Introduction to Accounting Software
A financial accounts package keeps track of an organisation’s finances by recording and processing transactions within a business.
At the centre of such systems, there is usually a general ledger, a facility for handling accounts payable and receivable, a payroll module, and a reporting function. Some accounting packages will also offer functions specifically for certain types of organisations or businesses. This introduction to accounting software will explain its main functions, benefits, and what solutions are available.
Accounting Software is vital for a business to fully understand their situation, determine the success of their business performance, and run a successful venture.
To get the best out of your purchase, you will need to answer some simple questions. The answers will ensure that you can analyse the available options and select the solution with the best possible fit to your organisations.
In need of inspiration? You can find our shortlist of the best accounting software 2018 here.
What Are The Main Functions of UK Accounting Software?
- General Ledger: This is an organisation’s main accounting books. They are the records that document the complete financial transactions of a business. A ledger contains the account information needed to prepare financial statements, and includes accounts for assets, liabilities, owners’ equity, revenues and expenses.
- Accounts Payable - This enters bills and pays out money to where it’s owed to creditors, such as suppliers or overheads.
- Accounts Receivable - This enters money received from debtors, such as clients or customers.
- Billing - Billing handles invoices to customers for goods or services.
- Stock - This records a business’s current stock levels to ensure efficient stock is maintained.
- Purchase Order - Accounting Software can create purchase orders, which are commercial documents issued to sellers, indicating types, quantities and agreed prices for products or services.
- Sales Order - You can also create sales orders, which are confirmation documents sent to customers before delivering goods or services. Accounting Software allows you to record orders from customers.
- Bookkeeping - Bookkeeping records the financial affairs of a company.
What Are The Benefits of Accounting Software?
Data entry into accounting software can be carried out far more quickly than manual processing thanks to its built-in databases of stock customers, supplier details and stock records.
Despite popular belief, there are plenty of low cost accounting software on the market. This means that you can still get access to basic accounting benefits without sacrificing all your cashflow at once. And added bonus is that Accounting Software reduces time spent by staff doing accounts, and reduce audit expenses as the system safeguards the accuracy of the data. Money saved is money earned, right?
Automatic Document Production
Additionally, it allows for fast and accurate invoicing, and fast production of documents, as reports can be drawn directly from software. All documents including invoices, credit notes, purchase orders, printing statements and payroll can be automatically generated, which streamlines the process which was once incredibly time-consuming when executed manually.
If your business is on the market for a UK accounting software, you're in for an extra treat: a good solution effectively removes the risk of human error, as only one accounting entry is required as opposed to two or three when done manually.
The Accounting Software is updated automatically, so account balances such as customer and client accounts are always up-to-date.
Availability of Information
Information is instantly accessible on work systems, and is available to employees in different locations at the same time.
Better use can be made of time and resources, and cash flow is improved due to easier debt collections and stock control.
Accounting Software adds a layer of security to records. Businesses can assign specific areas of accounts and grant them access to those areas only. This protects company data from those who aren’t authorised to view it.
The reporting function provides users an eagle-eye view of the business. Reports are usually customisable in Accounting Software, so reports can easily be produced for specific data sets that an employee wishes to evaluate. Reports on business data are vital when it comes to making important business decisions. The function is good for reporting on tax amounts due and how much is owed to other companies. Again, this improves the financial situation of your business as payments can be made on time and kept up-to-date.
The automatic creation of figures for the regular GST/VAT returns.
The data contained in and printed from accounting software is easier to read than manually, avoiding errors caused by poorly written figures.
Do you want to find out more about the benefits of accounting solutions? Click here for The 6 Best Features of Accounting Software.
What Type of Buyer Are You?
Before looking at what is available, you need to determine what kind of buyer you are. Most purchasers are one of three types:
Small businesses that are expanding:
Are you looking for small business accounting software? You're not alone. Small enterprises have often been using entry-level software such as QuickBooks. But soon enough, you need to upgrade to accounting software that can handle more complex functions, such as forecasting demand, producing integrated inter-company accounts, handling larger volumes of data and so forth. Businesses that are expanding may want to upgrade their accounting capability for a number of different reasons but it’s often the case that once a company reaches a certain point, it needs software that has sector-specific capabilities.
Full ERP buyers:
Larger companies usually need the extra power and capability that comes with a full Enterprise Resource Planning (ERP) system. Two of the largest providers in this area are SAP and Oracle. These suites of applications have the ability to handle interrelated companies and consolidate their accounts; to deal with operations in various countries and currencies; and to provide other functions that are needed by larger organisations.
The way in which the software integrates the various functions is key here, and in fact is usually more of a concern than the detail of individual functions. But it must be borne in mind that there are significant differences in these areas. Buyers of ERP systems should look closely at the capabilities of some of the leading solutions.
If you’re one of these buyers, you will be looking for specific features in your Accounting Software. For example, charities and not-for-profit organisations may need software that can provide specific accounting for fund requirements. Applications that can provide this will monitor funds so that different donors can receive specific reports as to how each grant or donation has been deployed.
When it comes to education, tertiary colleges and universities have very specific software requirements. For example, they may need to provide evidence as to how grants have been paid. In a completely different context, building or engineering firms will need a financial system that can analyse project costs and provide breakdowns by material, location, team or other entities.
If you recognise yourself or your organisation in this category, it’s likely that your key concern is that the software has the right features, rather than being able to integrate across business units or countries. We recommend that you read more about how to calculate the ROI of your accounting solution.
What Choices Are Available?
This is a key step along the road to a successful software purchase.
At this point, you need to see the systems in use and find out how they would perform for you and your business. You’re now at a critical point where you’ve done your internet research and are ready to talk to the providers of accounting systems. They’ll be keen to demonstrate their systems, and the advice that follows should help you to get the most from these demonstrations. You’ll need to be well organised, and to set aside a reasonable amount of time for the process.
It’s best to set a limit on the number of systems you intend to evaluate, and to draw up a short list. Five is probably the maximum - more than this and you just won’t be able to devote enough time to looking at each product in sufficient detail.
Next, make the arrangements for the software firms to carry out the demonstration, and give yourself time to prepare for this. The salesperson may well wish to demonstrate immediately but it’s usually better to arrange the demonstration at a point by which you will have had time to prepare. The attendees at the demonstration are vitally important. You need to ensure that key users from various departments are able to see and comment on the software functions that they will be using. If they are impressed, you will have a ready-made pool of internal advocates for the solution in question.
Always go into the demonstration with a clear idea of your specification and what functions you require. Ask the sales people to show these specific functions in use during the demonstration. A fantastic “dog and pony show” that skirts round the functions the company needs, is next to useless. If you know what you want from the demonstration, you will be able to ensure that it fulfils your requirements.
Here’s a brief checklist for organising an effective software demo: in 2019
• Make sure that you’re in charge, not the salespeople
• Be clear on what functionality the system must have
• Ensure that key stakeholders are involved in assessing the software
• Don’t try to assess more than five software packages
What Do You Need To Tell The Software Vendors?
The more you can tell the salespeople about the problems and requirements of your business, the better they will be able to explain how their solution specifically addresses these challenges.
They will be able to talk more meaningfully about the features that your business finds most important, and concentrate on showing you the functions that matter to you. It can help to give the sales people a timetable for your procurement process, so that they know when you will need input from them, and what kind of information will be most helpful.
How Can You Make The Demonstration Stage Effective?
You need to ensure that you, and not the salespeople, run the demonstration. You are not looking for a sales pitch. You are inviting them to show you how their software matches the requirements of your business. Assert control by writing up clear instructions for the vendors in advance.
A useful preparation for the first session is to write down the five most important functions that the software must fulfil. You can send this out to the vendors, so that each one has the opportunity to demonstrate how their software addresses these requirements. You can then score each demonstration against the criteria you have set. Be aware that some systems may do things in ways that are new to you. These may be better methods so don’t dismiss them out of hand simply because they are different from your current approach.
Selecting Accounting Software in 2019
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