Using accounting software saves hours of time compared to handling the books manually or using a spreadsheet. Accounting software reduces or eliminates redundant data entry, such entering the customer's address on the quote and then adding the work order and invoice. It's a booming industry, with one study projecting that the global accounting software market will reach $11.8 billion by 2026.
If you are a sole proprietor with modest income, you may not need accounting software, but small business owners who carry inventory and are juggling a large number of customers and employees will save time and have more accurate records if they use accounting software.
Here's a few tips on how to choose the right accounting software for your business.
Look for Certain Features
Narrow down accounting software choices by making a list of small business accounting features you need to run your business. Consult with your team first to ensure you are covering everything your business needs, because you may find that there are features that you need that you hadn't thought of before. And once you choose and implement the software, it can be costly to onboard your team on another software solution after finding out the previous solution didn't have the necessary tools.
Most of the small business accounting features include:
- Inventory management
- Sales tracking
- Managing customer contacts
- Merchant account support
- Business tax reporting
Some accounting software is designed specifically for industries such as construction, manufacturing, and wholesale distributors. If your small business is in an industry with specific accounting requirements, there may be accounting software with features to meet those requirements. Don't forget to ask other people in your line of work for opinions on their accounting software to help guide your selection.
Determine if It Fits Your Business
Now that you have narrowed down your accounting software choices, ask some questions while you shop for small business accounting software to determine if it is the right fit for your business.
Will the Software Grow With You?
Find out if the software has modules you can add later if needed. An example of a common module you may add later on is payroll accounting.
If modules cannot be added, does the software upgrade easily to a more capable version of the same accounting software? Or, does the software export to a data format such as CSV so you can upload it should you switch to another accounting software title later?
Does Your Bank Support It?
Being able to download transactions from your bank saves a lot of time, so find out first if your bank will support the software.
Should It Be Online or Installed?
Online accounting software is web-based software that runs securely through an Internet browser. Online accounting software is especially convenient for accessing accounting data and records from multiple computers.
Can Access Be Restricted for Some Users?
If more than one person is using the accounting software, one individual may need full access to all functions, but others may only need access to data entry areas and not reports.
Does the Accounting Software Come With a Free Trial?
It is always best if you can try the software before you buy it. To see how useful the software documentation is, download the free trial and try it out for a few days to see if it's a fit.
Factor in Support Costs
Remember to figure support costs into your accounting software budget. Some accounting software provides fee-based support by email or phone from the moment you start using the software. However, it is common for the cost of small business accounting software to provide support at no cost for a set period of time so you can ask questions when you first start using the software without incurring additional expenses. After that time period, you pay for support annually, quarterly, or on a per-use basis.
The accounting software may have a free online user forum where you can ask questions as well. This can be a good alternative to fee-based support when your question is about something simple, like how to use a feature.
Don't Pay for Unnecessary Features
A smaller, less complex business needs fewer features than a larger business does. No matter how irresistible extra "whistles and bells" seem, resist the temptation to buy more accounting software than you need.
Generally, you pay more for additional features in accounting software. If your business grows enough to need more robust financial features, the cost is justified, but until then you should stick with the basics. For smaller businesses, there are now enough accounting software options available that over-buying is unnecessary.
Consult With Your Accountant
Accounting software does not replace an accountant for ensuring that your business adheres to legal and accepted accounting and tax practices. But when you use accounting software, your accountant won't have to spend time doing certain tasks, which saves money for a small business.
Any good accounting software will have the reports you need to give to your accountant on a monthly, quarterly, and annual basis. Ask your accountant what reports are needed and be sure you can generate them with the accounting software you are considering.