Best Accounting Software

Accounting software helps businesses streamline and automate finance management processes. This helps companies ensure their books are accurate and cuts down on the time it takes for recurring processes such as invoicing and reconciliation.

Accounting software products vary in complexity and the features offered; many products are optimized for use by companies of a certain size, such as enterprise-level businesses or SMBs (small to medium sized businesses). Depending on the scale of the product, they can include features for payroll processing, as well as time and expense cost tracking. Some accounting solutions include industry-specific features such as project accounting for professional services companies and fund accounting for not-for-profit organizations.

It can also be a module of, or integrated with, business ERP systems. Integration with point solutions for accounting such as AP automation, budgeting, and forecasting or cash management is also essential. Finally, accounting software exchanges data with payment solutions or banking software.

To qualify for inclusion in the Accounting category, a product must:

• Maintain a company’s general ledger and chart of accounts
• Offer features for automating accounts receivable and invoicing
• Automate accounts payable workflows for payment processing and purchase orders
• Allow users to create journal entries to adjust transactions and account balances
• Track costs and revenues, as well as determine the profitability of the products and services sold by the company
• Manage cash, bank accounts, and payment methods (check, credit card, ACH, etc.)
• Assist users with the financial close process at the end of each accounting period
• Deliver standard reports such as financial statements and dashboards to track financial KPIs

What You Should Know About Accounting Software

While all accounting solutions include basic features for financial management, there are significant differences in functionality between different products. It is therefore vital to understand how robust a solution is by evaluating how its features can help you with your specific needs. Requirements for accounting software can vary per company size and industry, as well as the geographic presence of the company.

An accounting system should adapt to your existing processes. It is essential to know which steps need to be taken by which users for your company to move money efficiently. You can then tailor your search to a system that handles your workflows and automates or streamlines steps in that process.

It is also essential to prepare for the transfer of your financial data from the old system(s) to the new one. This is critical for the success of the implementation for several reasons, one of which is that your data needs to match the fields in the new system to maintain its accuracy. Incomplete or inaccurate data can completely change your numbers and financial statements; it is also necessary to keep historical data for compliance purposes and analytics. Make sure you understand which documents you need to keep to comply with financial regulations. Also, the more historical information you can transfer, the more relevant your reports will be.

Key Benefits of Accounting Software

• Increase data accuracy by removing the risk of human error in calculations.
• Maintain government compliance by enhancing the activities that impact regulatory standards.
• Speed up the entire accounting process through automated calculations and streamlined workflows.
• Easily organize and access data in a central location.
• Quickly pull together various accounting reports.
• Efficiently convey accounting data to various departments across an organization.

• Why Use Accounting Software?

  The primary purpose of accounting software is to manage a company’s financial information. Through the use of accounting software, companies track costs, revenues, and profitability, as well as comply with financial regulations and accounting standards.

  With accounting software, you can:

  • Increase data accuracy by removing the risk of human error in calculations
  • Maintain government compliance by enhancing the activities that impact regulatory standards
  • Speed up the entire accounting process through automated calculations and streamlined workflows
  • Easily organize and access data in a central location
  • Quickly pull together various accounting reports
  • Efficiently convey accounting data to multiple departments across an organization
  • Track financial transactions such as invoices, returns, payments, and so on

  Why Use Accounting Software?

  Accounting software is used by accountants, controllers, chief financial officers (CFO), and other members of accounting departments. Depending on the company size and the complexity of its operations, the accounting department varies in size and can include one person responsible for everything or many employees in charge of specific financial operations such as AP, AR, cash management, or expense management.

  It can also be used by independent accountants or accounting firms that manage finances for their customers. External accountants may use their own software to help clients or they may need to use the software of the customer.

  Finally, accounting software is used by executives and business owners who are interested in the financial situation of the company. Executives usually need to access reports and dashboards and rarely manage transactions or any other accounting activities.

  Kinds of Accounting Software

  There can be vast differences between types of accounting software. Accounting solutions can be very generic and provide essential features that any company can use or extremely sophisticated by including industry-specific functionality for medium and large companies. The delivery model and the way the modules of the solution are delivered are also relevant.

  Suite vs. best of breed – Accounting systems can be used to manage any aspect of a business that involves payment, but many are just the barebones: accounts payable and receivable. Suite systems often offer many modules that integrate inventory, expenses, time tracking, payroll, etc., and make reconciliations between these accounts easy and automated. Companies that are more specialized may make better use of a system that caters just to their needs. For example, a service provider may only need a general ledger that includes time tracking information; an accounting system that also manages expenses might best serve a consulting firm.

  Cloud vs. on-premise – Cloud vs. on-premise: Cloud accounting systems offer a software as a service (SaaS) pricing model and work inside a browser. On-premise tools are installed on hardware owned and maintained by the customer.

  Cloud – Most new accounting tools were born in the cloud; their pricing models are usually based on the number of users. Cloud-based software solutions are easy to implement, don’t require hardware investments and allow you to pay over time based on usage. Often, cloud tools have difficulty providing robust offline functionality that will enable you to complete actions and access accounts while disconnected from the internet. The cloud is usually a better option for small businesses due to its lower cost.

  On-premise – Many vendors that offer on-premise solutions also provide a cloud version of their software. Most customers who use on-premise tools purchase a perpetual license based on the number of users and pay an annual maintenance fee. On-premise systems might be client-server tools that require software to be installed on each user’s PC or could otherwise be browser-based. On-premise tools require IT support to install and maintain and also require investments in hardware. These systems may offer added security and usually can be customized without vendor involvement.

  Size of company – Size of company: Small businesses will often seek out a less expensive, easy-to-use interface that covers typical use cases such as billing and invoices. These might be single-entry bookkeeping with simple, standard reporting capabilities, but most are typically cloud-based and include mobile apps, offering a level of convenience to the harried small-business owner. Larger companies will need software that can handle many complex accounts requiring input from multiple roles. These should have more rigorous reconciliation measures, because higher volume and more complexity means a higher likelihood of mistakes. Additionally, audit trails and security measures help larger companies ensure the integrity of accounts maintained by many different employees.

  Industry – Tax codes, regulations, and best practices vary across industries. You will need to determine whether a product that specializes in meeting the standards of your industry is the best solution or one versatile enough to be customized to your needs. This may apply to companies of all sizes, from small businesses to large corporations.

  Accounting Software Features

  All accounting solutions include features for general ledger and chart of accounts. Since GL and COA make up the foundation of any financial system, an accounting solution cannot be used without them. Other features, such as accounts payables and accounts receivables, are also included by default, but not all accounting solutions offer the same level of support for them.

  More advanced features, such as budgeting and forecasting, are included in accounting solutions for medium-to-large companies, and are usually not included in accounting software for small businesses. These features can also be delivered as point solutions that can be used with any accounting system, but they include out-of-the-box integrations with most popular accounting solutions.

  The best accounting software includes robust core features and is flexible enough to allow companies to integrate with other solutions for advanced features.

  Common Features

  These are the typical features of accounting software that can be found in most solutions and are delivered out of the box:

  General Ledger and Chart of Accounts

  Journal Entries – Increases user efficiency by autopopulating based on previously entered information. Schedule future entries. Allow Journal Entries to be uploaded from an external source.

  Tags/dimensions – Ability to tag all transaction in the general ledger with customizable dimensions, classes, categories, etc. These dimensions should be available on any transaction, in any module in the system, and available to be reported upon.

  Audit trail – Automated, chronological tracking of activities that have affected a specific operation, procedure, event or record.

  Accounts Receivable

  Invoice customization – The layout of the invoice template is fully customizable, and you can add or remove fields. This can help optimize the invoicing process by personalizing templates.

  AR automation – Automation helps the user be more efficient by populating default customer data, setting up automated payments from clients, and automatically matching customer receipts to outstanding transactions.

  Collections automation – The system automates the dunning process to help drive collections.

  Accounts Payable

  AP automation – Streamlines invoicing by auto-populating invoices with recurring or predefined vendor values.

  Purchase orders processing – Software supports purchase orders and provides purchasing personnel, management, and accounts payable with visibility needed to streamline the procure-to-pay process.

  Payment processing – Ability to manage, track, and report on numerous payment types. Customize and automate complex purchase to pay workflow.

  Cost Management

  Companies need to capture, classify, and analyze different types of costs to determine how much they spend on each product and service they deliver. The final cost of a product or service, as well as the overall profitability of a company, can be influenced by many factors, both internal (waste or misallocation of resources) and external (market fluctuations).

  Cash Flow Management

  This feature is used by companies to collect, manage, and use cash. Since cash management doesn’t only refer to cash but also to any assets that can easily be converted into cash, this module can also be used to track the liquidity of the company.

  Reporting and KPIs

  General reporting offered covers all of the standard financial statements and meets the basic needs of the business. Other standard reports usually included in most accounting solutions are: accounts receivables aging reports, inventory valuation, cash flow reports, and so on.

  Mobile apps or mobile-friendly reports are critical for managers and business owners who require the ability to access their accounting system anytime, anywhere.

  Additional Accounting Features

  These features are usually not included in accounting solutions for small businesses because they aren’t always required. There are exceptions to the rule, and many vendors provide add-ons, point solutions, and integrations with software to complement their offerings.

  Multi-entity/consolidation – Multi-ledger and multi-tenant architecture. Automated consolidations, inter-entity transactions, and eliminations.

  Recognition rules – Automate recognition of revenue and expenses by defining recognition templates.

  Reconciliations – Transactions are imported from source systems, and automated matching reconciles majority of transactions. Includes user-flexible, user, defined matching, and grouping rules to help reduce the time needed to produce accurate reconciliations.

  Time and expense and payroll processing: Automated time and expense approval, reimbursement, and reporting. Payroll integration with an external payroll provider which automates the recording of payroll.

  Custom reporting – Reports created by the user to cater to specific requirements. If you can build it in Excel, you can build it in the custom report writer.

  Budgeting/forecasting – Create and revise an unlimited number of budgets, and plan and forecast scenarios. Basic budgeting can be useful for companies of any size, including freelancers and small businesses, while forecasting is a must-have feature for enterprises.

  Dashboards – An easy-to-read, often single-page, real-time user interface, showing a graphical presentation of the current status and historical trends of an organization's key performance indicators (KPIs) to enable instantaneous and informed decisions.

  Platform

  Customization – Allows administrators customization capabilities to accommodate their unique processes. Includes ability to create custom objects, fields, rules, calculations, and views.

  Workflow capability – Automates a process that requires a series of steps that typically requires intervention by several different users. Administrators can write rules to determine who and when a user needs to complete a step. Also includes notification of users when they need to take action.

  User, role, and access management – The ability to grant access to select data, features, objects, etc., based on users, user role, groups, etc. Some solutions provide advanced access rights such as the option to allow users only to view or change a part of sales or purchasing invoices.

  Internationalization – Enables users to view and transact business with the same content in multiple languages and currencies. Sometimes local regulations may require specific formats and detailed information to be included on invoices and other financial documents.

  Performance and reliability – Software is consistently available (uptime) and allows users to complete tasks quickly because they are not waiting for the software to respond to an action they took.

  Output document generation – Allows administrators to create templates that enable users to quickly generate dynamic documents in various formats based on the data stored in the application.

  Integration

  Data import and export tools – Ability to input, modify, and extract data from the application in bulk through a structured file. Accounting vendors provide their own tools or third-party applications for data import and export.

  Integration APIs – Specification for how the application communicates with other software. APIs typically enable integration of data, logic, objects, etc., with other software applications.

  The breadth of partner applications: Partner applications typically provide complementary, best-of-breed functionality not offered natively in a product.

  Trends Related to Accounting Software

  Bots and AI – While artificial intelligence for accounting is in its early stages, more and more vendors are starting to include it as part of their offerings. Most of these vendors released intelligent assistants that use machine learning and AI to help accountants with their daily tasks. All types of companies, including freelancers and small businesses, can benefit from accounting intelligent assistants.

  Two-tier implementation – Due to the limitations of some accounting solutions and ERP systems, companies sometimes choose to adopt two separate solutions to manage their finances. For instance, a manufacturer may choose an ERP that provides robust production functionality but weak accounting, as well as a different accounting solution that will better cover their needs.

  Potential Issues with Accounting Software

  Business owners and executives looking for accounting solutions should be aware of some of the possible challenges and limitations of this type of software:

  Internationalization – Not all accounting services can handle operations outside of the United States. If your business conducts transactions in other currencies or languages, this will narrow your search to systems that have been internationalized efficiently.

  Compliance – There are many accounting standards and financial regulations; not all accounting systems cover them all. Basic financial statements and reports for compliance purposes are usually included, but you need to make sure that financial compliance features specific to your industry are covered.

  Consolidation – When accounting systems are used across multiple locations, all financial information needs to be consolidated to be processed at the company level. This is not a problem when all users are using a single accounting solution, but it becomes a challenge when separate solutions, or different versions of the same software, are being used.

  Access to sensitive data – Accounting systems store personal and business financial data such as bank accounts and credit card information, as well as other confidential information, including social security numbers. It is therefore vital to ensure that only a limited number of users can access this type of information and that it is protected against external threats such as viruses or hacking attacks. A significant challenge that vendors need to address is the “bring your own device" trend, which means that users access accounting apps on their personal mobile devices, which aren’t always secure or protected against viruses.

  Integrations – Much of the information managed in accounting software is shared with, and can be leveraged by, larger ERP systems; oftentimes, these systems may offer their own accounting modules. Ensuring accounting information integrates well with current systems or expanding your search to more complex systems that can manage all of your company’s resources can be the key to choosing theright software.

  Software and Services Related to Accounting Software

  Software

  Point solutions fill the gaps left uncovered by accounting solutions or modules of ERP systems. Their purpose is to provide additional features for modules that already exist in accounting, such as AP and AR. Some examples of point solutions for accounting are: AP automation, AR automation, budgeting and forecasting, financial planning, cash management, etc. While small companies can use them, these solutions are a better fit for medium and large businesses.

  Advanced accounting refers to complex software designed for sophisticated financial analytics. Usually known as corporate performance management or enterprise performance management, these solutions provide features for data collection, deduplication, processing, and analysis, which are generally not included in accounting systems. CPM software can also be used to create complex budgets and provide forecasting information based on historical financial data.

  Services

  Business owners sometimes outsource part or most of financial management activities. For instance, many small companies prefer to outsource payroll processing to specialized companies. Large companies sometimes choose to replace large accounting departments with a CFO on demand (an accounting expert that is hired only once needed, on a temporary basis).

  Processing of financial documents can be a good option for medium and large companies with complex needs. Instead of buying additional software such as document management or AP/AR automation, companies can rely on service providers that use these types of solutions to automate financial operations for their customers

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