What is Accounting Software?
Accounting systems or accounting software packages are computer applications designed to handle financial tasks and accounts which were earlier carried out manually with large transaction journals. There are a range of accounting systems from basic and entry-level programs that store individual records to sophisticated and advanced programs that manage complex functions like accounts payable, accounts receivable, invoices, ledgers, payrolls as well as organizational assets.
Today, several businesses have started adopting online accounting systems that allow them to automate their accounting tasks, reduce accounting expenses and make better financial decisions through real-time reporting. Read on to find out why accounting software is necessary for businesses and what is accounting software’s role in helping you run a successful venture.
How to Use Accounting Software?
So, all your business processes are now streamlined with accounting software. What’s next? How do you make complete use of the software to receive all the immense benefits that it has to offer?
The first step that you need to do is to decide and select an accounting software that is right for your organisation. All accounting software does not come with the same benefits, and hence, you need to exactly know why to use accounting software and what features your software offers. Some of the basic functions that your accounting software must possess are:
- Invoice processing
- Expense and income tracking
- Vendor payment
- Organise financial statements
- Tax forms preparation
Accounting software helps businesses stay organised and keep track of their financial records. Here’s how you can use the above-mentioned functions of an accounting software for online businesses to take control of your financial processes within your organisation.
Accounting software for online businesses makes it easy to store invoice information of your vendors and customers. To create an invoice, you will be required to enter information regarding the transaction, product or service offered, quantity, price, invoice number, due date, account info, etc. Once the data is entered, you can save a pdf of it and mail a copy of it to your customer. This way, both you and your customer will have a record of the money that they owe you.
You must also enter the information into the software whenever you receive an invoice. This will help you keep track of who you owe money to so that you can pay the invoice easily and on time.
Track expenses and income
Your accounting software provides you with a clear view of the income and expenses of your organisation. Whenever you make or receive a payment, you can check the software for the new balance that shows the amount you owe and the amount that is owed to you. If you use accrual accounting, your software should offer features like accounts receivables and accounts payable tracking.
To get an accurate tracking of the amount you have in expenses, you can refer to your vendor invoices. Once you have a list of all your vendors, it becomes fairly easy to filter the ones with unpaid invoice reports and determine the business expenses. Similarly, to gauge the income that your business has earned, you can track the number of paid and unpaid customer invoices.
Making payments to your vendors is quite simple with an accounting software. As the software allows you to save all your invoices, you know the exact amount that you owe to each vendor. To pay your vendors, all you need to do is select the vendor, date, amount and the account, and print a cheque. You can also automate this process to avoid using handwritten cheques.
Organise financial statements
With accounting software, you can access your financial reports any time and anywhere you want. You can simply select the period or date and check all your profit and loss statements or the balance sheets within that period. Additionally, you don’t have to invest your time in preparing the statements as the software will track the income and expenses of your organisation and generate the report.
Storing financial transactions and statements within the software will prevent the loss of important records. Maintaining records on papers and documents can be tough as there is a risk of losing or damaging them. An accounting software enables you to organise the files better, have quick access to your records and keep them secure.
Tax forms preparation
In addition to all the features that you can use an accounting software for, there are some legal reasons to use it as well. When you are handling a lot of financial transactions and reports, mistakes could occur leading to a penalty for inaccurate filing during the time of paying taxes. Luckily, you can use the accounting software to help you with your tax preparation by analysing the right receipts and deposit statements.
What are the benefits of using accounting software?
Businesses using accounting software can benefit in several ways. Here are some solid reasons why getting an accounting software is the best thing you can do to boost your business.
Speed: Accounting software allows a faster entry and processing of data relating to back end transactions, customer invoices, cheques, bank deposits, etc.
Cost-effective: By using an accounting software, you can save up on the expenses and time that would have been otherwise spent by your staff while manually handling your accounts. As the software ensures the accuracy of the accounting data, you will also reduce the audit expenses.
Efficiency: As debt collections and stock control become more efficient with better use of time and resources, your overall cash flow is improved.
Security: You get an extra layer of security for your records by controlling who gets access to specific areas of the accounts. This helps prevent unauthorised access to your data.
Easy document accessibility: Whenever you need documents and reports for invoicing, it can be quickly accessed from the software. You can automatically generate all your documents like the purchase orders, credit notes, statements, etc.
Data accessibility across systems: Accounting data can be accessed on different systems in different locations at the same time.
Up-To-Date information: As the accounting software is automatically updated, you can be assured that the customer or client account or transaction that you are viewing at any time is up-to-date.
Accuracy: An accounting software effectively eliminates the chances of human error as compared to recording transactions and making entries manually.
Reporting: Usually, an accounting software will offer customisable reporting options so that you can produce data sets for a specific area to be evaluated. The reports generated can be used to make crucial business decisions.
GST/VAT Return: Accounting software enables you to automatically estimate the figures for GST or VAT returns.
Legibility: It is easier to read the data provided in the accounting software as compared to the ones filled manually. This can prevent errors resulting from poorly written figures.
How to choose the best accounting software?
If you are running a business, you need to invest in an accounting software to track and record your income and expenses. Ideally, this is the first software that you should be looking to purchase for your business, but many business owners postpone getting the software unless they have to apply for a loan or pay their taxes.
When you are planning to get an accounting software for your business requirements, you will be flooded with several options to choose from, and that could be confusing. However, you can easily filter out what you want if you are clear about the criteria that must be taken into consideration before investing in an accounting system. Here are some essential criteria to help you decide which software will make the best fit for your business.
Online or Offline
The first thing that you need to decide is whether you need an online software or an offline one for your desktop systems. Today, almost all businesses prefer going for cloud-based software because of the advantages that they offer over traditional offline software. Desktop-based offline software may find usage in some businesses like retail stores where connectivity to the internet isn’t necessary all the time. They can get their work done just fine with offline POS systems.
Some of the advantages that cloud accounting software has over offline systems are:
- You can just sign up for the cloud services and start recording your transactions right away.
- All upgrades and changes are implemented automatically without affecting your data.
- You get the flexibility of accessing your records from anywhere and at any time.
- You don’t have to worry about backup or maintenance as your service providers will take care of that.
- Collaboration between different departments within an organization becomes easier.
If you are choosing an offline accounting software, ensuring data security can be a tough job. But if you are planning to go for online software, the data security feature is probably the most important factor that you need to consider.
Ask your service provider about how they store the application data. Usually, companies make this information available on their website. Many companies rely on Amazon and Rackspace for their trustworthy cloud hosting services, while others may have their own servers as well. Before selecting an accounting software, you need to ask the company about the security measures they implement to protect your crucial information.
User Interface & Complexity
Most business owners don’t come from an accounting background. Even if the accounting software will be used by a dedicated accountant, it must offer an easy-to-use interface so that business owners can log in to the system and get an overview of their financial statements and records. If the software is complex to use, training the employees to use the software will take a significant amount of time, efforts, and costs. Therefore, you should choose software that offers a simple interface for its users and is not cluttered with unnecessary features.
Business owners tend to choose an accounting system based on their current needs. As their business starts to grow, the software fails to match the requirements and they are forced to migrate to new software. The process of completely shifting to another software from your existing system can be extremely challenging. So, it is recommended to choose a software which offers scalability features so that it can progress according to the growing business needs. Giddh, which is the best accounting software for small businesses, can offer you an entry-level version at the beginning which can be later scaled up to a feature-rich version as your business grows in the future.
Sometimes, an accounting software provider may offer a basic version of the software at a low cost and then charge extra for additional features and maintenance costs. It is always better to know about these costs before buying the software. So, you need to check if the software you are planning to buy has any hidden costs for its features. You can always go through the pricing page of the software provider’s site to check what they charge for their basic and premium features. Pricing details about any additional services will also be mentioned on their website.
After-sales support is an important feature of your accounting software, yet many businesses tend to ignore it. It doesn’t matter how easy-to-use or good your software is, you will need support at some point. If you get stuck with some part of the software and the support is not easily available, your investment will be futile. Moreover, some accounting software is available for a cheaper cost purely because they cut corners when it comes to a dedicated support team. It’s obvious that the support cost is excluded from their offering. It is better to avoid such products. You must always check for the quality of support before investing in an accounting software.
Adopting an accounting software for your business makes it easier to manage financial tasks with efficiency and accuracy. One thing to note here is that it doesn’t substitute the job of accounting professionals in your organisation, but rather enhances their productivity.
Giddh’s accounting software, which is the best accounting software in India, comes with an extremely small learning curve making it easy to master in a day and contains features that fit your individual business needs. It can help you and your audit/accounting team gain total visibility of the organisation’s financial health and prepare reports that can assist in making the right decisions for the future of the business.
Ready to try out accounting software for your business? Get in touch with us to take a free trial and select a software that is simple, affordable and time-saving.