As a small business owner, how do you keep your books organized? Accounting software is a business tool that manages financial transactions and has the power to analyze everything from business practices to your operation’s cash flow. The data from managing financial transactions can quickly be used to generate reports and projections regarding your small business's growth and performance. This functionality and ability to offer insights may help your business save time and money. That’s why it’s important to understand all your options when it comes to accounting software.
To help you understand how to select and integrate accounting software for your business, this guide will:
- Explain the rise of accounting software
- Detail the reasons to opt for accounting software
- Outline the types of accounting software for small business
- Provide a checklist for identifying the right accounting software to meet your needs
Accounting software
A report by Transparency Market Research found that in 2017, the global accounting software market was valued at over $5.7 million. That same market is expected to reach over $11.7 million by 2026.
The market’s steady growth means, in part, that accounting software is not ubiquitous in today’s business landscape. Viewpost, a company that helps businesses integrate payments and invoices to their existing accounting platforms, conducted a 2017 report of 5,000 small-to-mid-sized U.S. businesses and found that 18% still didn’t use any form of accounting software.
In a separate survey, Software Connect, a company that provides consulting services to businesses seeking new software, dug into 3,000 software projects from 2017 to determine some of the trends in software buying. What they determined was that 37 percent of companies surveyed were buying accounting software for the first time.
Due to technology advancements in accounting software, many business owners have changed to more robust software platforms. Twenty-nine percent of respondents to the Software Connect survey were replacing a system that they considered to be dated.
Why implement accounting software?
There are a number of reasons that a small business should consider using accounting software if it makes fiscal sense for the company. Here are some of the potential benefits:
Punctuality. Accounting software is one way to get paid faster. It can easily track accounts receivable and take immediate action when payment is past due.
Analytics and insights. Accounting software tracks all transactions, allowing detailed reports and insights on your business’s financial health. This functionality means a small business can easily make projections and real-time business decisions with just a few keystrokes. Producing these reports manually would be very time consuming. Automating these features can help smaller businesses compete with larger firms.
One-stop shop. Accounting software doesn’t just have to handle products or be internal. It can help with other functions regarding your company’s finances, including payroll, inventory and invoicing. The Software Connect survey showed that more than 20% of respondents need software that handles payroll, inventory and invoicing. Similarly, in the Viewpost study, 21% of those surveyed have already integrated their accounting software with an invoicing and payments product.
Not all small businesses stay small. Make sure the accounting software you choose can match your long-term goals and grow with you.
Types of accounting software
There are two main forms of accounting software: (1) desktop downloaded software, and (2) SAAS, or cloud-based.
The more traditional route of downloaded software requires upkeep on the part of the business owner. New versions of the software must be downloaded and maintained. Data is stored on an in-house server. If your small business is large enough to have an employee dedicated to IT, this might be something to consider.
Cloud-based software is growing rapidly. It stores data online and allows it to be accessed from virtually anywhere. It also eliminates the need for the business to update and maintain features. Because there is less maintenance, it tends to be the cheaper and more popular option for small businesses.
Recent data breaches and high-profile hacking incidents may have made small business owners leery of cloud-based systems that store data on external servers, but that might be misplaced anxiety. According to SCORE, a nonprofit association that offers education and mentorship to small businesses, security and accessibility are two crucial factors when it comes to evaluating where a business should store its financial information, and that it is a misconception that cloud-based systems are less secure than in-house software. In-house servers can of course also be vulnerable to hacks.
What are your company’s accounting software needs?
The next step is to assess exactly which accounting software features would be most beneficial to your business, and to also think about features you don’t need.
Go through the following checklist to make sure the software covers all of your business's specific needs:
- Obtain the opinions of your key players. Gather your IT person, bookkeeper and accountant in a room to narrow down the features you would like your software to have. Decide who will have access to the software and what type of functionality each person needs, to avoid overexposing your customers' financial data. Make sure everyone is on board with the functionality that makes the most sense for your small business and understands what this new software will and won’t be able to accomplish.
- Make sure the new software works with current programs. This is why you want to make sure you have your IT person weigh in on this decision. You don’t want to choose a piece of software that doesn’t fit with another program that is already crucial for your business, like your payroll system. If you already have accounting software that you feel is outdated, now is also the time to determine how you will be transferring all the data from the old system to the new. Make sure to understand the export functionality for the new system to make that transfer as painless as possible.
- Decide between cloud-based or desktop software. How and who you want to access your new accounting software will quickly narrow down your options. Also, assess an accounting software company’s safety parameters to make sure that you’re comfortable with how they store data. A data breach can make it hard to regain your customers’ trust.
- Make sure your software can grow with you. Not all small businesses stay small. Make sure the accounting software can match your longer term goals. If the software has the capability to match your growth, also make sure the service won't become prohibitively expensive for your business.
- Vet the software's customer service. Of course, we all want to think that implementing, using, and maintaining accounting software will be smooth sailing, but there will inevitably be some bumps along the way. Will there be someone there to talk you through these hurdles and get you on the right track? Ask about the options for getting in touch with support staff so you understand what your relationship will look like with the new software company.
CO— does not review or recommend products or services. For more information on choosing the best accounting software, visit our friends at business.com.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
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