Accounting Software Basics

Posted by
Tetiana Belevska

Updated November 28, 2023

The appropriate billing software is a must-have for executives desiring to run a successful business. It should present a summary or detailed description of profits and losses and ensure you have met all specific legal requirements of a relevant country.

Apart from addressing the existing legalities, your billing tools should

• automate labor-intensive accounting tasks
• accelerate tax preparation
• eliminate the risk of potential human errors

Meeting these requirements made accounting software more popular during the coronavirus pandemic when numerous companies have started working in a virtual environment. As a result, the cloud versions have become more trendy since those uncertain times.

What is account software? This is the question we’re going to dig in. And if you are interested: how accounting software features and functions can help perform business operations? We’ll analyze and figure it out too. Plus, cover a shortlist of bookkeeper software solutions worth implementing.

What Is Accounting Software?

Accounting software serves as a tool that records the flow of the organization’s money. At the same time, the financial reporting software helps examine the company's financial condition.

What actually does accounting software do? It allows

• recording transactions
• generating reports
• managing customer and vendor contracts
• creating purchase orders
• managing customer invoices
• overseeing account balances

With good billing tools, you can organize records easily and puts finances into a structured system. Besides, this system is incredibly efficient in terms of tax time.

8 Best Accounting Software to Check

QuickBooks Online

This cloud-based billing and invoicing software is famous for offering an all-in-one accounting platform. Such a platform is widely used by small businesses, freelancers, and independent accounting companies. QuickBooks Online provides robust tools, including automated tax calculations, bill management, or balance sheet reporting. As Intuit's product, you can integrate it with other Intuit apps like QuickBook Payments.

FreshBooks

FreshBooks is considered a fully-featured, simple system for efficient client invoicing and time tracking. This sales tax software is applied by more than 5 million organizations across the world. The system is perfect for freelancers and small companies. They seek the fast-tracking of a sales cycle and the ability to follow standards.

Kashoo

The particular cloud-based accounting solution allows small businesses to automate bookkeeping tasks. With machine learning algorithms, Kashoo can categorize and reconcile expenses regarding credit card transactions. Besides, it provides one-click real-time reports, along with receipt-matching functionalities. Kashoo also has an invoicing feature that enhances matching payments to client records.

Xero

Xero also serves as a cloud-based accounting tool primarily suitable for small businesses. It allows processing payments faster, saving time on data entry, and making better business decisions. This platform is a user-friendly one and has many significant features. Such features include invoicing tools, bank reconciliation, and financial reporting.

Sage Intacct

Sage Intacct provides cloud-based software for financial management and accounting. It is suitable for small and medium-sized accounting firms. Apart from financial reporting and operational insights, Sage Intacct helps automate key financial processes. Due to an open API, you can integrate it with different CRM or ERP systems.

Wave

Wave is a free business platform providing a combination of accounting, invoicing, and receipt scanning. This financial reporting software is a great option for small businesses and self-employed professionals. Wave is straightforward to configure and use. It has a very navigable dashboard where you can find and access everything you need.

Odoo Accounting

As an open-source ERP and CRM, Oddo allows running business operations with no additional software. This tool is suitable for growing and established organizations. In such companies, owners often juggle operations, finances, human resources, customer management, etc. The open-source model also provides high usability across different Odoo apps.

Zoho Books

This smart accounting system is popular among growing businesses. Zoho Books helps to handle their finances and remain on top of the cash flow. Apart from being simple and easy to use, it also can generate reports to make intelligent decisions. Ultimately, Zoho Books offers an intuitive design that pays attention to details and multiple useful functions.

Who Uses the Accounting System?

All people in the accounting system are considered system users. Among the professionals who may need to work with the company’s accounting system are:

• Accountants
• Consultants
• Business analysts
• Managers
• CFOs
• Auditors
• Business owners

With a well-designed accounting system, everyone can access and retrieve the same data. Also, the appropriate billing software makes data reporting to stakeholders outside of the company easier. For instance, consultants may use data for analyzing the efficiency of the organization’s pricing structure. Meanwhile, auditors use it for assessing internal controls, financial conditions, or compliance with legal acts.

What Are the Benefits of Accounting Software?

Financial reporting software offers many helpful features necessary for running business activities more smoothly. Here is a list of accounting software benefits you may find valuable for your company.

• Control finances

The ability to control finances is among the key advantages of accounting software. It helps organize and store financial information in one location. Also, a good accounting tool provides an overview of financial performance in real-time.

• Automate invoices

Multiple accounting software enhances automated invoicing. This capability is among the most critical characteristics of accounting tools. It allows creating recurring invoices, sending follow-up reminders, and accepting digital payments from invoices. Besides, you may track the unpaid invoices and provide discounts for early payments.

• Track expenses

Bookkeeper software offers automated expense tracking. Thus, it involves scanning and recording receipts and tracking mileage and expenses that clients incur.

• Reconcile bank statements

Among the core accounting software features is the connection with bank accounts. A good billing tool offers direct access to the company’s bank statements. It also matches and reconciles bank transactions automatically.

• Keep track of IRS

Although filing taxes is a complicated task, accounting tools can make it easier. The accounting software allows calculating sales tax and preparing tax forms automatically.

• Reporting

Data collection is among the key benefits of billing and invoicing software. Many accounting tools provide built-in reporting to analyze data and measure performance. Or companies can perform it through integrations with their POS, CRM, or other business apps. That allows getting deep insights regarding business.

• Inventory management

With accounting tools, organizations can manage their inventory and automate the ordering process. For example, they allow tracking products sold, setting reordering thresholds, and running different reports.

• Enhanced collaboration

Accounting software helps companies run one central location to organize finances. So accountants perform their job easier and faster.

• Round-the-clock access

One of the critical accounting software advantages is the ability to live in the cloud. Thus, organizations can access accounting tools from anywhere they have an internet connection. That allows checking up on sales, accepting payments, and running reports in real-time.

• Reduced overall costs

Online accounting tools traditionally cost $9-$50 user/month, so they quickly pay off. So adopting accounting software is the best approach to accounting for any business.

What Are the Main Features of Accounting Software?

Almost all online accounting tools apply double-entry accounting. That ensures accuracy and provides critical features like accounts receivable, accounts payable, banking, and reporting. Meanwhile, several systems may involve inventory management, project management, or payroll functionalities. Below enlisted the essential accounting software features list.

• Invoice processing

Modern accounting platforms allow printing invoices and email them to your customers. The tool should remember typical client data (i.e., names, addresses, or account numbers.) Also, many billing tools remember standard prices for different products or services.

• Automated invoicing

If you forget to send out invoices, your accounting software can be tuned to do it. Besides, thanks to automated statements, your billing tool serves as a collection department. It helps remind clients to pay their bills.

• Accounts receivable

Of course, accounting software must handle billing. But also, it should keep track of what clients owe (accounts receivable), along with payments.

• Payment processing

Payment processing is among the critical features of accounting software packages. Multiple accounting platforms allow paying the invoices online. This approach reduces staff time to process checks or make bank deposits. Also, it ensures better security for all payments.

• Accounts payable

The way of handling the outflow side of money your business conducts can be different. Here are several most helpful accounts payable functionalities.

• Purchase orders. Among the main tasks of bookkeeper software is to handle your purchases. However, the way it performs may vary. For example, while one system produces simple purchase orders, another one follows quotes.
• Credit card memos. Accounting software that allows tracking them helps keep your costs down.
• Automatic payment. Those modules automate all payment processes; that includes everything, from scheduling bank payments to printing invoices.
• IRS tax forms. Maintaining a database of the most traditional tax forms helps you save time. Your billing tools should input all the required information on the forms. Also, these forms must be filed electronically with the IRS.

• Payroll

Some accounting systems offer full payroll services, including calculating hours, processing wages, or paying payroll taxes. The most significant payroll features for accounting tools:

• Wage schedules. Your system should handle various pay schedules and various types of compensation and benefits. That includes commissions, salaries, bonuses, health insurance, retirement plans, and so on.
• Direct deposit. Many people want their paychecks to be deposited into relevant bank accounts. Thus, appropriate accounting tools allow setting up direct deposit payments.
• Automatic tax calculation. This feature varies from providing only the fundamental deductions to handling sophisticated tax tables.
• Expense reimbursements and deductions. Your staff may incur tax-deductible expenses, including travel or entertainment expenses. You need tools that accommodate such refunds and ensure the payments are compliant with deadlines.

• Banking

Your accounting platform should provide a link to your bank account. That allows making direct payments and importing real-time information from the bank to your system. 

• Account reconciliation

You may have several bank accounts. Thus, you need to track all accounts and reconcile them. So your accounting software should include a common ledger function, along with checkbook reconciliation. 

• Deposit prep. Today, all accounting packages can offer regular electronic deposits. So you need to consider different types of electronic payments it can provide. 
• Check handling. An accounting system that allows printing and processing checks can save your time. Besides, you should consider other features like check voiding.

What Are the Enterprise Accounting Software Features?

Online billing tools can maintain processes that go far beyond the boundaries of financial management. They provide a single platform that controls almost all aspects of business operations.

So let’s analyze the following enterprise features that can help run your business.

• Shipping. An accounting platform is a significant tool for online retailers and companies that send goods. It allows handling shipping processes and eliminates the need to invest in separate shipment software. Here we describe some features of accounting software that are helpful for shipping.
  • Shipping label printing. That allows saving a lot of time and streamlining the shipping process. With shipping label printing, companies produce labels, orders, and invoices.
  • Shipping cost estimation. Several accounting systems help understand the existing differences in weight and distance. That is critical for estimating shipping costs accurately.
  • Shipment tracking. This feature allows monitoring of what has been shipped. It is linked to a courier’s tracking system and helps calculate delivery times more accurately. In turn, that provides clients with better service.
  • Drop shipments. A good accounting platform should handle drop shipments. That is usual for sending products to customers directly from suppliers or manufacturers.

• Inventory management. Accounting software with stock and inventory management capabilities helps streamline business activities. That also allows identifying the available stock and the items to reorder. Thus, you will know what you are spending the purchasing budget for.
  • Inventory tracking. The ability to follow the lifecycle of a particular item is considered a great asset. That can help your organization track inventory levels.
  • Set inventory levels. An accounting system tracks the over or under-ordering of relevant products using automatic ordering for guaranteeing stock within a defined range. Therefore, there is no need to worry about not having pertinent items of stock.
  • Specified stock locations. In large distribution hubs, it is necessary to have stock locations involved in orders. Such specified stock locations eliminate the need to apply additional warehouse management systems (WMS).
  • Item images. Including item images also provides benefits to distributors. That helps all people involved in the process with the visual identification of products. Besides, item images can ensure the shipment of correct items.

What Are the Types of Accounting Reports?

The accounting software has built-in reports that quality and quantity can vary widely. For instance, some systems can provide multiple reports with almost unlimited categories. Meanwhile, others offer only the basic reports like money in and money out. Below, we describe several better options.

• Standard reports. One of the primary accounting features is generating regular reports. These reports are traditionally used in business. They include:

• Income statements (profit and loss)
• Balance sheets (assets and liabilities)
• Cash flow statements
• Accounts receivable
• Accounts payable
• Payroll summary

• Customized reports. Those reports allow creating and compiling any data you choose. In addition, some systems let users add columns or remove them in standard reports.

• Graph summaries. The billing software allows translating long lists of numbers into relevant pictorial forms. In most cases, such forms are pie and bar charts. They help companies understand correctly where their finances are going.

• Cost predictions. Those reports help to interpret data, make statistical analyses, and produce forecasts. The best option is implementing a system that includes budgeting, estimating, and other cost features.

• Subsidiary reporting. Often, an organization has multiple businesses. In this case, you need software that allows amalgamating certain financial aspects. That provides a better perspective of its whole portfolio instead of estimating from individual reports. 

How Much Does Accounting Software Cost?

Traditionally, accounting software solutions offer flexible monthly or yearly subscriptions. They can provide single-time licenses depending on quotes. Meanwhile, several accounting tools are available for free.

In other cases, they can offer unpaid packages for small teams. The existing gaps among various plans are always provoked by relevant differences. They include available functionalities and storage, the maximum number of users, or access to support. 

Below, we indicate the costs necessary for using billing tools of popular vendors.

QuickBooks Online

Small businesses prefer this sales tax software for its affordable prices. Pricing starts at:

• $10 a month per 1 user
• $17 a month per 3 users
• $30 a month per a growing company with large-scale projects

At the same time, self-employed people can use QuickBooks Online only for $5/month.

FreshBooks

FreshBooks offers three affordable plans in general:

• Lite ($15 a month per 5 active clients)
• Plus ($25 a month per 50 active clients)
• Premium ($50 a month per 500 active clients)

You can apply annual savings for all offers, and there is a 30-days free trial.

Kashoo

Kashoo does not offer a free version but provides a 14-day free trial. After that, the customer should pay:

• $27 a month if billed annually
• $30 a month if billed monthly

Xero

Xero offers three plans:

• Early Package ($9 a month)
• Growing ($30 a month)
• Established Plan ($60 a month)

Sage Intacct

Today, Sage Intacct is among the most popular ERP systems on the market. This tool can satisfy the needs of all-sized businesses. Thus, applying a particular system is calculated on a quote basis. It means you need to contact the vendor and obtain an individual package.

Wave

Wave is among the best billing tools that you can acquire for free. Thus, all fundamental functions of accounting are available at no cost. Only in selected countries, the clients must pay fees regarding card processing and payroll.

Odoo Accounting

Odoo Community edition can be used for free. But Odoo Enterprise edition will cost:

• $20 a month per 1 user if billed annually
• $25 a month per 1 user if billed monthly

Zoho Books

Zoho Books also offers three types of subscriptions:

• Basic Plan ($9 a month, per 1 user, 1 accountant, 50 contacts, 5 automated workflows)
• Standard Plan ($19 a month per 2 users, 1 accountant, 500 contacts)
• Professional Plan ($29 a month per 10 users and unlimited number of contacts)

What Are the Latest Trends in Accounting?

• Data security. Data fraud is still a critical challenge. Thus, organizations are required to invest more in data encryption and biometrics. 
• Blockchain. The particular technology will impact the ways of storing financial records. After all, some current accounting software solutions are considered obsolete.
• Cloud apps. Companies are migrating from desktop-based tools to mobile applications. In this case, the entire financial data is accessed on the cloud.
• AI automation. Machine learning technology will replace traditional bookkeeping processes. 

What Factors Should Be Considered Before Purchasing Accounting Software? 

To answer this tricky question correctly, you need to know your specific needs and priorities. However, there are some critical criteria all accounting systems must meet. Here are some key points you need to consider before investing in an accounting tool. 

• Integrated invoicing

Despite the core operations, the accounting solution you choose must be complete. Besides, if possible, you should implement a system that provides several billing and invoicing functions. Then, you don’t need any additional tools or copying data to other platforms.

• Usability

At least, your financial reporting software must provide you with an intuitive environment. It means the neat data arrangement and the availability of functions on a single dashboard. Thus, you can run operations quickly by following a familiar navigation pattern.

• Connectivity

You should avoid changing your software infrastructure to meet the requirements of an accounting system. Instead, you consider purchasing software that will integrate with your current solutions. Or, in the ideal scenario, this tool provides an open API, so you connect it with any desired system.

• Security

Accounting software is connected with the organization’s most sensitive information. An efficient billing tool ensures security while making calculations or sharing data. Before selecting a reputable vendor, you should analyze its security mechanisms and compliance.

• Customization

Probably, you cannot find an appropriate accounting system to match your business model. In this case, you should seek a flexible program for adjusting to your operations. The particular program may grow along with your company.

• Support

Most vendors are proud of their knowledgeable teams that always provide fast responses. But you cannot measure their efficiency before you actually have a problem to address. Thus, you should test support in advance to avoid unexpected disappointment.

• Pricing 

The more an accounting tool can do, the higher its price. So if you can purchase a fully featured solution, go for it! But you must remember that you can buy high-quality systems at a lower price too. At the same time, several tools are available for free. 

• Mobile versions

Nowadays, mobile-ready accounting solutions are affordable for businesses of all sizes, not only enterprises. Many vendors provide their users with native Android and iOS apps. Ultimately, the operability of such apps is the same as the desktop version has. 

Wrap Up

Maintaining an accurate accounting process is essential for business growth. If organizations plan the future scaling, they require digitizing the books with accounting software. Investing in accounting tools is a must-have purchase for new companies to make.

With numerous accounting software options, businesses can choose the perfect tools for their needs. Today, invoicing and billing tools help manage inventory, reconcile bank accounts, and stay tax compliant. Applying efficient accounting software also enhances generating automated and custom reports and drawing conclusions from collected data.

Ultimately, accounting platforms are a crucial part of the business that impacts overall performance.