All the equipment needed to give their product lines a prolonged shelf life will be found in this plan by businesses. They will also be able to keep an eye on product availability and movement and steer clear of delivery issues including overstocking and understocking.
6. Asset Administration
To help handle financial data more precisely, these accounting software functions, referred to as a ‘fixed asset management tool,’ can be utilized as a standalone tool or as a component of a larger module. These activities include keeping track of costs, calculating depreciation, allocating money to departments, and more.
7. Reporting Canvas
In today’s organizations, accountants are responsible for a variety of duties, including managing company data and information. In the same way that a professional employs tools to carry out his obligations, accounting software offers the permanent solutions that accountants need to complete their work.
Modern accounting systems come with robust reporting and analytics tools that significantly improve decision-making about financial and statistical issues. It offers crucial financial insights and accurate financial data to accountants and finance managers, who can subsequently convey it to management for guidance.
The information provided in the accounting software can be used by other company software. The data may be required by the departments of HR, Marketing, Sales, Shipping, and others. The chosen system must be able to use data from other applications as a result and work in collaboration with other software because most organizations use a range of applications.
9. Tax Administration
An excellent example of how tax law changes over time is the India-enacted Goods and Service Taxes Act. Accounting software can help you comply with all of these regulations by automatically computing sales tax (GST) and payments as well as employee payroll withholdings (ESI, EPF, and other direct tax rules such as Tax deducted at Source) (TDS).
The accounting software keeps you up to date and alert by automated reminders and organizing everything, minimizing the potential of receiving a penalty for late payments.
Accounting software goes beyond being only a necessary evil. It offers a variety of tools that might make managing your business easier. Here are some of the key ways accounting software may help your organization, from automating bills to managing cash flow.
1. Subledgers and General Ledger (GL)
The general ledger can now be automatically populated with both journal and automatic sub-ledger entries, giving CFOs and controllers a realistic idea of their financial data.
2. Accounts Receivable and Accounts Payable (AR)
More than basic accounting is performed by a comprehensive accounting software package. It enables detailed and appropriately categorized spending management while also assisting firms in reducing record redundancy, providing improved accounting and forecasting, to deliver better budgeting. It also offers seamless connectivity with banking systems, permits precise audits, and maintains thorough monitoring records of all liabilities and assets.
3. Finance Management
Accounting software’s cash management features automatically match up cash transactions with bank statements to produce accurate cash positions. With the use of automated cash forecasting based on payables, debtors, payroll sub-ledgers, and outside transactions, organizations can also make timely decisions about borrowing, investing, and other cash-related activities.
4. Asset Administration
You can manage the complete asset life cycle, including purchase, capitalization, depreciation, and retirement, with the use of a contemporary accounting system. Businesses can produce accurate financial accounts for appreciation and depreciation with the help of this total visibility.
5. Regulations and Risk Management
Accounting software with integrated security, risk evaluation, and audit controls is an organization’s strongest line of defense against fraud and unapproved user access. Your organization now has a safe, single source of truth for data due to these internal controls and separation of responsibilities (SoD) procedures.
6. Collection Management
An essential feature of accounting software is the capacity to manage client collections. It is simpler to rank clients, set collection plans, handle collection payments, and start late-stage collections for bankrupt clients with full collection management.
7. Fiscal Management
Accounting software with integrated revenue management features automates the process of applying analytics to increase revenue and profitability for the company.
8. Analytics and Reporting
A full accounting system provides reporting and analytics tools in addition to the ability to record financial transactions. Finance directors can use these prebuilt dashboards to drill down for more specific information and make sense of the financial health of their organization. These dashboards track crucial financial KPIs in real-time, such as inventory turnover, net working capital, quick ratio, debt-to-equity ratio, and current ratio, to mention a few.
What does Accounting Software do?
What functions and features are offered by accounting software? Depending on your company’s core functions and goals, accounting software can streamline your operations in a variety of ways. Accounting systems include a variety of options, ranging from basic invoicing to complicated tax reporting, and a lot more is made possible with the right system.
So, what does accounting software actually do? Here are a few characteristics of accounting software:
The first thing that your accounting software does is to provide reliable solutions in accounting, which is the core element of every system in this category. General Ledger, Accounts Payable & Receivable, Fixed Assets, and Bank Reconciliation are some of the terms associated with accounting. These are undoubtedly the most fundamental and crucial functions, while advanced systems provide their customers with extra options.
Billing and Invoicing
Although there are accounting solutions specifically dedicated to invoicing and billing, the majority of them nevertheless handle related procedures as an essential component of any financial operation. Thus, they enable clients to automate routine collections, modify operations in accordance with new and efficient payment options and industry norms, providing correct and timely bills for their clients.
Budgeting and Forecasting
The majority of accounting systems also include a module called ‘budgeting and forecasting’ as part of their standard bundle. This module computes and analyzes the financial performance for the existing year and helps in forecasting the budget for the following one. With the use of such a system, businesses may plan their estimates and establish their ambitious sales goals.
Fixed Asset Management
Fixed asset management can be used as a standalone solution or integrated into a larger module to help handle financial data with more precision. The module includes functions like resource allocation, cost records, depreciation computation, audit history, and many more.
Advantages of using Accounting Software
1. Access financial details anywhere and anytime
Computerized accounting software allows you to access your data anytime you want, from any device you want, which is the most obvious benefit that an accounting system has over any traditional system of accounting. Using online accounting software (i.e. a website) is possible on a computer, laptop, tablet, or smartphone. An internet-connected gadget and a browser are all you need.
There are a tonne of benefits for businesses of all sizes from this. For instance, invoices can be generated and sent instantly from a mobile device. Alternatively, you can generate, browse, and print financial reports and statements with only a few clicks.
There is no need to request three days in advance from your accountant. You can get the necessary financial statement by logging into the platform, going to your Financial Statements section, and selecting it.
2. More effective teamwork
Collaboration is a breeze with cloud accounting software. Do you recall the times you needed to update a worksheet, save it to a USB drive, and then distribute it to your coworkers so they could get the most recent financial statements as well?
Well, those days have passed. Everyone can access real-time financial and accountancy information due to cloud accounting software, which is one of its key benefits. Your staff only needs to log in to the site and complete their tasks.
In real-time, many users can work on the same financial information without ever obstructing one another.
You can also grant several users varying access privileges using online accounting software. This enables you to customize permissions according to the specific accounting or bookkeeping tasks that a user must perform.
3. Automate to save time
A significant portion of an accountant’s or bookkeeper’s daily tasks are labor-intensive and repetitive. For instance:
- Generating a bill for every transaction? Repetitive.
- Keeping track of transactions and making the appropriate diary entries? Repetitive.
- Sending your customers reminders for late payments? Repetitive.
Most accounting cycle processes are automatable. Online accounting software excels at doing exactly that.
You can automate the process of writing journal entries. All you have to do is include your bank in your accounting system. This will automatically generate a journal entry and link it to the respective accounts for each payment you make or receive.
Various tasks, including financial reporting, can be automated. Another option is to set up automatic vendor payments. However, keep in mind that not every cloud-based accounting solution offers the same level of accounting automation.
4. Enhanced Accounting Security
Your accounting data is fully secured on the cloud, which is one of the main benefits of cloud-based accounting software. This implies that instead of being stored on a shelf in the office, your data is protected by multiple layers of advanced encryption techniques.
The greatest aspect is that your data is always synced. Thus, it’s not only safer but also the latest.
To give you a better picture, accounting data had to be regularly backed up when organizations used desktop-based accounting software. After all, a hard drive was used to store the data. However, hard drives are pretty delicate. The data may be lost, deleted, or just become corrupted and useless.
The incorporation of accounting and financial data into disaster recovery plans required organizations to invest a significant amount of effort. Because of this, there were increased expenses and lost time.
The system will back up your data for you if you use online accounting software, so you never have to worry about it.
5. Increased accounting and Bookkeeping accuracy
You may avoid the majority of common accounting mistakes by using online accounting software. Your data will always be structured correctly and accurately thanks to online accounting software.
Do you recall the instances when you wasted five hours trying to figure out why the balance sheet was off? Now, no need to think about all these.
With a cloud accounting system, if newly made journal entries don’t match, the system will inform you right away and point out the probable errors. By doing this, you’ll be informed of the mistake before making it. This is a very basic illustration of how an accounting system can assist you in maintaining proper accounting information for your company.
If a spreadsheet or table has been altered in the past but you have not received the new version, what do you do? Using accounting software will help you avoid any errors relating to the change, especially in the data, which is another common accounting mistake.
It can take a lot of time to figure out how to integrate updates from two separate files. However, since all the data is synced in the cloud, you will not ever have to deal with issues of this nature if you utilize online accounting software.
Employing online accounting software can ensure that your information is accurately and correctly structured. Your team decides more quickly and sets better priorities along with that your accounting records will be more clear.
6. Real-time Reporting
One of the main benefits of accounting software is real-time tracking and reporting. You can manage things like expenditures, revenue, and inventory in real time by integrating your cloud-based accounting system with the business bank accounts, which only takes a few minutes.
You can monitor all the accounts and metrics you wish to track using a dashboard that is specifically designed for your accounting software. Stop spending time on something as basic as bank reconciliation as it can be completed using online accounting software in just a few easy steps.
7. Reduce spending and save money
Every Company looks for effective ways to save money but now you might be wondering how paid software will help your company save money. There is an easy solution.
Your company will save, on average, about 300 hours a year by using online accounting software. This accounts for time lost on activities like repetition, accounting errors, financial report creation, and other activities.
Furthermore, as online accounting software normally only costs between $9 and $50/ month per user, it effectively pays for itself ten times over. The best and most cost-effective approach to handle accounts for a startup is without a doubt employing online accounting software, which can cost less than $10,000 per month compared to ERP software.
8. Minimize paperwork and boost Sustainability
Nowadays, paperwork is something that no one enjoys. It takes a lot of time and money to deal with documentation. When you can easily make a copy with a click, why make a photocopy?
Using accounting software has the benefit of being completely online, including all financial data reports, statements, and journal entries. Every invoice, record, and entry that is made is saved in the cloud with multiple layers of security. Only users who have authorization can easily access it.
Additionally, you can produce and send invoices to your clients straight from the software, saving time and money on print and sending the invoices to accelerate the payment process.
Most Popular Accounting Software
There are many software that you can use to keep track of your business’s finances, but you need to select one that suits your budget and is simple enough to use every day. Some of the popularly used Accounting Software are discussed here to help you identify your ideal one.
Quicken is a budgeting tool used by many small business owners. If you want to improve your money Skills using a program rather than a spreadsheet, you might want to consider Quicken Home and Business. Though Quicken is primarily intended for handling personal finances, it contains a number of practical small-business accounting capabilities, including the ability to categorize expenditures, manage income from a bank or another financial institution, display business financials, and gather tax data.
To manage your income and expenses for a business expansion, you might want to consider using QuickBooks Online or Pro. Spend no money on QuickBooks Online for the first 30 days, after which you can pay a monthly subscription to use it. QuickBooks lets you handle bank accounts, keep tabs on spending, create invoices, and monitor sales. The mobile capabilities of QuickBooks will allow you to do business on the move and keep track of your finances.
GnuCash is another option for keeping track of your company’s revenue and outlays. With an intuitive interface and a checkbook-style register, this software’s double-entry accounting method can assist you in keeping track of your spending. The software can aid with taxes and billing customers.
Avanquest Bookkeeper is a low-cost software program for keeping track of business spending and revenue. Along with invoicing your clients, you may track and pay bills. By tracking your payments and balancing your checkbook in one place, you can keep track of your revenue. Although the program has a low upfront cost, processing credit cards are subject to fees. This application does not support tracking fixed assets.
Comparing FreshBooks to other accounting software, more customization options are available for invoicing. Although sending, receiving, printing, and paying invoices is its main purpose, it can also take care of a business’s essential bookkeeping requirements. Service-based companies can more easily send bids, keep track of project time, and collect payments with the help of this accounting software.
Thus, any business, big or small, can benefit hugely from using accounting software to keep its finances managed properly with the help of evolving technology.