If you have a business, you need accounting software to record your income and expenses. Ideally, this is the first piece of software you should purchase when you start the business.
However, most business owners get one only when they need to pay taxes or apply for loans.
So, how to choose the right accounting software for your business?
This can get confusing as there are plenty of products available in the market today. I’m trying to make your job easy by listing down some important filtering criteria that you should consider before you invest in an accounting system.
There is also a short step by step process, in the end, to help you in decision-making process.
8 Important factors for selecting a perfect accounting software.
1) Online or Offline
The first question to ask yourself is – Whether I want online software or desktop-based offline software?
How does it matter?
Well, most businesses nowadays are adopting cloud-based software as they offer a lot of advantages over traditional offline software. However, some businesses like retail stores require speed and not always connected to the internet. For them, offline POS (Point Of Sale) systems are the best bet.
Advantages of Cloud Accounting Software:
– Nothing to install. Just signup and start entering your transactions
– You don’t have to worry about upgrades as all changes are pushed automatically. Online software are always up to date.
– Can be accessed from any internet-enabled device at any point in time
– Cloud accounting software providers take care of backup and maintenance which is a cost-saving for you.
– Data across all your offices is always synchronised.
– It can integrate with other cloud-based applications.
When you should buy offline or desktop-based software:
– You have a retail store and need to create few hundred invoices over the counter.
– You do not have internet connectivity at your business location.
Its strongly recommended that you go for an online accounting software as you will have your financial data on your tips even when you are not in the office.
Read more about how your financial data is more secure in cloud.
2) Data Security
Skip this point if you have opted to go for an offline accounting package. If you are thinking forward and considering an online accounting application, then data security is the most important aspect to check.
Essential things to check:
– Ask the company how they store the application data. In most cases, this information will be available on their website. Here is an example. Some of the trusted cloud hosting service providers are Amazon and Rackspace. If your accounting software provider is hosting the application on their own servers, ask them about the security measures they are taking to safeguard your data.
– Check if these services are using HTTPS connection. Its very simple to check this – just open the application and see if the URL in address bar starts with https://. Normally, this is highlighted in green colour. You can even click on that to view the security certificate. HTTPS protocol ensures that the data transferred from your computer to software company’s servers is encrypted and can not be viewed by hackers.
Make a list of essential features that you absolutely need in an accounting software. Here are some feature which must be part of a good accounting package.
Create invoices and customise the look and feel
Track expenses according to categories
Manage inventory, inward-outward stock movements and wastage
Perform bank reconciliation by importing bank transactions
Create purchase orders (PO) and record inventory purchases
Create and manage taxes
Record Journal Voucher entries
Manage list of customers & vendors
View account payables & receivables
View Balance Sheet, Profit & Loss statement and Trial Balance reports
Add additional team members
Good to have Features:
Support for multi-currency transactions
Option to manage employees and process payroll
Categorise transactions according to projects
Access control for every team member
4) User Interface & Complexity
Most of the business owners do not have any accounting background. Even if you have a dedicated accountant who would be using the application, as an owner you should be able to log in and browse the things. Also, it should be easy enough for your employees to learn the software. Investment in training is a cost and should be avoided.
If the software is stuffed with every possible feature you can imagine, it will become difficult to use for your team. So, go for software that has a simple user interface and is not bloated with unnecessary features. A clean interface makes it easy to focus on important tasks and can reduce the learning curve.
A lot of businesses make a mistake by buying an application that suits to their needs at the time of purchase. Later, when their business starts to grow, the accounting software fails to cope up with the progress and eventually business owners have to migrate to another software. Migrating data from an existing system to completely new software can be painful.
So, select accounting software that can scale with your business needs. Some software offer only one version of the product and some have progressive versions depending on the business type or size. Go for the software that offers an entry-level version as well as a feature-rich version which you might not need now but will definitely need in future.
6) Exit options
Imagine if the company you are buying from shuts down its operations or you discover a lot of bugs a few months after the purchase. To save yourself from such situations, ensure that the accounting software provides a data export facility.
You should be able to export ledger or other transactions at least in the form of excel as most other softwares will accept excel file for import.
If fact, as a good practice, you should always backup your data at regular intervals.
7) Hidden Costs
Some software providers might charge for the support or upgrades. Sometimes, basic software is provided at a lower cost and then you are forced to buy ‘add-ons’ or pay for a ‘maintenance fee’. So, check if there are any hidden costs associated with the software you are planning to buy.
Best way to know this is to check the pricing page of the software provider’s website. If they are selling additionals services, those will be mentioned there.
8) Post-sale Support
This is the most important but most ignored thing while selecting accounting software. No matter how good or easy the software is, you will need support at some point. And if you have nobody to talk to when you are stuck, your entire investment will go in vain.
Lack of support is also one of the reasons why some accounting software are cheap. Obviously, support cost is not included in the offering. You should avoid such products at any cost.
Here is a simple tip to check the support – just post a message or call the support number and see how they respond. Based on the response time and quality of response, you will come to know about their support infrastructure.
5 Step Process For Selecting A Perfect Accounting Software:
Talk to the employees who will be using the application
Know your budget
Search & shortlist
Schedule a demo
Take a trial
Find out what exactly they need to get their job done. Once you understand your accounting needs, make a list of it and keep it handy.
Find out how much you can pay at this time. This will filter out almost half of your options.
Google is your best friend and should be the first point to start your research. Check out software comparison sites and testimonials of the existing users. Shortlist your software names in a simple spreadsheet.
Visit the software provider’s website and request for a demo. You can ask questions related to your niche during the demo. Watch application walkthrough videos, if available.
Always take a trial before purchasing any accounting application. Enter dummy transactions related to your business and check the accuracy of reports. If everything looks good, you are all set!
Finding perfect accounting software for your business is not an easy task. Once you invest your time and money into one accounting system, it will be very difficult to migrate to another after some time.
So, its always better to spend more time before the purchase to save frustration a later stage.
Already started searching for an accounting package for your business?
Create your free account on ProfitBooks. It’s totally free accounting software.
Please feel free to share your thoughts in the comments section below.
Also read –
Comparison between an offline and online accounting software.
Create paperless office using cloud accounting.
9 Business processes you can outsource & save money
How to make your business GST compliant