FreshBooks: No. 1 In Accounting Software
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What is accounting software?
Accounting software is a fundamental application that allows an organization to record the flow of money for internal and external review and auditing. It is the primary tool for assessing the financial health of the organization and for meeting legal compliance through such core financial tools as general ledger, accounts payable and receivable, purchase order, stock or inventory and billing. Modern implementation of the application expands to payroll modules, electronic payment, timesheet and expenses among others in order to gain a wider foothold in the market.
A good accounting software is a given if you want to steer your business to success. It should not only be capable of presenting a quick summary or detailed presentation of profits and losses along with your other financial transactions: it should also keep you meeting the legal requirements of the specific region or country where your business is operating.
If you are in the UK, for example, your accounting software should be fully MTD compliant, to facilitate automatic tracking of professional and business transactions for taxation purposes. If you are in the US, the sweeping Tax Cuts and Jobs Act requires accounting software that is fully flexible in handling the new legal mandates.
Aside from addressing evolving legalities, your choice of accounting software should let you automate labor-intensive accounting tasks, accelerate tax preparation, and reduce the risk of human error in the workplace. The software should eliminate critical bottlenecks such as inaccurate audit information. A 2018 survey by AccountancyAge shows that 89% of AAT members look at advances in accounting technology as opening up new opportunities for them.
It this article, our software experts present a comprehensive definition of accounting software, explain how accounting software could help you manage your business and give you a list of candidate applications to help you acquire your ideal system. Specifically, we look forward to giving you a good handle on these topics:
What are examples of accounting software?
- FreshBooks – A fully-featured and simple client invoicing and time-tracking system used by more than 5 million businesses around the world. Ideal for freelancers and small businesses looking to fast track their sales cycle and keep their processes in line with standards and regulations. The solution is well integrated and mobile friendly. If you need a reliable FreshBooks alternative, check out our other comparison articles.
- Xero – A handy asset for managing different accounting operations, preferred by solo accountants and small business teams. The capable accounting management system works in line with business rules and priorities, and manages money in a way that will coincide with their goals and long-term objectives.
- QuickBooks – Available in different editions, QuickBooks caters to the accounting needs of any company. As a notable Xero alternative, it offers a vast array of insights and organizational capabilities to help companies keep their accounting data organized, including overdue items, payable bills, accounting notes and contacts’ data, and standard accounting operations. Also popular for great Profit&Loss reporting.
- Wave – It’s the definition of what a free accounting system for small and developing businesses should be. A solid QuickBooks alternative that combines accounting, invoicing, and receipt scanning into one compact and straightforward package, it allows easy integration with other third-party applications for seamless data migration. Wave is likewise fully optimized for mobile usage.
- Zoho Books – The accounting app of a reputed software family, Zoho Books is designed to help small businesses handle their finances and stay on top of their financial operations. It offers an array of unique accounting features, including cash flow statements, P&L, Balance sheets, and many more.
- CashManager – An on-premise/cloud-based accounting software designed to streamline your accounting processes—from computation, automated quotation and invoicing, and reconciliation of banking statements and faster than ever without sacrificing accuracy.
- Declaree – a cloud-hosted expense management solution with a mobile app that helps company employees digitize their expenses. With Declaree, staff can instantly capture receipts instead of manually filling out end-of-month expense forms. This functionality affords companies full control over their workers’ expenditures.
There are many other examples of accounting software that are popular and reliable. For more ideas and alternatives, check out our list of top 10 accounting software solutions to consider in 2019.
FreshBooks, a very popular accounting solution
Why use accounting software?
We discussed what is accounting software, but what are its main benefits? Why use accounting software at all? The tool with its deep financial information shows you where to cuts costs and drive productivity. With an appropriate system in hand, companies automate bookkeeping tasks and draft in-time tax-friendly reports, but what is most important, they can forecast expenses and develop a smarter investment strategy with this system.
These are the key benefits of accounting software:
- Simplification. Accounting systems put finance control in the hands of a non-accounting audience, designed to give numbers a meaning while performing automated calculations. With little to no training at all, the business owner can complete all accounting operations and comply with legal standards from a desktop computer or a mobile device, and without paying an external party to keep budget in the loop.
- Cost savings. Accounting and finances systems automate core calculations and administrative procedures and take control of your revenue framework so that you won’t have to outsource finance management to an external expert. In parallel, they also reduce costs related to printing and distributing documentation and store sensitive data in secure and monitored locations.
- Full financial transparency. From an accountant’s or an auditor’s point of view, the highlight of good accounting systems is that they prevent costly and recurring human errors. Calculating inaccurate sums or failing to report data in time can easily lead to a business crisis, and that’s where automating calculations is most useful.
- Accurate forecasting. It’s one of the main advantages of accounting software. Understanding in detail the patterns and trends of your financial performance is something that would take ages to complete without a solid system. Accounting software gives numbers a meaning, helping you understand where to cut expenses or where to invest more. With a clear overview of your current financial status, you will find it easier to develop smart strategies and allocate resources the right way.
- Productivity. Should a business owner have to choose a single suite of digitized services to improve performance, his first option should definitely be accounting software. These systems drill deep inside the most cumbersome, day-to-day tasks of companies, collect, organize, and analyze their most sensitive data, and what is most important, make smarter use of their money.
- Tax compliance. Many of today’s top accounting systems are dedicated to payroll assistance and reporting and adhere to tax regulations automatically. Once you’ve activated them, they become your number one source of tax and audit information; they store all the important details for you to maintain a transparent workflow.
- Improved relationships with customers. One could argue that accounting software has little to do with how customers are served, but that couldn’t be any further from the truth. Most accounting systems nowadays (regardless of their main functions) work around effective billing and invoicing, and prevent all sorts of delays and miscommunication. They are also easy to personalize on the business’s behalf, and thus make company performance appear more professional and credible.
- Security. Financial data is the company’s most valuable information and must be prevented from falling into the wrong hands or getting lost by mistake. That’s exactly what accounting and finance systems do for their users: prevent accounting from being jeopardized in any way, and keeping an extra copy in case you need to retrieve them. In most cases, you will get to build your internal security structure and decide who will have access to sensitive data.
A quick look at reporting in Zoho Books
What are the types of accounting software?
Let’s now proceed to the various types of accounting software. Depending on the type of operations, accounting & finance systems fall under four different categories. Note that there are also comprehensive accounting suites designed for enterprises that combine the best features of each category. Here is a brief overview:
Billing & Invoicing systems
Billing and invoicing systems complete companies’ basic, day-to-day tasks, including check writing and informing customers about their due payments. They are important to preserve control over the accuracy of accounting figures and make service look more professional and credible to the end recipient. On the company’s side, billing and invoicing tools help document financial activity and prepare it for authorization and validation.
Examples: FreshBooks, Zoho Books, and Zoho Invoice
Payroll management systems
If you are looking to preserve control over your account payables and account receivables, you should be looking for payroll management systems that will handle it all. These tools were developed to perform an array of different tasks, including calculating employees’ salaries, cutting deductions, depositing the salary directly into staff members’ bank accounts, producing tax forms and payslips and more. On the long run, they will secure your financial transactions, cut expenses, and help prepare detailed reports.
Examples: Xero, Zenefits, AccountEdge
Enterprise resource planning systems
This is one of the most important accounting software categories. It combines all systems used for product planning, material purchasing, inventory management and control, distribution, accounting, marketing, finance, and HR. The latest ERP solutions also offer modules for CRM and business intelligence, so that the company can learn from its own practices and prepare better strategies in the future.
Examples: Intacct, Brightpearl, Odoo
Time & Expense management systems
These apps are designed to help expedite billing cycles and approve expenses on the go, and are usually configurable enough for any business to adjust them to its operation pace. The core rationale behind them is to help collect payments faster and detect slow and ineffective practices that were not visible before. Their biggest advantage is being able to produce detailed graphical reports on how time and resources are being used in each company.
Examples: FreshBooks, Zoho Expense, Expensify
Xero offers its users a wide range of accounting features
What does accounting software do?
How does accounting software work exactly and what features does it offer? There are many different ways in which accounting software can optimize your business, depending on its main features and objectives. From simplified invoicing to complex tax reporting, accounting systems come with all sorts of extras that are not even feasible without an appropriate system.
So what does accounting software do? Here are some of the features of accounting software:
- Accounting – Accounting is the main component of each system in this category and the one you should be looking for first when choosing a reliable solution. What we have in mind by ‘accounting’ is general ledger, fixed assets, accounts payable & receivable, and bank reconciliation. These are, of course, the basic and most important ones, while advanced systems have much more bells and whistles to offer to their users.
- Billing & Invoicing – There are accounting systems exclusively devoted to billing and invoicing, but most of them still treat similar operations as an integral module of any finance operation. Thus, they let customers automate mundane collections, adjust operations to new and effective payment methods and industry standards, and prepare accurate and in-time invoices for their clients.
- Budgeting and Forecasting – This is also a common bundled module in most accounting systems, which calculates and interprets finance performance for the current year and helps estimate the budget of the upcoming one. Using it, companies can prepare their estimates and set up feasible and optimistic sales targets.
- Management of fixed asset – Both as a separate tool or an inclusive module, fixed asset management helps manage financial data much more accurately. The module combines features such as audit history, cost records, depreciation calculation, resource allocation and many more.
- Payroll management – With an array of payroll features, you will be able to calculate and process employee payments, prepare and print their checks without delays, and respond to all active legal and tax commitments without errors. There will be systems out there exclusively devoted to payroll management, used by enterprises and high-tier performers to remind them of their financial obligations.
- Project accounting – Project accounting software is usually packed in separate systems that represent the accounting version of vertical industry software. They are most welcomed by construction operators and software developers, where both costs and applicable rules differ from one project to the other. The main capability of this software is estimating and handling overheads and costs related to labor, material, and equipment, in line with all other features frequently met in accounting systems.
- Fund accounting – These features are to be found in accounting software designed for government agencies and nonprofit organizations and include tracking donation expenditures, grant management, GASB (governmental accounting standards board) regulations, and a special suite of financial reports.
- Inventory management – Inventory management is a specific toolkit developed for stock control, and where you will find all the necessary tools to give your business a higher shelf-life product line. This means you will be able to control the availability and movement of your products and avoid all sorts of delivery issues such as overstocking or understocking.
Wave is a reliable, and free, accounting solution
What should you consider when getting an accounting system?
Of course, the answer to this question depends mostly on the specific needs and priorities of your business, but there are several key criteria each system has to meet to be worth the money you’re investing. Here are few thoughts on what you should be looking for:
- An integrated invoicing module. Regardless of the core operations, your accounting system should be complete (inventory management, for instance) and, if possible, you should always acquire a system that offers at least some basic billing and invoicing functionality. This way, you will spare yourself the trouble of purchasing additional software or migrating data to another system.
- Customization. There is no “one-size-fits-all” accounting system (in fact, this is one of the most diversely targeted software category), and the reason for that is that each company runs specific finance calculations and adheres to a different set of rules. If you’re unable to find a specific system that matches your business model (and that will hardly ever happen), look for a flexible program you can adjust to your operations, one that is able to grow with your business.
- Ease of use. There is nothing simple about accounting procedures and calculations, so the least your new accounting system should be able to do is to give you an intuitive environment to work in. This means information should be arranged neatly and functions should be available on a single dashboard. You should complete operations within minutes following a navigation pattern you already know.
- Security. As we already pointed out, accounting systems play around a business’s most sensitive data, namely the numbers it depends on. In order to ensure that making calculations and sharing data within the system is bulletproof, choose a reputable vendor and check security mechanisms in advance.
- Connectivity. At the point where you’re buying an accounting solution, you will already have an array of software pieces to put up with it. In order to avoid changing your entire software infrastructure for the needs of a single program, do things the other way around—get a system that integrates with the tools you have, or, in the best scenario, offers open API for you to connect it with any system you want.
- Mobile usage. Mobile-ready accounting systems are no longer a luxury only enterprises can afford, so why not choose one for your needs? Most popular vendors nowadays offer native Android and iOS apps for their users, where operability is just about the same as with the desktop version of the system.
- Pricing. The software logic applies again: the more a system can do, the more it will cost, so if you can afford a fully-featured and ahead-of-its-time suite, go for it! You should know, nevertheless, that quality accounting systems can be purchased at a fraction of that price, and some of them are even available for free.
- Reliable support. Most accounting software vendors pride themselves with knowledgeable and fast-to-respond teams, but the truth is you won’t know how efficient they are before you’ve actually had an issue to submit. To prevent some bitter disappointment for the money you’ve invested, test support in advance.
How much does accounting software cost?
Accounting is not exactly the cheapest and small-biz friendliest software arena you will come across. Much of its premium functionality and instant technical support is still reserved for enterprises, but that doesn’t mean a quality system cannot be found below that line.
In general, accounting & finance systems come with flexible monthly/yearly subscriptions or single time quote-based licenses, while some of them are also available for free (or offer an unpaid package for small teams or such looking for basic functionalities). The gaps between different plans are usually formed by differences in available features, number of users, available storage, and access to support.
Here are the costs of accounting software of popular vendors:
- FreshBooks – Offers three affordable plans in total, starting with the Lite ($15/month to bill 5 active clients), followed by Plus ($25 for 50 active clients) and Premium ($50 for 500 clients). Annual savings may apply to each offer, and a 30-days free trial is also available.
- Xero – Xero’s pricing starts at $9, the Early Package where you get 5 invoices, 5 bills, and 20 bank transactions. The other two plans are Growing ($30/month) and the Established Plan ($60/month).
- QuickBooks – QuickBooks offers a variety of payment plans, depending on the intended application and size of the business. Their main accounting suite is available at $10 (Simple Start for basic invoicing); $17 (Essentials, for billing and multiple users); and $30 (Plus for tracking inventory and printing 1099s). All plans offer annual savings and a free trial where you can test their features.
- Wave – Wave is one of the best accounting systems that can be acquired for free, as all basic accounting functionality is available at no cost, and the customer would only have to pay card processing and payroll fees in selected countries.
- Zoho Books – Its pricing scheme is similar to FreshBooks’, with a Basic plan for 2 users (1 user, 1 accountant), 50 contacts, and 5 automated workflows priced at $9/month; it’s followed by the Standard Plan ($19/month for 3 users (2 users, 1 accountant) and 500 contacts, and the Professional Plan ($29/month for 10 users and unlimited contacts).
- Brightpearl – Brightpearl is a popular and very powerful accounting system that charges users annually. Once you’ve selected the desired plan, you’ll have to pay some of the following annual licenses: £3,780/year (an Entry package for 3 users and 800 orders); £9,600/year (High Growth package for unlimited users and 2000 orders); or £16,800 (the Established package for unlimited users and 5000 orders).
- Intacct – Intacct is one of the currently most-popular ERP alternatives on the market, tailored to meet the needs of any business. The system is priced on a quote basis, which means that you should contact the vendor, and get an individual package prepared to meet your needs and financial possibilities.
What are the potential issues of accounting software?
The trend of designing industry-specific accounting systems. If facing a choice between a general, standardized accounting solution and one that has been developed to meet the specific needs of your industry, choose the latter. Note, nevertheless, that in most cases you won’t be relying on years of reputation to support its quality, so make sure all the features you need are there and do so in advance.
Scalability and customization. Due to the fact that accounting deals with a non-creative subject, there is little developers can do to make the digitized process more engaging than usual. Thus, accounting systems won’t be the most thrilling and open-to-configuration apps you can get your hands on. What could be a good course of action on your behalf is to choose a customizable solution and make sure you can implement your rules and business specifications inside. This will also ensure that you won’t have to replace the system as your business starts developing.
Lack of integrations. When looking for a solid accounting and finance system, make sure it has an open infrastructure that supports third-party integrations, or at least that the connections you need are already taken care of. Settle for nothing but the best, as developers nowadays are more than aware their tool has to work in line with sales software, business intelligence systems, CRMs, project management apps, and a variety of other services.
What does the future of accounting look like?
A central position for workflow automation. Accounting software developers are now focused on what more can be done to facilitate accounting, basically giving accountants and finances experts a break, and getting more of the heavy lifting off their shoulders. In technical terms, this means that workflow automation is rising, and soon there will be no data entry of operation that won’t be automated.
Deployment no other than in the cloud. It sounds almost incredible that all that complex accounting machinery companies took months to install will now become history, but that’s how it is. The new trend is cloud hosting, as it is a safer, faster, and considerably more affordable alternative.
Machine learning: the future of accounting. The rise of AI-powered accounting will continue as businesses seek the aid of advanced programs to seek out low-value and redundant tasks, assign it to machines, and leave humans with more time to do tasks that are better left to their creative capabilities. Machine learning should allow accountants to enjoy faster computation time, more accurate calculations, effective detection of any fraud, and point to accounting trends to impact any business’s overall bottom line.
Is any of these accounting applications in the cards for you right now?
Having reached this section, you most likely have a good idea of what type of accounting software to purchase. Before making that last hurdle, consider going for any free trial offered by a target vendor. If it’s Freshbooks, for example, you can easily sign up for Freshbooks free trial here.
You might want to expand what you’ve gained from this article to other areas of specific interest to you. If this is the case, how about checking out any of these: