What is Accounting Software?
Accounting software is computer software that records and processes accounting transactions within functional applications. These functional applications are different sections of the software dealing with particular areas of accounting such as Accounts Payable, Accounts Receivable, Budgeting, Cash Management, General Ledger, Inventory Control, Payroll, Purchase Order, Report Writer and Sales Analysis.
What is Accounts Payable?
Accounts Payable automates the recording, tracking and payment of invoices or bills received from your vendors for purchases of products and services. You can track vendor relationships with ease when you automate your Accounts Payable. Instant access to your records allows you to take advantage of early payment discounts, as well as determine which bills to pay and when to pay them. You’ll also tighten control of your cash flow by tracking how much you owe each supplier, when specific invoices are due, and what discounts are available. Not to mention, you can reduce errors by automatically printing repetitive checks and preparing recurring invoices.
What is Accounts Receivable?
Accounts Receivable tracks things like customer invoices, contact information and payment history. Keep in mind that creating invoices for your products or services is typically done by Order Entry, Time and Billing, or Point of Sale. With this application, you can easily track late payments and interest rates. You don’t need to pull multiple spreadsheets to figure out which payments are overdue and how much interest you should charge. You can save time with built-in rules that will automatically calculate appropriate rates and late fees. Having your customer data stored in one place will help keep your staff organized and efficient. You can track customer payment terms and even prevent further sales until an account is in good standing. Applying Balance Forward or Open Item Tracking allows your company to be flexible when tracking your customer payments. You can decide whether to have your customers pay off their bills in lump sums, or pay for each invoice individually.
What is a Budgeting Application?
Budgeting helps you forecast your expense and revenue figures for the year. In addition, this application tracks and reports on the actual financial progress of your company compared to your expectations. You’ll be able to reduce the time it takes to create annual budget figures. This will free up time for you to explore what-if scenarios and effectively plan for the financial future of your business. Custom reports provide you with a way to clearly look at your business from every angle, drilling down to the detail behind the bottom line and enabling more informed decisions. A Budgeting application also creates reports to compare your budgeted figures versus your actual spending, which will help inform your expectations of revenue and expenses.
What is a Cash Management Application?
Cash Management records details of all receipts, disbursements, deposits and related transactions of your multiple bank and cash accounts. It also serves as a centralized location for all inflows and outflows of cash. You will improve your security and reduce human errors through automated forecasting and reconciliation. Stay on top of your cash flow by simultaneously tracking your register and bank balances. With Cash Management you will always know when checks have cleared, what transactions are outstanding, how much each bank account contains, and exactly where all your money is. This application also allows you to use multiple bank accounts for deposits and checks, which gives you the flexibility to receive and disburse money from separate accounts.
What is a General Ledger Application?
General Ledger is the foundation of your accounting system. It accumulates your transaction details from other applications and prepares financial reports. Your General Ledger application will provide your managers with accurate, up-to-date information in order to make short and long term business decisions. It also includes the controls and audit trails necessary to ensure that the correct information is reported. Income Statements, Balance Sheets and Statements of Cash Flow are all standard reports needed by management to judge business progress. In addition, these key business reports are used to collect information to file tax returns, and banks require them to receive and keep business loans.
What is an Inventory Control Application?
Inventory Control keeps track of all information about the items that your company builds, buys or sells. This application also simplifies the management of pricing products and helps maintain the most effective inventory stock levels. You’ll tighten control over your stock levels and prevent inventory costs from consuming too much of your spending. Maintaining lower inventory levels will free up more of your cash flow for other investments which can directly affect your bottom line. No matter what size your company is, you need to accurately track inventory and sales to maximize your profitability. When you automate your inventory you’ll always have an up-to-date item count that allows you to quickly determine which products are selling and which are not.
What is a Payroll Application?
Payroll calculates employee earnings, prints pay checks, and tracks salaries, wages, bonuses, tax withholdings, and deductions. This application also provides reports for completing tax-related forms and enables accurate payments for taxes withheld. Payroll makes sure your employees are paid correctly and on time. You’ll be able to eliminate typical payroll errors caused when using manual computations and spreadsheets. Additionally, all of your employee pay data will be stored in one central location, which will save you time when processing payroll. With this application, you can also easily comply with rules and taxes on a federal, state, or provincial level. You will be sent yearly updates on the new regulations, so you won’t ever have to manually track them again. You may be required to pay an annual fee for this update feature.
What is a Purchase Order Application?
Purchase Order allows you to create orders for services and products your company needs. It will track the vendor, purchase quantities, item or service purchased, delivery timeframes, payment terms, and costs. This application adds security and accountability to your ordering processes. It also helps to eliminate vendor payment errors and track the delivery time of items you have purchased. You can ensure that each order is legitimate, authorized, and trackable. This can be especially important when different people place orders within your company. By automating your purchase order creation, you can eliminate the practice of “eyeballing the shelves” to determine your order quantities. By linking your Purchase Order application to your Inventory Control application, you will have instant access to your exact stock quantities, movement history, seasonal trends, and supplier lead times.
What is a Report Writer Application?
Report Writer creates custom reports using data already existing within your accounting applications. All applications such as General Ledger, Inventory Control, etc. include standard pre-designed reports, but still may not provide the type of report you need. A Report Writer enables you to create virtually any print or onscreen report using existing data. Typically this application is used to create reports that will be used more than once. It can also generate reports that are too complex and time-consuming to create by hand. Generating reports with this application is in effect “simple programming,” and a certain amount of training may be needed in order to maximize your return on investment. Alternatively, many firms will create custom reports when you need them, for a fee.
What is a Sales Analysis Application?
Sales Analysis allows you to track trends in sales personnel performance, revenue forecasts, win rate, and length of the sales cycle. Sales Analysis aids in your understanding of what products are being sold by whom, into which regions, and for how much. Using this information to determine your sales trends, you can make improved purchasing decisions and identify your most profitable customers. This application also allows you to break down your sales further by showing you which reps are the most profitable by analyzing sales performance. Additionally, your win/loss trends can help you to determine which sales tactics are working and which are not. Last but not least, you can calculate and distribute sales commissions based on fully paid, partially paid, and even unpaid invoices.
Do I Need Accounting Software?
The management of money generated by your online business may be handled through Accounting Software or through E-commerce Software. Two Accounting Software programs that have dominated the pack for years are QuickBooks www.quickbooks.com and Peachtree www.peachtree.com. Some e-commerce software, like Netsuite www.netsuite.com provide basic accounting functions within the program as well as e-commerce store and CRM functions. Integrated e-commerce solutions tend not to be as robust in each area.
Should I Buy or Rent Accounting Software?
Deciding on what type of software system to invest in depends greatly on your comfort level with technical control, your need for customization and your purchasing power. For example, when you purchase your software system there is a larger price tag upfront, but in the end you will actually own the software. Buying your accounting software gives you the ability to customize it if needed and puts you in charge of security controls. It also means you have additional maintenance responsibilities.
With hosted software, you rent your accounting system from an Application Service Provider (ASP) instead of buying it. Although your initial price is low, you will have monthly rental fees that provide access to the software, regular updates, and technical support. This reduces the need for employees to install or maintain the software. However, since you don’t own the software, it’s likely you’ll not be able to customize it to meet your specific needs. You also do not have as much control over any security issues you may encounter. Finally, your accounting data does not reside on your computers but resides on your ASP service provider’s computers. Before making your decision either way, be sure to consider all of the following points.
Benefits of Buying the Software
Wider Choice of Software Options Available
The option to purchase software has been available for a longer time than the ASP option. Therefore there are thousands of software options from which to choose. Frequently you will find a software solution designed specifically for your industry.
One-time Purchase Investment
You invest in one payment for the software at the time of purchase (note: various financing options exist to ease the payment for the software). Although there will be ongoing upgrade and support costs, you won’t need to make additional payments to use the software…you own it.
Can be Customized to Meet Your Specific Needs
When you own the software you can tailor the configuration, change pre-set defaults, and decide when to install upgrades. The software will be used only by your company, and it’s common that some standard features will need to be customized to best complement your business processes.
Prevent Security and Accessibility Failures
Since you have control over your system you control the measures to prevent unauthorized users from entering your system. You also determine the security of your data since it doesn’t ever need to travel outside of your company’s secure network.
Find Multiple Local IT Companies that Represent the Software
Simply because of the commonality of purchased software, you will likely find local companies that offer and support a variety of software solutions. This can be an advantage when training new employees to use the software.
A few companies that have continually “led the pack” for years include: www.quickbooks.com, www.peachtree.com and www.sage.com. These companies offer a variety of accounting software programs for you to purchase to meet the size and specific needs of your company.
Benefits of Renting Software or a Hosted Software Solution
Pay a Low Monthly Service Fee to Access the Software
For companies that do not have as much capital available, paying a low monthly service fee per user lessens the financial strain of a software investment. You can also add modules and users as your business grows, which eliminates the possibility of outgrowing your system.
Rental Fees Include Support, Upgrades, Security and Data Back-up Systems
All of the upkeep responsibilities are in the hands of the ASP, and they are all included in the monthly fee. You will always have access to the newest version of the software, and your ASP typically provides daily back-ups of your data.
Decrease the Need to Hire and Train Employees to Maintain the Software
Since tech support responsibilities will be done by your ASP, the staff time needed to maintain the system is not needed
Reduced Time Needed to Install Your Software
Since the ASP provider already has the software loaded on its server, you’ll not need to install it on yours. That means less time spent getting your company started using the system.
Access Your Data From Anywhere with an Internet Connection
If you have access to the Internet, you have access to your accounting system. All you need to do is find an Internet connection and log into your system.
If the benefits of a hosted software provider sound good to you, checkout the following companies: www.quickbooksonline.com and www.netsuite.com. In the past, hosted software had a bad reputation for slow response time during peak traffic times; however, new technology has resolved this problem.
Need Help to Get Started with Your System?
When you purchase an accounting system, keep in mind that the software cost is only part of your investment. Besides purchasing the software you need to budget time and money for installation, configuration and training. In addition, you may also need to convert your existing accounting system data to the new system.
The amount of time needed to get your system up and running can add up. Some firms try to tackle this on their own. Although this is possible, remember that your other responsibilities still have to be done while you try to learn, install, and configure your new system. You’ll find that the services provided by your software seller will lighten your load and get you off to a great start with your new system. The costs charged by your software seller vary by locality and software purchased, but typically this can range from 50% to 200% of the software price. Additionally, the software needs to be installed and configured specifically to work with your office’s hardware like fax machines, printers, and servers. When installing the software it also is very common to customize many standard features to better work with your day-to-day business tasks.
It is critical that your staff understands your new system. Initial and periodic orientations will help them use the system efficiently and reduce their apprehension about the changes being brought on. A common trait of dissatisfaction with software can be traced to lack of training. All of your staff will need training on the basic functionality, and management will need to understand how to effectively interpret your new reporting capabilities.
Training Your Employees
Software isn’t a good investment if it’s not used to its fullest extent, so it’s vital that your employees understand the capabilities of your new system. You’ll want to train your entire existing staff on the general functionality of the software, the accounting staff on the use of specific applications, and management on report interpretation. Additionally, the System Administrator will need to be shown how to perform maintenance tasks such as upgrades, updates, logs, and back-ups.
Where Do I Begin My Search?
Whether you’re just beginning your search, or have spent weeks sifting through brochures, www.findaccountingsoftware.com can help you free of charge! We highly recommend them as an excellent way to weed through the overwhelming choices. A two-step form filled out by you provides them with some general details about your accounting software needs. Within two business days they will contact you for a brief phone interview, to learn about your unique project needs, and to answer any questions you may have. Your project details are anonymously distributed to trusted partners that have expressed interest in projects such as yours. You decide how many options you wish to discuss; only the most qualified firms will be allowed to contact you. Trusted partners that have been matched with your project will contact you to discuss how they can assist with your accounting software needs.
How do I decide?
Accurate bookkeeping is important in operating a successful web company. Research and choose your accounting software carefully. Make sure that it integrates with your website shopping cart software (and vice versa). Some software options that are especially helpful to online businesses included:
- XML or IIF (IIF is proprietary to QuickBooks) Data Import
- Integrated Shipping
- Remote Access
- Banking Transaction Import
- Integrated Payroll
XML or IIF (IIF is proprietary to QuickBooks) data import allows you to automatically transfer customer and order information into invoices. This is a very important feature! Not only will this save you a tremendous amount of time by not having to key in all your orders manually, it will also eliminate data entry errors.
Integrated shipping capabilities allow you to transfer a customer’s address onto a shipping label. This eliminates address errors and saves time. Numerous accounting programs actually interface directly with UPS and Fedex to create a shipping label without leaving the program. The ability to associate tracking information with orders is a very helpful feature in handling customer service issues.
Remote access is a great feature allowing you to access your accounting software from another location. This feature will definitely save you time and money. Your bookkeeper and accountant can use this feature to access your data for reconciliation and tax preparation. Rarely will you have to bring material to their office; rather they access your accounting program from their desk computer and look up all the needed information.
Banking transaction data import allows you to upload transactions into your accounting software. For example, if you pay for a tank of gas for your company car with your company debit card, you will not have to manually enter the transaction when you return to the office. Not only will this save you the time of manually entering all your transaction, it will also keep you from making costly mistakes caused by forgetting to enter a transaction.
Integrated payroll makes the chore of paying your employees simple and easy. The once overwhelming task of payroll is made simple by calculating employee earnings, printing pay checks, as well as tracking salaries, wages, bonuses, tax withholdings, and deductions. The ability to print the necessary tax form you need to file for your state is a very valuable feature!
Handling Accounting transactions well is crucial to your business’ success. Whether you buy software to perform all tasks in-house, or rely on an outside web-based service, you will need to track: money coming in and going out; inventory levels; sales performance; and customer data. The more closely your chosen accounting solution matches your business’ needs, the better able you will be to make timely and informed business decisions.
IMPress Action List
Below is a list of the steps necessary to choose an accounting software program. Be sure to check off each task as you complete it to stay focused on this important business decision.
- Familiarize yourself with the basic accounting functions
- Decide if you need accounting software or if your e-commerce software is sufficient
- Decide whether to purchase a particular software program or rent an online accounting service
- Make sure accounting software integrates with your website shopping cart software
- Decide if you need help installing your accounting software
- Train yourself and your employees to use your accounting software