Choosing the right accounting system and software

Years ago, keeping the books had a complex significance. Ledgers were paper-based with several columns., with a manual to understand the many lines and columns. The entries had to be done with a pencil, allowing corrections when necessary. Today, in the digital age, computer programs drastically facilitated the task. Accounting software not only reduces human errors in calculations, but it also generates a wide array of reports with the click of a button.
However, with a wealth of options, it benefits you to have an understanding of accounting basics to choose the program that suits best your needs.

Bookkeeping is a complex subject, and it should be considered on per case basis. Hence, it is highly suggested that you consult a CPA and have a thorough conversation about your options.
Accounting systems are often overlooked by many small businesses, but the right selection of software plays a critical role in a new company. When numbers are correctly input, the program provides you with valuable information. For my service business, it has helped me decide which services I should drop, and which ones to invest.

Know your budget

Before you start searching looking for software, it is paramount to know how much you are willing to spend. Off-the-self programs, such as Quickbooks and Sage, are affordable. But when you are considering an industry-focused system, the pricing will drastically change. Depending on the size of your business, or how much you are intending to grow, you should explore options on a more robust software. You want to select the right program for your needs to avoid changing later down the road. It is always complicated to migrate your data from incompatible platforms.

Many of the vertical accounting software are sold through a value-added reseller (VAR). What is a VAR? And what do they do exactly?
A value-added reseller is a firm that intensifies the value of a third-party product by customizing products to resell to end-users. Such companies play a distinct role in the information technology sector by providing additional hardware, installation services, consulting, troubleshooting, and technical support on top of the core product.

Find out what similar businesses are using

Try to reach out to other business owners on your segment to find out what they are currently using. There are a few different ways you can go about doing this.

1. Chamber of commerce meeting. This is a great place to start. Don’t be shy to ask peers what they are currently using.
2. Social media groups. Social media is not only for marketing your business, but you can also use the platform for assistance.
3. Ask your accountant. Using a platform that your accountant is familiar with can facilitate on their end. Furthermore, they will not have to spend so much time maneuvering through a new system.
4. Software consultants. Search online for accounting software specialists who operate independently of any vendors, but they will assist you in matching your business needs.

How to choose your accounting software based on your needs

As previously mentioned, there is a wide array of platforms with different features to suit various needs. Several packages are made available, and you have to decide what is the best fit for your needs. You should never purchase a system on your current needs, but consider where you want to take your business and your future needs. The ultimate goal is to minimize the amount of manual work.

Here are the features you should consider

• Inventory management. Your business keeps inventory in hand. Additionally, if your business creates new products by an assembly, checking into software that enables such tracking might be worthwhile.
• Sales tracking. Having salespeople with areas and commission is a game-changer.
• Customer relationship management. Is a CRM embedded into the system, or does it support the platform you are currently using?
• Credit card acceptance. If your business accepts credit card, having a system that integrates the payments can save you a great deal of time.
• Budgeting. This is one of the most important aspects for me in the servicing business. Being able to set up budgets based on the project is a must-have for me.
• Estimates. Salespeople should be able to create a standard estimate without much hassle, your software should be able to provide this feature easily.
• Payroll. Understanding this feature is very important, as mistakes can cause severe damage, especially for a small business. Many off-the-shelf software – including Quickbooks, Sage, Simply Accounting, etc. – have this feature available based on tiers you purchase.
• Web-hosted applications. This feature can come really handy if you are out in the field, you can have access to all your information on the tip of your fingers. I have personally used it on several occasions.

Deeper consideration

Once you have narrowed based on the options listed above, there are other things to contemplate before pulling the trigger.

a) Is the software growing with your business. If it is not, you should understand what you are getting into. Check if modules can be added or if it can be customized to suit your needs. If neither one applies, then consider the steps to export the data, and all it would entail moving to another software.

b) Banking. Is the software compatible with your current bank? Downloading transactions saves a lot of time. Some systems are better designed to work with the platform offered by different banks.

c) Restrictions. You do not want any employee to have access to all of your information. Finding software that enables restrictions is critical.

Open-source software

When it comes to the subject of selecting a stable platform, open-source is my very first option.

What is open-source? It is a software with source code that anyone can modify and enhance. Unlike many other platforms, an open-source can be fully customized. However, the language can be very complicated, and an expert will be needed. In such cases, hiring a programmer, or a VAR company to make the adjustments for you.

The upside on these types of software is that the cost is very attainable, and its platform is very robust. With a wide array of options, this type of software offers reasonable solutions that could be beyond your budget otherwise.

Due to the complexity of the program, it might be difficult for your accountant to navigate through it.

Using open-source software as your CRM (customer relation manager) or your ERP (Enterprise resource planning) with an integration to a simple accounting system, is an option that should be considered.

Cash Basis vs Accrual Basis Accounting

The cash basis and accrual basis of accounting are two different methods used to record your transactions. The main difference between them is the timing of transactions being recorded.

Cash basis is recorded when cash is received, and all expenses are entered when money is paid to suppliers or employees. This method does not use accounts receivables or payables.

Accrual basis is revenue recorded when earned, and expenses when consumed, regardless of when the money is received or paid.

Although the size of your business could determine which accounting system you use, I highly suggest contacting an expert to provide you with details.

Final thoughts

Finding a software that will fulfill all your requirements might not be possible. Either because it is not available, or simple because, and the most likely cause, you do not have the budget to have it designed. One key take away is to be sure to have a system that has the capability to migrate into another. Also, a simpler platform requires less training for you and your staff.