As businesses evolve and transactions become more complex, the need for robust accounting software becomes increasingly evident. Choosing the right accounting software for your business is a pivotal decision that can significantly impact the efficiency, accuracy, and overall health of your company’s financial operations.
In this article, we will provide the essential considerations and practical steps to help you navigate the process of selecting the perfect accounting software for your business. From understanding your unique needs to evaluating features and scalability, we present a comprehensive approach to ensure that this solution matches with your business goals.
Key takeaways
- Consider factors, such as the size of your business, your industry-specific needs, and the complexity of your financial transactions.
- Choose accounting software that can scale with your business as it grows. Ensure that it can handle an increasing number of transactions, users, and data volume.
- Assess the features and functionalities, considering key aspects, such as invoicing, expense tracking, payroll processing, and financial reporting.
- Opt for accounting software with a user-friendly interface and intuitive design, which reduces the learning curve for your team and facilitates efficient use of the software.
- Understand the cost structure of the accounting software, including subscription fees, implementation costs, and any additional fees for extra features.
Step 1: Evaluate How Much You Want To Spend on Accounting Software
Most businesses operate within a budget, and overspending on accounting software can affect your overall financial health. Assessing your budget can help you choose a solution that aligns with your financial resources.
Also, as your business grows, your accounting needs may evolve. Considering your budget allows you to choose a platform that can scale with your business without requiring a significant financial investment each time you need to upgrade or add features.
The cost of accounting software goes beyond the initial purchase or subscription fee. It involves factors, such as training, support, updates, and potential future upgrades. Therefore, it’s important to strike a balance between the affordability and the quality of the solution. While it may be tempting to choose the cheapest option, it’s crucial to ensure that the software meets your business requirements and provides reliable support.
Below is a summary of pricing for some of the most popular small business accounting software:
Software Provider | Monthly Pricing |
|---|---|
QuickBooks Online | $30 to $200 |
Wave | Free forever |
FreshBooks | $17 to $55 or custom-priced |
Zoho Books | $0 to $275 |
Step 2: Consider the Features You Will Need
Selecting the right accounting software for your business involves considering a range of features that cater to your specific needs and help streamline financial processes. It is important to consider how you’re going to use the software. For example, if you’re going to use it to actively manage your business, you’ll want to select software that offers invoicing, account reconciliation, and financial reports.
However, if you only want to track expenses, free software like Wave would work well. Deciding which features are important for your business will ultimately help you save money because you can opt for simpler software if you don’t need the more advanced features.
Here are key features to look for in accounting software:
- Invoicing: The software should have the ability to create and send professional invoices to your clients, customize invoice templates, and track the status of invoices as sent, paid, or overdue. Ideally, you would also be able create recurring invoices and send automated payment reminders for past-due invoices.
- Expense tracking: You should be able to record and categorize business expenses, link bank and credit card accounts for automatic transaction updates, and monitor spending patterns.
- Tracking and paying bills: The software should be able to perform various aspects of accounts payable, including processing purchase orders, receiving and paying vendor invoices, printing checks, and payments via online bill pay.
- Bank reconciliation: Match transactions in the accounting software with those in your bank statements so that you can identify discrepancies and ensure accurate financial records.
- Project tracking: Project tracking for small business accounting involves monitoring and recording various aspects of a project to ensure accurate reporting and financial control. This includes budgeting, time and expense tracking, client communication, and invoicing clients based on project milestones or time spent.
- Financial reporting: Access customizable reports to analyze specific aspects of your business, and generate standard financial reports, such as profit and loss statements, balance sheets, and cash flow statements.
- Fixed asset tracking: While most small business accounting software providers besides Xero don’t offer the ability to track fixed assets, such as property, equipment, and vehicles, this feature will ensure compliance with accounting standards and allow you to accurately calculate depreciation.
- Payroll: Whether offered as a direct or indirect integration, it will allow you to calculate and process employee salaries and taxes, handle payroll tax compliance, and generate pay stubs and reports. It’s nice to have payroll integrated with your bookkeeping software so that the required journal entries are automatically recorded.
- Inventory cost tracking: If you deal with inventory, it is crucial your bookkeeping software tracks the cost of inventory purchased, sold, and remaining in ending inventory using either the average cost method or first-in, first-out (FIFO) method.
- Inventory management: In addition to tracking cost, some bookkeeping software will track and manage inventory levels, monitor product sales and restocking needs, and integrate with ecommerce platforms if applicable.
- Scalability: Choose accounting software that can scale as your business grows. Consider the software’s ability to handle increased transactions, users, and features.
- Integrations: Integration capabilities are essential for a seamless workflow. Check if the accounting software integrates with your customer relationship management (CRM), ecommerce platform, or other business applications.
- Tax compliance: Ensure the software helps with tax-related tasks, such as tracking deductible expenses, generating tax reports, and staying compliant with tax regulations.
In our first example, a freelancer doesn’t require any features other than the ability to track expenses. Therefore, it’s unnecessary to invest in accounting software like QuickBooks Online, which provides access to features like invoicing customers and reconciling bank accounts. The following are the most important features in this scenario:
- Expense tracking: A reliable expense tracking feature allows freelancers to record and categorize their business expenses easily. This includes expenses such as office supplies, travel, meals, and any other costs associated with their work.
- Receipt management: The ability to capture and store digital copies of receipts is essential. Many accounting tools allow users to upload and attach receipts to corresponding transactions for better record keeping and audit readiness.
- Mileage tracking: Freelancers who travel for work should have a mileage tracking feature to log business-related travel. This is important for claiming deductions for taxes.
- Banking integration: Seamless integration with bank accounts streamlines the expense tracking process by importing transactions that can then be categorized.
- Mobile accessibility: Access to accounting features on mobile devices is beneficial for freelancers who need to track expenses because it allows them to manage their finances from anywhere.
A retail store requires more robust accounting features to manage its finances and operations effectively. The ability to manage inventory is crucial, as is sales and revenue tracking and sales tax compliance. Here are some important accounting features for a retail store:
- Inventory management: Retail stores need advanced inventory management features to track stock levels, monitor product sales, and automate reorder processes. This helps in preventing stockouts or overstock situations.
- Point-of-sale (POS) integration: Integration with POS systems is crucial for retail accounting. This ensures that sales transactions are accurately recorded in the accounting software, providing real-time insights into revenue and inventory levels.
- Sales and revenue tracking: The ability to track sales and revenue is essential. Retail accounting software should provide detailed reports on daily, weekly, monthly, and yearly sales, helping businesses analyze performance trends.
- Purchase order management: For efficient procurement, retail stores need a feature to create and manage purchase orders (POs). This helps in tracking supplier transactions and maintaining a clear record of inventory purchases.
- Employee management: Features related to payroll, employee scheduling, and time tracking can be important for retail stores with multiple staff members. This contributes to efficient workforce management and compliance with labor regulations.
- Tax compliance: Retail accounting software should support complex tax calculations, including sales tax. It should generate accurate tax reports and help ensure compliance with local tax regulations.
A lawn care business has specific accounting needs related to its services and operational structure. For example, tracking expenses and employee time is important, as well as a reliable mobile app and job costing. Below are the essential features for a lawn care business:
- Job costing: Job costing features help in tracking expenses and revenue associated with specific lawn care jobs. This includes costs for labor, materials, equipment, and any other job-related expenses.
- Estimating and quoting: The ability to create estimates and quotes for potential clients is important for lawn care businesses. This feature helps in setting customer expectations and can be integrated with invoicing once a job is completed.
- Equipment and asset tracking: Lawn care businesses often rely on specialized equipment. Accounting software should allow businesses to track and depreciate their equipment, helping with maintenance planning and financial reporting.
- Seasonal billing: Some lawn care businesses operate seasonally, so accounting software should support seasonal billing cycles and provide flexibility in invoicing based on service schedules.
- Materials and inventory management: Features for managing materials and inventory are important for businesses that use fertilizers, pesticides, and other supplies. Tracking usage and reordering supplies when needed helps in cost control.
- Mileage tracking: Lawn care professionals may need to travel between job sites. Mileage tracking features help in recording business-related travel for tax deductions and expense tracking.
Step 3: Determine the Usability Factors That Will Fit Your Business
Look for software with an intuitive interface that matches your skill level and is easy to navigate. A user-friendly design can save time and reduce the learning curve, so you should consider how quickly you and your team can learn to use the software. Some providers offer tutorials, webinars, and customer support to assist with the learning process.
Additionally, multiuser access is important if you have more than one user, and accounting software that can accommodate multiple companies is essential if you require multi-business support. If collaboration is needed within your organization, look for accounting software that includes collaboration features. This may involve multiple users accessing and working on financial data simultaneously.
Step 4: Figure Out the Type of Accessibility You Will Need
To determine the type of accessibility you will need in accounting software, you should consider where your team members work. If you and your employees often work remotely, travel, or need access to financial data outside the office, cloud-based accounting software with online accessibility is essential.
Because cloud-based software relies on internet connectivity, a secure internet connection is essential for consistent access. Meanwhile, a desktop solution doesn’t require an internet connection. However, if you’re sharing your books with a tax preparer, it is much easier to do so with cloud software because they can log in from anywhere. With desktop software, it is much more difficult and labor-intensive.
You’ll also want to consider whether mobile accessibility is crucial for your business. If employees need to access financial information, approve invoices, or perform other accounting tasks on mobile devices, look for software with mobile compatibility. Also, determine the roles of individuals who will interact with the accounting software. If multiple users across various departments need access, consider a solution that offers role-based permissions and access controls.
Step 5: Decide Whether You Will Do Your Own Books or Hire a Bookkeeper
Deciding whether to do your own books or hire an internal bookkeeper is an important consideration when implementing accounting software. Both options have their advantages and drawbacks, and the choice depends on various factors, including your business size, complexity, available time, and expertise.
Here are reasons to consider each option.
Do Your Own Books | Hire a Bookkeeper |
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Are you interested in hiring a bookkeeper but don’t know where to start? Check out our guide on how to hire a bookkeeper for important considerations and a free job template.
Step 6: Evaluate the Customer Support Options
Good customer support is crucial. Check if the software provider offers phone, email, or live chat support. Be sure to also consider the following factors:
- Implementation assistance: During the initial setup and implementation of accounting software, having reliable customer support can be invaluable. Assistance with configuration, data migration, and troubleshooting ensures a smooth transition to the new system.
- Familiarity with software: It is important to select software that most bookkeepers are familiar with, such as QuickBooks Online. This ensures that they will be able to help you troubleshoot any issues that may come up while using the software.
- Training and onboarding: Quality customer support provides training resources and assistance during the onboarding process. This helps users, especially those unfamiliar with the software, quickly learn how to use the features effectively.
- Problem resolution: Inevitably, issues or questions may arise while using the software. Responsive customer support helps resolve problems promptly, minimizing downtime and potential disruptions to your business operations.
- Software updates and upgrades: Accounting software is regularly updated to introduce new features, enhance security, and address issues. Good customer support ensures that you are informed about updates, understand the changes, and receive assistance if any challenges arise during the upgrade process.
- Technical support: Access to reliable customer support demonstrates the software provider’s commitment to meeting customer needs. This accessibility helps you address urgent issues, ensuring that your business operations run smoothly.
- Customization and specialized needs: For businesses with unique requirements or customization needs, good customer support can provide guidance on tailoring the software to meet specific demands. This is particularly important for businesses with industry-specific needs.
- Accessibility and responsiveness: Quick and responsive customer support demonstrates the software provider’s commitment to meeting customer needs. This accessibility helps you address urgent issues, ensuring that your business operations run smoothly.
- User confidence: Reliable customer support fosters confidence among users. Knowing that help is readily available instills trust in the software and encourages users to explore its features and capabilities.
Step 7: Research Different Accounting Software
Researching different accounting software options is a critical step in making an informed decision that aligns with your specific needs and goals. It allows you to identify solutions that are tailored to the specific requirements and complexities of your business and also those that can scale with your business, accommodating increased transaction volumes, users, and additional features.
Understanding the cost structure allows you to compare pricing models, subscription plans, and additional fees to find a solution that fits with your budget. Many accounting software providers offer free trials or demos, which can help you assess whether a particular solution meets your requirements before making a purchase decision. It will also help you to evaluate the user interface to determine whether the software is intuitive and aligns with your team’s skill level.
Researching the vendor reputation is also important. This is because it allows you to review the track record, reliability, and credibility of different accounting software providers, ensuring that you choose a reputable solution.
Our guide to the best small business accounting software provides recommendations for different types of businesses and is a useful tool for deciding which software is the best fit for you.
Step 8: Check Out User Reviews
Read reviews from other small business owners to understand their experiences with the software. Look for feedback on its ease of use, the quality of its customer support, and its available features. You can also seek feedback from potential users within your organization. Seek to understand their preferences, pain points, and specific needs when it comes to accounting software usability.
Frequently Asked Questions (FAQs)
The cost of accounting software can vary widely depending on factors such as the features included, the size of your business, the number of users, and whether you choose a cloud-based or desktop solution. Additionally, there are different pricing models, such as subscription-based, one-time licensing fees, or usage-based pricing. Many accounting software providers offer a free plan, and average paid subscriptions range from $15 to $200 or more a month.
Accounting software offers numerous benefits to businesses, regardless of their size. It automates various financial tasks, including invoicing, expense tracking, and payroll, which minimizes errors and improves overall efficiency. It allows you to generate financial reports quickly and easily. You can create and send professional invoices to clients, and some software also allows for automated invoice reminders and recurring billing. You can easily track and categorize business expenses, making it simpler to monitor cash flow.
Some of the top accounting software providers include QuickBooks, Xero, FreshBooks, Wave, and Zoho Books. To learn more about which provider would be the best fit for your business, check out our guide to the best small business accounting software.
Cloud-based software offers accessibility from anywhere with an internet connection, automatic updates, and scalability. Meanwhile, desktop software may provide more control but requires maintenance and might be less flexible.
Bottom Line
Choosing the right accounting software for your business is a crucial decision that can impact your efficiency and overall business operations. By keeping our tips in mind, you can make a well-informed choice that aligns with your business goals and enhances your financial management capabilities.
