Most business owners know that accounting is one of the most important aspects of running a company.
Without organized finances and accurate financial statements, it's impossible to tell if the business has a profit or loss.
Basic financial reports such as income statements, balance sheets, charts of accounts, and others help business owners, shareholders, investors, and creditors see clear financial gains or losses. These reports also assist CEOs and financial officers with determining where to cut back on expenditures and which budgets to increase.
It's pretty obvious. If any aspect of a business requires software and automation, it's the accounting department.
What is accounting software?
Before diving into the key features of accounting software, let's define the basic benefits this software provides.
What is accounting software?
Accounting software helps businesses streamline and automate finance management processes. It helps companies ensure their books are accurate and cuts down on the time it takes for recurring processes such as invoicing and reconciliation.
Because there are so many accounting software options available, finding the one that's right for your business is imperative.
For example, some software is great for small businesses in niche industries, while others are optimized for enterprise-level organizations.
All accounting software, however, should have these key features listed below:
1. Basic accounting functionality
All accounting software should include basic accounting functionality, such as general ledgers, chart of accounts, invoicing, account reconciliation, accounts payable, and financial reports. They also help keep track of finance-related laws, like state-by-state regulations on things such as internet sales tax.
2. Payroll and time tracking
If the company has its own employees – versus contracted employees or those employed with an agency – then payroll is a must-have.
Almost all payroll software includes time tracking, which is helpful for hourly employees or businesses that keep track of individual job costs. Some payroll software also include tax integration as well.
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3. Expense tracking
If the company's employees regularly turn in expense reports for reimbursement, some accounting software offer options to keep track of employee expenditures.
Specialized accounting software features
Beyond the key accounting features listed above, there are also more complex, specialized functions that accounting software can perform.
Mid-market level or larger companies may rely on multiple types of software for day-to-day operations, such as CRM or ERP systems. For these businesses, it's important to make sure their accounting software easily integrates with other systems already in place.
2. Complex accounting standards or tax codes
While most companies will benefit from standard accounting software, some industries have more complex accounting standards or transactions that are affected by tax codes.
In addition, there may be local or state regulations or tax codes that need to be included in financial reporting or routine tax filings.
3. Ease of use
For a new company, any accounting software should be fairly easy to use once the accountant has been trained. However, many companies or accounting departments already have their own strategies and processes in place.
If possible, it's best to find software that works well with these techniques so the transition is as smooth as possible.
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4. International utilization
If a company operates outside the United States or regularly works with clients from other countries, internationalized accounting software may be necessary. Not all software includes support for foreign currencies, so these businesses may have limited software options.
Every business needs accounting software
Bookkeeping is no longer done on paper and stored in large three-ring binders.
If your company plans on scaling at any point in the future, you need to digitize your books with accounting software. In fact, investing in accounting software should probably be one of the first purchases a new company makes.
Thanks to the vast number of software options, businesses can find the perfect software for their needs.
Interested in learning more about accounting? We've compiled the top 30 accounting statistics of 2019 – detailing everything from AI's role in accounting to cloud computing.