It is a computer program that helps accountants and bookkeepers to record and report financial transactions of a firm. It provides convenient calculations which are otherwise difficult to make manually.
Importance of accounting software (1)
Modern businesses find accounting software as an invaluable resource for them. It allows the recording, processing, and reporting of financial transactions within various modules such as trial module, payroll, general ledger, journal, accounts receivable and accounts payable. Before accounting software, large transaction journals were used to perform such tasks manually. It eliminates the high space coverage and stores the financial data in a system. Less space means fewer expenses for maintenance. Accounting software is easily accessible. Any permitted body can approach accounting data through accounting software and that makes convenient audit completion whether it is internal or external. The need for accounting software of any firm is specific to its demand. Small companies need off-the-shelf accounting software and on the other side, big firms demand complex and customized accounting software.
Advantage of accounting software
- Fast and simple processes for data entry
- Eliminates human error and improves the efficacy
- Less time is consumed to approve invoices and cash disbursements
- Save costs for hiring staff for manual accounting
- Access of multiple departments to centralized accounting information enhances their collaboration
- Timely acquisition of informative accounting reports enhances the decision-making processes
Accounting software comprises of different modules.The most common modules are:
- Core module
- Accounts payable- where the firm submits bills, maintenance costs and pays money
- Accounts receivable- where the firm submits money received
- Billing- where the firm generates invoices to customers or clients
- General ledger- it is a firm’s “books”
- Inventory or stock- where the firm maintains its inventory
- Sales order- where the firm records the order of customer to deliver inventory
- Purchase order- where the firm orders stock
- Bookkeeping- where the firm keeps the record of payments
- Financial close management- where the verification and adjustment are done at the end of the indicated duration
- Non-core module
- Debt collection- where the firm tracks and receives overdue bills
- Expense- where the firm-related expenses of employee are entered
- Inquiries- where the firm checks data on screen without additions or edits
- Payroll- where the firm tracks taxes, wages and salaries
- Report- where the firm prints out the information
- Timesheet- where the consultants and attorneys record the time of working.
- Purchase requisition- where the approval and tracking of purchase order requests are done
- Reconciliation- it compares the records of transactions from both parties to maintain consistency
Types of accounting software (2)
- Free accounting software
Small businesses can buy free accounting software. However, it comes with some limitations. For instance, blocked access to modern features or disruptive advertising.
- Small business accounting software
It provides all fundamental bookkeeping features to a small business such as reporting, payroll, invoicing and more. These are easy to use and simple programs. These are available over the net or off-the-shelf. The various price plans provide more functionality.
- Enterprise accounting software
It is a bundle of programs that helps the organization in keeping track of their financial transactions and results. These bundles are costly and provide all the basic financial tools along with a broad range of functions and features. For instance, they often integrate:
- Inventory control
- Supply chain software
- Customer relationship management
This software offers the features of industry-specific modules e.g for manufacturing or construction. It must be noted that a firm can enjoy its advanced features only at a high price. So this type of software is not meant for a simple or small organization.
- Online accounting software
This type of accounting software provides great cost benefits and flexibility. It eliminates the hardship of installing and maintaining the software at the firm’s body and allows remote access to services and data from anywhere. However, it can pose some risks as well, specific to:
- Protection of data
- Data portability
- Options for business continuity
- Dependence on Internet connectivity
An electronic spreadsheet is a software of choice in small businesses where transaction volumes are very low. It is less costly and can be configured in various ways. However the chances of error are high since data may be submitted at the wrong place, entered incorrectly, or sometimes not submitted at all. This results in false financial statements.
- Custom accounting software
This type of software is meant to fulfill the requirements of an organization. Such software is developed when the highly specific requirements of a firm are not met by any other software. However this is the least taken option since its maintenance requires more attention than any other software.
Top providers of accounting software
It is a software vendor that provides best-in-class accounting software to small and medium organizations. It helps the company to track expenses and profits, receive bills, prepare invoices and manage purchase orders.
This provider was set up in January 2003. It supports self-employed professionals and small firm owners in their financial responsibilities. It offers cloud-based accounting software with easy-to-use tools.
It is a worldwide provider of NetSuite ERP software. It offers an option for the SuiteCloud platform. It is a customizable feature that allows a company to achieve its full potential. It includes the development and testing of apps, protection of information, integration between an existing cloud app and NetSuite.
- Quickbooks online
It targets small enterprises, freelancers, and independent. It combines accounting tools on one platform and provides robust tools to aid small firms in simplifying time-consuming and tedious financing and accounting processes.
It is a software provider that helps enterprises in enhancing and improving their financial operations. It provides a cloud-based accounting program that manages invoices, tax compliance and funds disbursements.