Types Of Accounting Software

Accounting software can either be used on a local server, known as an on-premise deployment, or using a cloud-based solution. Both offer the same features and functions; however, the on-premise solution may be better suited for larger enterprises and those with the capability to host on local servers.

Cloud-based solutions can be accessed via software download or a web app via a browser. These are ideal for SMEs, those who work remotely, and businesses that lack the necessary infrastructure.

Depending on the size and industry of your business, you can choose either an integrated suite that combines multiple functionalities into one software package or an entry-level product that focuses on one particular area of accounting. Common types of software include:

Payroll management software

Payroll software solutions are often integrated into accounting solutions, allowing users to manage their accounting tasks and draft detailed reports via drag-and-drop functionality.

This type of accounting software is ideal for better control over your company’s account payables and receivables. Payroll management systems are designed to help you perform a variety of tasks including producing tax reports and payslips, managing salary deductions and bonuses, and the ability to pay employees directly through the portal.

Payroll management systems help you control your financial transactions, reduce expenses in the long run, and enable you to prepare accurate and detailed reports for management.

Billing and invoicing software

Businesses typically use this type of accounting solution to help with day-to-day payments and invoices. These may include issuing checks, payment processing, issuing invoices to customers, and informing clients of due/pending payments. The software can also be utilized for tracking expenses, monitoring payables and receivables, and other important financial transactions.

Typically integrated into full-featured accounting solutions, billing and invoicing systems are integral in ensuring the accuracy and transparency of accounting figures. They also add credibility and professionalism to every transaction.

Enterprise resource planning (ERP) systems

ERP systems are among the most important types of accounting software, especially for medium and large organizations. Enterprise resource planning (ERP) effectively combines all systems associated with marketing, finance, inventory management, human resources, product planning, purchase orders, distribution, and accounting.

Most ERP software solutions come as a suite that includes all the features and functions mentioned. Additional platforms can also be integrated into ERP suites, customer relationship management (CRM) solutions, point-of-sale (POS) systems, business intelligence (BI) capabilities, analytics, and reporting modules.

This type of accounting software may also be industry-specific, particularly in the manufacturing, legal, wholesale distribution, and construction sectors.

Time and expense management solutions

This type of accounting software is specifically designed to help improve billing and payment processing, easily approve or deny expenses, and identify inefficient practices that can slow down billing cycles.

If you’re providing a type of service that depends on billing customers based on time spent, this accounting solution can also help you produce detailed reports on how you’ve been spending your billable hours. This can also be used for direct employees. Time and expense management tools can be great for small business accounting, as they allow you to be more transparent with the amount that is being paid.

Specalized accounting software

The software can be tailored and adapted to any industry that requires an accounting solution. Most platforms include industry-specific features. For instance, if you are running a real estate firm, you may look for a product that automates commission calculations. If you often need to send financial reports to regulatory authorities, you may look for a product with strong financial reporting capabilities. Some products even have advanced features that allow you to report depreciation to your tangible assets, such as equipment and buildings.

Freemium options

Most solutions allow you to complete a free trial period before investing in the product, mainly to ensure that the features, functions, and capabilities of the software are what you need. From here, you can upgrade to the full version or choose another software solution.

Some software is classified as “freemium”, which offers the features required to conduct basic accounting processes but requires an upgraded version to access more advanced features that you may need. There are also many free accounting software solutions available in the form of mobile apps

How To Choose Accounting Software

When choosing accounting software, you must consider what type of buyer you are by identifying the needs and preferences of yourself or an organization. Important considerations include the features and capabilities of the software as well as scalability, user interface, ease of navigation, and the number of users the system can handle.

The most important questions to consider are:

What do you need from an accounting software solution?

How are you going to use it?

Do you require advanced features of the core functions like tracking income and expenses for your business?

A large portion of accounting software buyers can be categorized as small or medium-sized businesses, enterprises, or best-in-class buyers.

Small and medium-sized businesses

These businesses are growing and expanding rapidly and need accounting software with features and functions to help manage their financial data. Replacing a basic accounting solution with more robust and scalable software that is capable of supporting more complex functions, including on-demand forecasting, increased data capacity, intercompany accounts, and more advanced features could help your business save time, money, and resources.

Enterprise buyers

Enterprise-level businesses and organizations need enterprise-level accounting software. These types of buyers represent larger companies and organizations that require the functionality of a full-featured enterprise resource planning (ERP) system. Normally, ERP solutions have multi-company consolidation, foreign currency, international operations features, and other features crucial to the day-to-day processes of larger businesses.

For this software, seamless integration into existing platforms is often more important than some of the features they get from their accounting solutions. As many solutions offer software that includes advanced features and functions that may not be necessary or applicable to your business, you should carefully consider and analyze which features are most useful to you and whether or not you can easily integrate the program into your existing software architecture.

Best-in-class or industry-specific buyers

Business owners looking for premium, market-leading software find it contains advanced features and functions that can automate and make the accounting process even more efficient, especially when dealing with complex sectors of the business or large numbers of employees. These solutions will be ideal for businesses with a large budget, the capability for advanced features, and applicable use cases for the software.

Industry-specific buyers may need to upgrade their software for their specific industry needs or their growth is too large for their particular solution. For example, buyers in the construction and engineering sectors may utilize the software's features and functionality, rather than its integration capabilities, and buyers in the academic sector may need an accounting solution that offers higher education-specific features such as tracking the disbursement of financial aid or student loan payments.

Benefits Of Accounting Software

Businesses using accounting software can take advantage of many benefits that using the solution offers, including:

Saving money, time and resources

Using online accounting software means that payroll and other accounting functions don’t have to be outsourced. The software helps automate key functions and provides a more efficient accounting system experience for the user, meaning that the functions can be completed by trained staff and users of the software.

The time and resources saved by using the software can be invested in other departments of your organization.

Improved productivity and process efficiency

Accounting software allows you to automate complex tasks that are otherwise very time-consuming and lets you simply compile and collect important financial data that can be utilized to further improve processes.

Being an online solution, core processes are automated and you can significantly reduce the time it normally takes to process, including sales tax, expenses, cash flow, inventory, bank accounts, and other financial transactions. The software can also increase the accuracy of your accounting records and ensure that documents aren’t misplaced as they’re stored in the software.

Easy to use and understand

Most accounting systems are designed with ease of use in mind and often include training resources, help guides, and support options alongside simple, user-friendly interfaces for inexperienced users.

This means that employees and users of the system don’t have to learn complex accounting techniques to conduct operations. The learning curve is low and designed so those with minimal technical knowledge can operate the software after adequate training.

Easier tax management and compliance

Tax management and compliance for businesses of all sizes involve significant documentation and paperwork. When it comes to taxes and regulatory compliance, organizations have to make sure they are accurate and vigilant to avoid penalties. Accounting software stores account information and financial records to ensure that the tax reporting process is made easier for business owners and financial managers.

Accounting software is crucial for businesses of all sizes, as it legitimizes your operation, ensures proper financial management, automates core accounting processes, provides a way of tracking expenses and cash flow, assists with payroll and account functions, and helps with tax management and regulatory compliance.

Common Features of Accounting Software