Frequently Asked Questions About Accounting Software
What is accounting software?
Accounting software is software which electronically records and processes accounting transactions. Whilst accounting software can take various forms and offer a range of features, at a minimum you will be able to record and track revenues, expenses, assets and liabilities, allowing you to maintain a updated and accurate view on your company’s financial position. Most software providers will also offer additional functionality, including creating invoices, tracking bills, and managing inventory or projects.
Which accounting software do you recommend for me?
This depends on what you're looking for based on your exact business requirements . In general, I rate Xero as the best overall accounting software provider for Small and Medium-Sized Businesses (SMBs) because:
- Very wide range of features
- No user, transaction or client limits
- Compatible with a wide range of integrations
- Functional mobile app
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What are the benefits of accounting software?
Introducing accounting software into your business will unquestionably help to improve productivity and reduce costs, which can’t be a bad thing, right? The main benefits are discussed below:
- Reduced accounting expenses - accounting software makes the financial management process a lot simpler. As a result you'll rely less on your accountant, or in some cases wont need one at all!
- Improved productivity - automating complex and intricate processes which would usually take hours to complete if done manually will allow you to focus on more important tasks relating to your business. See the answer below for a list of the most common time savers!
- Software integration - accounting software is designed to be integrated into your existing financial framework, allowing you to seamlessly integrate multiple data operations into one platform, rather than running multiple systems and transferring data manually.
- Improved financial visibility and decision making - accounting software will give you a clear and up to date / real-time picture on your company’s financial health through a variety of lenses (e.g. consolidated and segmental / product views). This will help to improve the quality of your strategic decision making going forward.
How can accounting software save me time?
Accounting software can help automate a a number of manual and time consuming processes. In particular, the following could be very useful for your business:
- Convert quotes to invoices or sales orders - once a customer accepts a quote, you can quickly convert this into an invoice or sales order. Generally these invoices can be edited with any required changes. Similarly sales orders can be converted to invoices.
- Recurring invoices - these can be set up to be sent automatically for recurring payments due by customers.
- Payment reminders - some software provides an option to send automated reminders for upcoming overdue payments.
- Bank feeds - this allows you to automatically import account transactions into the accounting software from your bank. As a result there is no need to manually download and import bank statements into the system.
- Reconciliation - linked to bank feeds, this matches imported bank statement lines with transactions entered into the system. Matches are based on a number of factors, including amount, due date and contact name.
What’s the difference between cloud and desktop software?
Cloud-based accounting software is hosted on the software provider’s servers and accessed online, whereas desktop means that the software is is installed locally on your computers and servers.
Whilst accounting software was previously mainly been sold as desktop software, there is a growing trend towards cloud. Cloud solutions typically include all the features of the desktop software, but have a number of benefits, including lower and more predictable costs, greater scalability and flexibility, seamless updating, in addition to anytime, anywhere accessibility.
How much does accounting software cost?
The cost of accounting software will depend on a bunch of factors, including the range of features required, and the number of users, contacts, clients or transactions that will need to be supported, along with some others. Most accounting software providers offer a range of packages with varying levels of features and different price tiers. There's no need to pay for features that you won't need, so choose the most appropriate one for your business!
Given most accounting software products are cloud based solutions, it is usual for providers to charge a monthly subscription fee. Plans usually range from ~$5 - $70 per month (after a free trial period, usually 14-30 days), although there are options above this price range.
The great thing about cloud based accounting software is that generally you're not locked into a long-term contract. Instead, contracts are rolling on a monthly basis, allowing you to cancel at any time without incurring a bulky termination fee. Though its worth noting that if you're sure about your choice, accounting software providers will offer discount rates (e.g. 2 months free) if you sign up to an annual plan rather than a rolling monthly one.
What about free software?
Although some companies do provide free versions of their accounting software, there are usually limitations to the features, and number of users, contacts, clients or transactions etc. Such software may be sufficient for freelancers or very small companies in the short term, but over time growth and increasing complexity in business operations will likely require a paid service.
In my opinion, if you’re looking to try out free accounting software, I’d look no further than Wave Accounting. It’s completely free and has a decent range of features.
Which accounting software do you recommend for me?
I know how challenging it can be choosing the right accounting software - searching through the varying features provided by the wide range of providers is a daunting prospect! For this very reason, I’ve put together a checklist setting out the steps you should take before making such an important decision. I’ve also reviewed the most popular options in detail so you don’t have to - check out my comparison table here.
What features will I need?
As a small business, the accounting needs will likely be relatively straightforward, comprising general ledger, accounts payable, accounts receivable, fixed assets, and bank feeds and reconciliation. Hence in most cases, the standard plans of software providers may be sufficient. However, every company and industry is different, so it is important that at an early stage you work out exactly what you will require - I’ve set out a list of considerations here. Aside from the accounting features, it’s important when choosing a provider to make sure that their level of support is sufficient for your needs.
What training will I need to use accounting software?
Most software is designed in a user-friendly fashion to make the financial management process easy and understandable - hence it shouldn’t take too long to familiarise yourself with it. In most cases there are clear explanations and intuitive designs for non-technical users, in addition to a wealth of educational materials and support in case you get stuck at any point.
I have two business - can I use the same account for both?
Unfortunately this depends on the provider - some do support more than one business under the same account, but others will require you to set up (and pay for) separate accounts.