How do I choose the best business accounting software?
Understandably, today’s busy entrepreneurs might feel bewildered when choosing between computerised accounting systems. Apart from selecting a solution that is compatible with the office computer system or opting for a cloud-based solution, there are other decisions too: what about free invoice software? Will the new package handle VAT returns? And is it necessary to understand double-entry bookkeeping?
Here, we set out the essential features and explain the vital concepts in straightforward terms, so that you know what to look for and can make a fully informed decision. The information below will enable you to select the best PC-based or online accounting software to suit your business needs.
Will accounting software make my business more efficient?
As well as practical advice from a qualified accountant, small business accounting software can boost office efficiency in a number of ways. With a logo upload, it is possible to create beautifully designed and fully trackable invoices that reflect the brand or company look. Additionally, with most packages, it is possible to manage customer accounts and analyse payments with just a few clicks of a mouse.
Whether your business is a private limited company, a partnership or a sole trader, your back office administration could benefit from accounting software if it is not already doing so. In particular, some of the latest feature-rich programs and easy-to-use interfaces will probably save you time and money, once implemented.
If you have noticed that your accounts or bookkeeping is particularly time-consuming, disorganised or could just do with some streamlining, the latest accounting software could be precisely what your back-office operation needs. Usefully for small businesses, the right accounts software enables quick, straightforward budgeting. With a few clicks, you can compare actual expenses versus budgets, or check current sales performance with ease.
Some other typical tasks which accountancy software can automate are:
- Sales invoice production with income analysis by department or member of staff.
- Account statements and analysis of unpaid invoices by age, to facilitate credit control and debt reduction.
- Purchase order and remittance advice production.
- Payroll, including salary or wage payslips.
- Quarterly value added tax (VAT) returns to Her Majesty’s Revenue & Customs (HMRC), if VAT-registered.
- Reconciliation of bank accounts and credit cards.
- Preparation of monthly trial balance
- Profit and loss accounts and balance sheet preparation, for annual reports.
Additionally, depending on the system chosen, a business can automate its stock control with inventory tracking.
What other advantages does accounting software offer?
Cash flow projections rank highly among the benefits. Accurately predicting the money coming in and going out of a business is vital; cash flow forecasts help to maintain solvency and warn of possible liquidity problems.
Accounting software also tends to encourage good record keeping and, therefore, compliance with legal requirements. By keeping proper expense and payroll records, small businesses can minimise their accountants’ fees – and reduce stress in the event of a possible tax query.
Which accounting features do I need ?
With such a wide offering of invoice and accounts software, how can one be sure of choosing the best solution? On the one hand, straightforward software packages such as FreeAgent cater for micro-businesses and freelance contractors who need to raise invoices but have little or no experience of using financial software. There again, growing organisations will need most or all of the accounting features listed above, along with:
- Manual or (preferably) automatic synchronisation with business bank accounts.
- Customisable financial reports.
- Mobile app access, to stay up to date during business travel or in remote meetings.
- Employee timesheets or professional time tracking.
- Payroll* including hours worked, holiday payments, sickness or unauthorised absence and workplace pensions.
- Supplier updates, if the software is installed on the office computer.
- Cloud storage to enable data sharing – such as with an accounting service – and automatic backups.
*Also, for growing businesses with employees, computerised PAYE (Pay As You Earn) income tax and NICs (National Insurance contributions) calculations should use the latest software parameters to calculate employer and employee payments correctly.
Designed to deliver solutions that are easy for businesses to use, some accounts programs or online solutions for SMEs include a free trial or an evaluation period, along with optional telephone support. Depending on the business requirements, it may be worth comparing their features in detail. For instance, Zoho Books handles purchase orders and accounts payable, but FreshBooks does not. Similarly, QuickBooks Online handles multiple currencies with exchange rate updates every few hours.
Transaction forms that are easy to use as well as flexible contact records are useful for start-ups and growing firms. In the same way, transaction categorisation and the ability to set up multi-currency accounts will be essential for businesses that invoice customers in different countries.
Some applications do not come with payroll functionality as standard, while others have powerful integration features. In some cases, accounting packages might offer multiple currencies, inventory management or time tracking as optional bolt-ons. Indeed, as businesses grow, scalability becomes increasingly important. Before buying, then, one should check: is the software expandable?
Why opt for a cloud accounting solution?
Cloud accounting applications use what is known as the software-as-a-service model. Their advantages include simple, straightforward deployment, seamless updates and automatic backups. Although some accounting software providers charge monthly or annual subscriptions, others offer their service (mostly) free-of-charge. With Wave, for instance, invoices and receipts are free to set up and use, though there are transaction fees with the associated (but optional) Stripe payment handling. Alternatives include FreshBooks, also designed for SMEs and easy to integrate with chargeable debit and credit card handling.
Typically, cloud-based accounting applications have associated mobile apps to allow work when away from base. Some systems make scanning expense receipts directly into the business accounting system easier, too. In short, when portability or remote access is a must, web-based systems offer significant benefits.
How should I introduce accounting software?
If your new accounting software is to replace an existing system, you may decide to opt for a trial period. Implementing the changes gradually and running both the previous and the new systems in parallel with each other allows proper testing and checking. That way, as you gain confidence and see tangible results, the business can change over to the new accounting system. As a result, the efficiency savings should free up time and allow you to focus on core activities and customer care.
In summary, accounting software helps SMEs to maintain proper records, integrate their customer database with their invoicing and comply with legal requirements – notably, the timely completion of periodic VAT and income tax returns to HMRC. If well implemented, the right back-office system can boost business efficiency, improve customer communication and lead to long-term growth.