The Benefits Of Having Accounting Software For Businesses
In today’s fast-paced and increasingly competitive landscape, businesses aiming to thrive can’t afford to waste time and resources manually carrying out administrative tasks that could be automated. Chief among these is staying on top of the company’s finances, which includes recording its income and expenditure, paying its staff and suppliers, preparing financial statements, and, calculating its tax liability.
Accounting software assists companies of all sizes in managing their finances while streamlining and automating the administrative tasks and processes necessary to do so. Let’s take a look at the benefits of accounting software for businesses and how its many features can save your company money and help increase its productivity.
What Is Accounting Software?
Accounting software collects, records, manages, and shares financial data from a single platform. There are several types of accounting software, such as:
- Desktop Software: this is what most people picture when they think of accounting software: an application that’s directly installed on a company’s IT infrastructure, i.e., workstations and servers.
- Cloud-based Software:a software-as-a-service (SaaS) solution which sees the software stored and maintained by a cloud-based provider. Cloud-based accountancy software usually has a large range of features, many of which are available through add-on modules available at extra cost. This type of software typically comes with a monthly or annual subscription fee, as opposed to a single licensing fee like other options.
- Enterprise Resource Planning (ERP) Software: Typically usedby larger companies, ERP software combines applications that cover a wide range of functionality, including inventory management, purchasing, customer relationship management – and accounting.
- Specialised Software:Accounting software specifically designed for the needs, particularly regulatory, of certain industries, such as construction or manufacturing. However, nowadays these needs can often be covered by add-on modules in cloud-based solutions.
- Customised Software:bespoke software tailored completely to the needs of your business. This requires enlisting a software developer to create the software based on your specifications.
What Are The Uses Of Accounting Software for Business?
Although the first things that probably come to mind when you think of accounting software are bookkeeping and tax management, it can actually help you run your business in many ways. These include:
- Storing all your financial data in one place
- Increasing the accuracy of data entries
- Automatically scheduling customer invoices payments and reminders
- Automatically scheduling supplier payments and reminders
- Generate accurate and compliant financial statements, i.e., profit and loss statements, balance sheets, and cash flow statements
- Better cashflow management and forecasting
- Creating customised dashboard and reports for clearer analysis of your company’s current and growth trajectory
- Inventory management
- Calculation and payment of employee wages and payroll taxes
What Is The Importance Of Having Accounting Software For Your Business?
- Time-Saving And Efficiency: By keeping all financial data in one place and automating manual functions, you’ll save considerable time.
- Reduce Costs: Less time spent on manual tasks means the accumulation of fewer man hours. This reduces costs that allow your company to remain more competitive while freeing up your staff to do more important work.
- Greater Accuracy: Between accounting software automation features and built-in error correction tools, you’ll make fewer mistakes with your financial data. This further serves to save time and ensures you’re compliant with tax and industry regulations. Additionally, greater accuracy leads to fewer mistakes. This includes accounting discrepancies that cost you money in the short term and, more importantly, missing trends through inaccurate analysis that incurs opportunity costs of missed income in the long term.
- Better Ability To Make Strategic Decisions: By allowing you to generate customised dashboards and reports, you’ll gain insights that better drive your business strategy and lead to growth.
What Are The Key Features Of Accounting Software?
Let’s turn our attention to the key features of accounting software, as well as the advantages and disadvantages those features offer.
- General Ledger: This is a database in which a business can record, view, update, and manage all its transactions in real time. These include all income, expenses and its chart of accounts (assets, liabilities, and equity). The general ledger syncs all the financial data from a business’ sub-ledgers, such as cash, receivables, inventory, and payroll, and forms the backbone of any accounting software.
With all your financial records in one place, the general ledger allows you to perform the following important functions:
Accounts payable and receivable: this includes the creation, scheduling, and sending of invoices, as well as tracking their progress and reminding customers of outstanding payments. Similarly, it calculates, tracks and, through integration with bank accounts, automate payments owed to creditors.
- Creating Financial Statements: extracting recorded financial data to create your company’s profit and loss (income) statements, cash flow statements, and balance sheets.
- Reconciliation: comparing your internal financial records and income statements against banking statements and other external sources to ensure that the figures match.
Tax management: the automatic calculation of tax liability in line with your business’ income and outgoings and ensuring compliance with tax regulations.
- Analysis And Reporting: Accounting software has built-in features analysis and reporting features that give you full transparency into your company’s financial standing. This includes customisable dashboards that give you a snapshot of various key aspects of your business and helps you make more informed decisions.
Additionally, you can automatically generate customised reports on any function of your business, such as sales, expenditure, marketing, inventory, and projects currently in progress. This greatly assists in understanding your company’s financial trends, growth trajectory, and if you’re on course to meet your business objectives and, if necessary, the actions required to get back on track.
- Inventory Management: As well as tracking the products you have on hand, inventory tracking functionality provides real-time information on outstanding and outgoing orders, forecasts when you’ll run out of items, automatically reorders stock, and pays suppliers. payments. It also identifies trends that enhance your ability to make better strategic decisions.
- Payroll and Expense Management: Automatically calculating and paying each employee’s wages, handling and reimbursing expenses they’ve accrued, and calculating payroll taxes.
- Ease of Use: More of a characteristic than a feature, it’s vital that your chosen accounting software caters to users of all financial and technical proficiencies within your organisation. That means selecting software that’s user-friendly and intuitive, so anyone required to use it can do so without a steep learning curve.
- Scalability: You should also choose your accounting software with your future needs as a company in mind, as well as your present requirements. This means it should scale as your business becomes bigger and your meet your growth objectives, with the ability to handle a larger user base and more transactions.
- Mobile Device Integration: Mobile-friendly accounting software is now more of a necessity than a luxury. You and your employees should have the ability to access the information you need from anywhere and at any time. Fortunately, modern accounting software has an associated includes iPhone or Android apps that feature most, if not all, of the functionality of their desktop counterparts.
- Security Features: Financial data is always sensitive and needs to be secured to both protect it from loss and to meet regulatory compliance, so strong data protection and security features are essential. This includes built-in controls that allow for different levels of financial data, secure encryption during data during transfer, automatic backups and software updates to increase protection against emerging cyber threats.
What Are The Benefits of Accounting Software?
Now that you know what to look for when it comes to features and functionality let’s explore the many benefits that accounting software brings to your business.
- Save Time: The biggest benefit that accounting software offers is that it saves you significant amounts of time. Firstly, by consolidating all of the data into a single platform, you’ll save the time required to draw financial data from various sources, reconcile data from different accounts and ledgers, use that data to calculate your taxes, etc. Secondly, accounting software automates lots of common accounting tasks and business processes that would have taken considerable time to perform manually. This includes data collection and calculation, invoicing and payments, creating financial statements and reports, inventory management, tax management, and more.
By automating these processes, you’ll not only save time but improve the accuracy of your financial data. This frees up you and your staff, particularly financial personnel and management, to focus on higher-value activities that aid in your company’s growth.
- Reduce Costs: The more tasks you can automate, the less time required to undertake them manually, which cuts down on man hours and reduces your costs. processes. Also, with cloud-based accounting software in particular, because the platform and all data are stored on remote servers, you reduce the costs associated with IT staff, infrastructure, and maintenance. Subsequently, your IT staff will be able to spend their time on work that adds value to your company.
- More Productive Employees: Another benefit of the automation that accounting software brings to businesses is making their workforce more efficient. As your staff is less occupied with tasks like data entry and locating pieces of information from an array of documents and sources, they’ll be able to perform their jobs more efficiently. Plus, as accounting software provides more accurate data with greater frequency, teams and departments within your company will be able better communicate, collaborate, and develop more effective business strategies.
- Real-time Information: Accounting software gives you easier access to the most up-to-date data flowing through your business. This ranges from revenue, profits, assets and inventory to outgoings and liabilities. Additionally, it makes it simple to analyse recent data to corresponding data from other periods to measure your company’s performance and projected growth.
Better still, through dashboards and reporting, accounting software offers a clear and comprehensive way to analyse and interpret data. These tools make it easier to communicate financial and strategic insights to key stakeholders and employees, ensuring everyone is on the same page.
- More Accurate Information: As well as being more frequent and up-to-date, accounting software provides more accurate information. While manual accounting processes increase the chances of data collection and calculation errors, automation guarantees such tasks are performed with accuracy. By eliminating these manual processes, your business saves time while improving accounting accuracy. Plus, when errors do occur, the software will notify the user and highlight the mistake or, in some cases, restrict data from being input in the first place.
- Better Cash Flow Management: Cash is the lifeblood of any business – particularly small businesses – so properly managing its cash flow is paramount for a company to survive, let alone thrive.
Accounting software significantly assists in cash flow management by recording and tracking your payables and receivables. Not only will you have a clearer of your current cash flow status, but through its analysis and reporting tools, you’ll be able to better predict it in the near future. Plus, with automated payment facilities, you’ll pay your most important suppliers and creditors on time, which helps to preserve your reputation and avoid late fees and overdraft charges.
- Better Strategic Planning and Decision-making: By providing greater and clearer visibility into accurate real-time data, accounting software significantly aids a company’s management in its strategic decision-making. With the latest data concerning sales, revenue, purchases, and inventory levels, you’re able to make informed decisions based on relevant data.
You can also use this information to make for more accurate forecasts. With the help of your accountant, you can use this data to devise business and tax strategies through building forecast and scenario modelling techniques and by analysing market trends.
- Security and Continuity: As accounting software makes use of security measures like encryption, automation, and access restrictions, your data is safer than if you employed manual accounting methods. Not only does this better shield your business from the potentially considerable cost of data loss or a security breach, but it protects you from the reputational damage that accompanies them.
This also allows for more robust business continuity as it’s far easier to recover data in the event of loss or theft. This is especially true of cloud-based accounting software, with which your data is stored offsite on a remote server, which also protects it from break-ins and physical damage caused by fire, floods, etc.
- Compliance: As proper tax management isn’t challenging enough at times, it’s made all the more difficult with ever-changing tax rates, regulations, and structures. Fortunately, however, accounting software helps with this in several ways. First and foremost, merely having all your financial data in one place makes it easier to prepare your tax filings on time. Better yet, the software’s automation features and built-in error correction functionality ensure you complete tax forms accurately.
- Remote Access: Between mobile apps and cloud-based software, the relevant personnel in your company can access pertinent financial data from anywhere and on any device. With the ability to access information as you would in the office, you or your employees will never be caught short by not having the right information on hand, which boosts efficiency and decision-making ability. Remote access is especially useful and important in the post-pandemic era of remote work, where your staff have become accustomed to, at least occasionally, working from home. Always having access to the latest information allows them to speak with more conviction when dealing with clients or customers and makes for better collaboration with their colleagues.
How To Choose What Accounting Software Suits You Best?
Lastly, now we’ve covered the main features you’ll find in accounting software and the benefits of that functionality, let’s look at a few considerations when selecting the most appropriate accounting software for your business.
- Consider Your Company’s Needs
Firstly, look at how your business operates and then map its need against the different accounting software options on the market. That being said, it’s also crucial to think about your growth objectives and what you’ll need from an accounting software solution in the future.
- Your Budget
You’ll also need to make sure that the accounting software options you’re considering are in line with your budget. Fortunately, we’ve reached a point where there are business accounting software solutions at lots of price points – with some even being free. However, while software designed for broader use is typically lower-priced, the more specialised the software, the more expensive it’s likely to be. So, if you’ve determined you’d be best off with software specific to your industry – even a customised solution – be prepared to pay more for it.
- Desktop or Cloud?
Between allowing you to access information from anywhere, the software provider assuming many of your IT infrastructure and security needs, and their scalability and upgradability, cloud-based accounting software looks like the superior choice. However, there are some cases in which desktop accounting software may be best.
For instance, cloud-based software requires a strong internet connection. Now, while that’s not a concern for most businesses, if you’re in remote areas with spotty coverage – or if your staff consistently travels to far-flung places to see customers, desktop software might be better for you. Similarly, if you’re a small company with a handful of users, you might opt for desktop software.
- Consult Your Accountant
Lastly, let’s not forget how useful your accountant can be when it comes to choosing business accounting software. Having dealt with businesses of all types and sizes, they’re in an excellent position to advise you on the best type of accounting software based on your circumstances. At the very least, you can drop them a quick email to run a handful of potential options by them, as they’ll help you narrow down your choice or offer better alternatives.
- Accounting software collects, records, manages, and shares financial data from a single platform.
- The main features of accounting software include:
- A digital general ledger
- The ability to produce accurate financial statements and custom reports
- Account reconciliation
- Payroll and expense management
- Inventory management
- Tax calculation and management
- The benefits of accounting software include:
- Time-saving and efficiency
- Reduced costs
- More accurate data
- The ability to make better strategic decisions
If you have any queries about accounting software for your business or concerning any other aspect of your company’s finances, please don’t hesitate to get in touch.