The first decision you’ll make regarding accounting software for your business is not if you’ll use such a tool, but rather which will you choose? You’ll especially want to seek out an accounting program if the concepts of accounting are new or feel complex to you. Modern accounting programs are designed to help anyone manage their accounting records, which accountants often refer to as the books.
Accounting Software Benefits
Accounting software will benefit you and your business in several ways. Most importantly, it gives you a predefined framework into which every financial transaction will be entered. This framework will help ensure that you enter transactions correctly and enable you to check the pulse of your business on demand by way of instant reports. Of course, the output from your accounting software will only be as good as the inputs. Fortunately, you’ll generally find that it’s much faster to write checks and record payments from customers within the software than by hand.
Accounting software can help minimize mathematical errors that could cause you to overdraw your bank account. You may be able to avoid entering many transactions by importing activity directly into your books from your bank and/or credit card accounts.
Cloud-Based Versus Desktop-Based
Historically, all accounting software was installed on each user’s computer, but there’s now a persistent march toward the cloud. Online accounting packages such as FreshBooks, QuickBooks Online, and Xero all offer the flexibility of accessing your books from wherever you are from any Internet-connected device. The downsides include monthly or annual subscription fees that you’ll pay in perpetuity. Disruptions in Internet access can also mean limited or no access to your accounting software. Some cloud accounting programs, offer a companion app that you can use on a mobile device such as a smartphone or tablet computer.
Presently, there’s a distinct trade-off between cloud-based accounting software and “traditional” desktop-based programs such as the Pro, Premier, and Enterprise versions, You will have a larger up-front investment for desktop-based programs, and you’ll have to periodically install software updates that give you the latest payroll tax tables or fix bugs in the software. All of this maintenance is simply handled for you within cloud-based accounting programs.
Selecting an Accounting Program
As for choosing a program itself, first you should know what kinds of your business needs so you can pick the right account program such ASC 842 lease accounting, billing/ invoicing software, payroll management system, ERP systems and more. Most accounting packages offer either a free trial period or a limited period of time during which the software can be returned for a refund. Every accounting program, whether cloud- or desktop-based, offers one or more sample sets of books – often referred to as companies – that are already populated with fictional customers, vendors, employees, inventory items, and associated transactions. You can use these sample companies to get a sense of the look and feel of the software, and how your own transactions will appear within the software. You’ll typically be able to access sample companies for desktop-based programs by way of an Open Company command that will typically appear on the File menu. Make sure that you use the sample companies for testing purposes only. Locating the sample companies for cloud-based programs typically requires using a search engine to find the link to a sample or test company.
During the trial period or while using the sample companies try to enter some fictional transactions that emulate how you plan to use your accounting software. In particular, pay attention to features such as inventory, payroll, and sales taxes, if any of these apply to you. Cloud-based accounting programs in particular may offer limited or no ability to track inventory, payroll, and sales taxes, or may require that you pay a more expensive monthly fee. Most desktop-based accounting programs will do at least an adequate job of handling these tasks, but payroll will always require an annual subscription fee on top of the cost of the software itself.
In certain cases you can migrate data from a desktop-based application, such as QuickBooks, to its online equivalent. If you find the cloud-based environment to not be to your liking, you can migrate the software back to the desktop. Keep in mind that you may lose some details of your accounting records during this transition. Further, any program that offers to convert you from a competing program tends to do so for free, but at the expense of again losing much of the detail behind your accounting records.
Cloud-based programs absolutely offer the lowest initial cost, but the costs can add up over the months and years. Keep in mind that the monthly fees charged by cloud-based accounting programs are often per user. Desktop accounting programs are also licensed on a per-user basis, but depending upon the provider you choose you may be able to upgrade as often as every third year. However, some vendors are adopting a mandatory annual subscription model even for desktop-based programs, so read the fine print carefully when considering your purchase.
If you quit paying for support for a desktop-based program, you can continue to use that program as long as the software remains compatible with the operating system on your computer. This means you can retain the historical records for your books as long as you like. When you cancel a cloud-based program, you do retain read-only access to your books for a period of time, perhaps one year, but then your records vanish. Governmental authorities may not raise an issue for three years or more related to your books, so you could be in a quandary if you cancel a cloud-based service and can’t provide supporting documentation for a given year. This means you may find yourself locked into paying subscription fees for at least one user for an accounting package that you became disenchanted with.
A benefit to cloud-based accounting programs is that there’s no software for you to update, or back-ups of your data to prepare. The downside is that features may be added or removed with little or no notice from cloud-based programs. Your data is automatically backed up, but being able to roll your books back to a certain date can require submitting a request to a support department, which means you cede some control over your data.
You’ll periodically need to install new versions of desktop accounting programs, as well as software patches and payroll tax updates. Version upgrades and patches have to be installed on all computers, while payroll tax updates can typically be installed just once. You’re definitely on your own with regard to keeping your books backed up when you use desktop-based software, but most programs offer the ability to schedule unattended back-ups. Arrange to have your back-ups stored to a folder that syncs with a cloud-based storage service, such as Dropbox, Google Drive, or Microsoft’s OneDrive service. This gives you the security of having copies of your back-ups offsite, which you’ll be eternally grateful for in the event of fire, flood, theft, or other calamity.
In short, be prepared to spend some time researching your options with regard to accounting software. There are many aspects to consider, including price, but ease-of-use will be your primary guide. If the software feels sterile and unapproachable, it’s unlikely that you’ll use most of its features. Conversely, you may find some programs are too simplified, which means you either won’t be able to carry out basic tasks, or will have to use some creativity to accomplish what you need. Fortunately you have many choices, and if one program isn’t a fit, you can generally migrate your books to another platform.