Mohammad Khan Yusufzai is Masters in Management, specializing in Economics, Finance and Marketing, with corporate & lectureship exp.
All businesses use one or the other accounting software for their book-keeping needs. From simple Excel sheets to highly complex and customized software, the market is filled with various options to suit specific needs. But does your small business really need separate software for its book-keeping needs? What are the costs and benefits associated with it? And what else can an accounting software offer? Let's find out.
What Is An Accounting Software?
Simply put, accounting software is something that will make your accounting and book-keeping process easy. Depending on the software, it may require a user to have basic or advanced accounting knowledge. But under no circumstances is accounting software a replacement for book-keeping. It cannot automatically record transactions as and when they happen. It requires input in one way or another.
Thus, Accounting software is a computer program that helps in the entire accounting process of a firm, from recording to reporting. It makes accounting calculations, procedures, and analyses easier to perform. It reduces the workforce needs as it can automatically post the transactions as and when they happen. Therefore, it ultimately helps a business in costs and time savings.
How Does Accounting Software Work?
Accounting software utilizes a set of digital programs, either through the web or software package that can record, track, organize, manage and report financial transactions of a business entity. A bit technical?
Let me simplify it for you. Think of accounting software as your virtual employee. He can perform all the functions of an accountant. So, He knows about Accountancy laws, rules, regulations, and guidelines. And he never fails to record all the effects of a given accounting transaction. Now, all you have to do is to inform him about a transaction you just made. Of course, this has to be in a language understandable by the software. After knowing about the transaction and the dollar value, the software will debit and credit the necessary accounts with the mentioned amount. Lastly, it will carry the effect of the transaction over to the final accounts and Balance Sheet of the company.
Benefits of Accounting Software For Small Business
Accounting Software Offer More Accuracy
Small businesses need to make sure that their accounting process is accurate. Manual Calculations are time-consuming and more prone to errors. Accounting software takes care of the entire accounting process automatically and efficiently.
You can integrate Accounting Software with existing and new software to improve operational efficiency. For instance, a lot of famous accounting software can integrate with OnlineCheckWriter- an online payment management solution, that can handle all the payment systems of your small business, be it check printing, ACH payment, Payroll Check, or invoicing (and much more).
Easier Access of Accounting Data
With software for accounting, all your records are properly organized. You no longer have to shuffle through endless files and papers to find the exact accounting entry that you made on a specific date. This can be done through a click of a mouse button. You can easily verify all your business transactions. It helps you to monitor and eliminate any unnecessary expenses.
Accounting Software Ensure Accuracy
Even though you might be a prodigy in calculations of large numbers, but these will not help keep all your accounts up-to-date. A single accounting transaction involves entries in at least two accounts. So, Accounting is much more than calculations. Accounting Software keeps all the necessary entries and book-keeping procedures accurate. They will never miss updating a single account. Not even by mistake.
They Are Reliable
Accounting software is highly reliable. You are certain that there's no rounding up of numbers, no omissions, and no inconsistencies with them. This is especially necessary when you are evaluating the performances of your business or at the time of tax calculations.
Faster Accounting Through Software
Speed is always an issue for manual accounting. And if you have less workforce or if you are a solopreneur, Accounting will always be a cumbersome task for you. Think about all the paperwork. Manually updating all the accounts every day. If your accounts' balances do not match, then finding the error is something that might take days to rectify. Here Accounting Software rescues you from all these issues by automation of the entire process.
They Offer Better Security
As a small business owner, you want to keep a lot of things private. Your ex-employee or competitors may use vital business information such as vendors, customers, or purchases. But a paper account is easily readable by anyone. With accounting software, you can set passwords to your accounts. You can also limit what part of your business accounts are accessible by which department.
For instance, the sales department cannot access the accounts of the HR department. Likewise, only you can access the Final Accounts of your business.
They are Scalable
Accounting Software can grow alongside your business. You can add as many new accounts as you want. Be it the increasing number of employees in your firm, or a lot of new vendors, accounting software can easily accommodate all the changes of any scale as your business grows. Of course, that's another reason why large organizations have accounting software. With their scale of operations, it is impractical to keep physical accounts.
Simple and Easy to use
You don't need to have an accounting certification to operate the accounting software. They are easy to use. Even some basic knowledge of book-keeping is sufficient. That means you or your employee can do the necessary book-keeping for your business.
Accounting software helps you save a lot of costs. The cost that you would otherwise be spending on hiring extra staff, accountant fees, report creations, and paperwork. It automatically updates the effects of any business transaction across all the accounts. Naturally, this results in saving time as well. The time that you can otherwise utilize in focusing on your business goals. Thus, not only an accounting software helps in saving costs, But it also helps you to improve your overall productivity.
To conclude, keeping accurate records of business transactions is highly essential to measure the performance of your small business. Manual accounting and spreadsheets don't offer the necessary information in this fast-paced environment. Indeed, accounting software solves all your business needs right from creating an invoice to the financial reporting of your business activities.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2021 Mohammad Khan Yusufzai