Choosing the best accounting software for your business

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best accounting software

Choosing accounting software for a small and medium business can be a confusing process, especially since there is no such thing as “best accounting software” – only accounting software that is right for your business.

Selecting the right accounting software package will not only help you save time and money but you will also be able to make fewer mistakes, providing your with a clear view of your finances. Good accounting software is designed to be easily used by anyone with or without a background in accounting.

All businesses are legally required to maintain up-to-date and accurate financial records.  But digitalising your accounting systems can have greater benefits, such as filing government returns online (like VAT), and day-to-day jobs such as invoicing.

Every business will benefit from using specialist accounting software as opposed to Excel or a paper-based system. But with so many accounting software packages available on the market, how do you choose one that is right for your business?

Why you need accounting software

Unless you are running a business that hardly ever processes more than ten transactions per month, getting an accounting software will be one of the smartest and the most economical decisions you could ever make for your business. Basic accounting software costs less and is pretty easy to use and so it saves both time and money in the long run.

Work gets easier and less time consuming

Accounting software has made bookkeeping easier and less time consuming through automation. The entire process has been simplified. For instance, the software will automatically update your inventory levels and customer records the moment you enter any order. Not just that, you can even get the order you just entered translated into a sales invoice.

Checking bank account statements, VAT returns and monthly management accounts, is no longer exhausting either and can be done with a single click.  Some software packages not only support online banking and online tax filing but also offer optional features to help you run payroll.

Accounting software helps you in many ways

Accounting software provides you with a wide range of real-time management reports and information regarding your debtors, i.e. who owes you money and how much;

It can check your bank account balance on your behalf and also help you calculate your VAT liability and even prepare your financial statements, such as balance sheet, profit or loss account and cash flow statements, helping you to analyse your business’s performance against budget.  Some software will even allow you to calculate the profitability of a certain job/project you undertook.

The preparation for your final accounts or audit will no longer be so difficult and stressful with an accounting software at your service.   You may even be able to use and share the data in several ways with the help of accounting software, for instance;

  • Information regarding unpaid debts can be used to generate automatic debt-chasing letters;
  • It can help you identify your most loyal customers and automatically present them with exclusive offers;
  • It can identify the employees who keep claiming expenses and then check whether those expenses are genuine or not.

Understanding  your business needs

Before you decide on particular accounting software, you must first identify your business needs. You need to ask yourself how you can use the aforementioned accounting software to help you fulfill your business needs in the best possible way. It’s important to have your priorities set straight when evaluating packages for your business.

Talk to the people who will be using the software:

Their opinions must be taken into account when choosing a software;

Ask yourself about the expectations your employees might have from the new accounting system or the flaws that exist in the current modus operandi;

Have a detailed discussion with your accountants. Ask for their advice on the purchase since they will be the ones using the software to prepare your financial statements and fulfill audit requirements. It is important to get software that will aid them in performing their job and not hinder them.

Accounting software helps you in many ways

Accounting software provides you with a wide range of real-time management reports and information regarding your debtors, i.e. who owes you money and how much;

It can check your bank account balance on your behalf and also help you calculate your VAT liability and even prepare your financial statements, such as balance sheet, profit or loss account and cash flow statements, helping you to analyse your business’s performance against budget.  Some software will even allow you to calculate the profitability of a certain job/project you undertook.

The preparation for your final accounts or audit will no longer be so difficult and stressful with an accounting software at your service.   You may even be able to use and share the data in several ways with the help of accounting software, for instance;

  • Information regarding unpaid debts can be used to generate automatic debt-chasing letters;
  • It can help you identify your most loyal customers and automatically present them with exclusive offers;
  • It can identify the employees who keep claiming expenses and then check whether those expenses are genuine or not.
Does the software perform all tasks required to be performed?

Compliance with the law and accounting standards is not the only use of accounting software. Most of your business decisions will be solely dependent on the information provided by your accounting software i.e., a retailer will need instant access to his inventory accounts to maintain his stock levels.

The data provided by the software could be used by your accountant to help improve your business.  Accounting software can assist you with several business activities that occur daily, including, but not limited to, the following:

  • sales, invoicing and receipts;
  • purchases and payments;
  • cash flows management;
  • VAT, tax and accounts; and
  • Inventory management and payroll.
Note about compliance
Choosing the simplest accounting package may not be the best idea despite how easy it may be to use or how attractive its user interface may be. It may not be able to offer a satisfactorily higher level of compliance with the laws and accounting practices.
Does the software provide an audit trail?  The accounting software should allow you to track every transaction that took place during the year, providing you with an audit trail, and the software processes must be by good accounting practices (GAAP).
How does the software manage back-ups? The software should make sure not to let you end up using the old data by accident, allow you to maintain all the records for as long as required.

Ease of use

Modern accounting software is specifically designed to provide its users with easier access, and simple understanding of the main features . Some of best accounting software packages on the market allow the interface to be tailored to suit your needs.  If this is an option, you need to look for the following features:

  • Addition of new fields and controls: For example, the option to enter additional information to your sales ledger such as the name and contact details of the customer;
  • Option to set defaults for fields: For instance, should your payroll software automatically add a list of standard benefits the moment details of a new employee are entered?
  • Ability to define a range of values: Able to define certain entries beforehand to lower the chances of data entry errors.
  • Customisation of documents and screens: For example, can company branded invoices be created?
Import and export data

The ability to import data will help avoid manual input of information when setting new software up initially and save time by ensuring you can transfer data from your old software when switching accounting software.

Can the software be accessed from anywhere?

Does the software have a cloud version? This makes it possible for you to work from anywhere with or without the computer since everything is saved over the internet and can be simply be accessed by signing in online.

Typically known as cloud accounting software, you can check your figures and perform financial tasks from almost anywhere you have an internet connection. Cloud accounting software may consist of mobile apps for both smartphones and tablets to provide you with the option to decide how and when you work.

How is data processed

Most software present sales and purchase transactions in the form of a sales and purchase ledger. To determine how the software handles sales and purchase transactions, check to see if the software allows you to enter detailed information regarding your customers and suppliers, for example.

Flexibility of the nominal ledger

Accounting software is usually built around the nominal ledger since it brings all your assets, liabilities, incomes and expenses together.

Flexible accounting systems allow you define your account allocations, and categorise items according to your business’ departments and cost centers. In contrast, simpler systems, only allow asset, liability, income, and expense accounts to appear in the same structure as that of balance sheet and profit or loss account, rather than giving you the option to structure them to your preferences.

Other considerations regarding flexibility of the accounting software should be, can you input the a full range of transactions in the software? What facilities does the ledger allow for budgeting? And, are you able to track specific pieces of infomraiton by generating separate ledgers?

These considerations will help you gauge the suitability of the software for you business.  Afterall, the more flexible the accounting software is, the more it can be tailored to your business.  Flexibility will play an important role in determining how useful the software is to your business. For example, the reports generated by the software need to meet your accountant’s needs to allow them to prepare year-end information.

Options and costs

Although decent accounting software will not cost much, you might end up spending a certain sum when setting up the system and providing your employees with the training necessary for operating it.

All the best accounting software packages are specifically designed to assist you in managing your business’s expenses and income; generate business financial reports, and send invoices. However, there may be specific features you may wish to consider, such as whether a cloud accounting solution or desktop solution is a better fit for your business?

Cloud computing services have matured considerably, and most businesses prefer an online accounting software since this provides the flexibility to work on your bookkeeping and access your business’s financial data from anywhere at at any time.

 

Cloud accounting software

Cloud accounting software, as with any Software as a Service (SaaS) offering, is a compelling method for purchasing, and using accounting software. Cloud based software is fast to implement, offering low upfront costs.

Furthermore, most pricing for cloud-based account packages operate on a subscription basis – per-user, per-month. Since the platform provider is responsible for the infrastructure and technical support, there are zero up-front costs management costs.  Both these factors negate the need for a large initial capital outlay.

Cloud accounting software also provides a great deal of flexibility, being able to be accessed via the internet. Since your data is stored with the accounting platform provider, your data is completely secure.  This functionaility also help helps you collaborate and communicate with your accountant or advisers from anywhere and at any time.

Using a recognised and truder cloud accounting platform provider is a must, since your organisation’s financial data is stored outside your business.  Some of the most popular cloud software packages include Clearbooks, FreeAgent, Freshbooks, Intuit QuickBooks Online, KashFlow, Pandle, Sage Business Cloud, Xero, and Zoho Books.

Desktop and server options

Desktop accounting software, unlike a cloud accounting software, installed on a computer and is thus confined to that computer alone. All of your data in the software can only be accessed through the computer it is installed on. Desktop and server-based packages are also likely to take more time and knowledge to set-up.

Add-ons and modules

Most accounting software platform vendors also provide add-ons and modules to further tailor the accounting package to your needs.  Add-ons and modules can enhance various aspects of your accounts and financial management, for example, payroll, and connecting with your e-commerce platform.

Specialist training

Costs for any training will need to be taken into consideration when choosing your accounting package.  To be able to perform their jobs, the individuals who will be using the software to manage your accounts will need to have a clear understanding of the software.

Any employees responsible for the specific functions will need training for their specific areas of responsibility.  For example, a salesperson may only be required to know how to raise an invoice, while a manager will be required to have a thorough understanding of the entire system.

Maintenance and support

For cloud accounting software, the monthly fee is typically inclusive of ongoing updates and support.  However, if you opt for a desktop or server option, you may be required to pay a certain sum annually for receiving ongoing technical support.

Best accounting software packages for small and medium businesses

The ability to process ingoing and outgoing payments and payroll makes things very straightforward for any business.  Businesses that need to connect with eCommerce, CRM, ERP, email marketing, POS systems and Google apps, should look at third-party integration options, as this is something that not every package offers.

When choosing the best accounting software, a function that nearly every business will find useful package is tax preparation.  The ability to calculate your tax and submit statutory returns to HMRC is a great timesaver.  Business seeking the best accounting software for their business will be wise to ensure this feature is available in their selected accounting package.

Brexit and General Data Protection Regulation (GDPR) Update
GDPR came became legislation on 25 May 2018, placing increased obligations on businesses on how they process, manage and store information for EU citizens.
As part of the Brexit withdrawal agreement, the UK has agreed that GDPR will be adopted into UK domestic law. Upon leaving the EU, the UK continues to abide by the same standards as the rest of the EU.
While most marketing-leading accounting platforms have demonstrated their compliance, to avoid hefty fines, the accounting package you choose must adhere to the GDPR standards
Making Tax Digital (MTD)
The UK government has now introduced its digital tax initiative, known as Making Tax Digital (MTD) MTS makes having an accounting software package increasingly important.  MTD should, however, make interaction with the HMRC less complicated, as well as leading to a decrease in overpayment errors.

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