Counting beans correctly is essential to running a successful business, as any mistake could lead to big problems for a business. This makes accounting and business accounting software one of the most important parts of IT infrastructure.
Financial departments use accounting software to manage accounts and perform various financial operations within an organization, including accounts receivable (AR), accounts payable (AP), general ledger (GL), and payroll.
Within companies, accountants use the data generated by this software for internal and external audits, reports and financial analyzes necessary to meet legal, regulatory or internal requirements.
Enterprise-class accounting software
As part of a business strategy, accounting software brings a level of automation to increase efficiency and productivity. Without these apps, accounting staff would have to perform tasks manually. By automating these tasks, the software can reduce accounting costs and provide senior management with much more accurate and timely reports.
Accounting software comes in different forms. Which system is best for an organization depends on the size of the business and other factors.
For example, large enterprises that require extensive functionality, scalability, and integration with other business processes may wish to deploy enterprise accounting software modules into enterprise resource planning systems. Using these platforms, companies can link accounting data and functionality to customer relationship management, business intelligence, and human capital management systems, as well as inventory.
For SMBs with more limited budgets, there are less expensive options such as basic SMB systems available through off-the-shelf or, more often, ready-to-download packages. These products support many of the basic accounting functions that small businesses need to run their business. While some SMBs can get by with basic spreadsheets, there are some popular small business accounting software options they can consider.
Standalone accounting software, which some vendors refer to as financial management suites, business accounting software, or accounting software for small and medium-sized businesses, bridges the gap between these options. Companies in this class have outgrown simple SMB accounting software, often due to expanding global customer bases, multiple locations, and distributed inventories.
As with other types of business applications, business accounting software is available for both on-premises and cloud platforms.
The growing accounting software market
Accounting Software Market was valued at USD 12.01 Billion in 2020 and is projected to reach USD 19.59 Billion by 2026 growing at a compound annual growth rate of 8.5% over the forecast period between 2021 and 2026, according to the report “Accounting software market — growth trends, COVID-19 impact and forecasts (2022-2027)” by research firm Mordor Intelligence. The report notes that the market for financial and accounting software products has seen many changes over the past two decades, including the emergence of cloud-based offerings.
The growing trend to integrate accounting software with other online applications, such as automated banking feeds and invoicing features, is expected to further drive adoption of the software over the forecast period, the report summarizes.
The ability to access business accounting software from mobile devices provides organizations with greater flexibility, as it allows staff to manage accounting tasks regardless of time or location. Mobile accounting apps also streamline processes such as sending invoices, accepting payments, recording expenses, tracking receipts, and planning budgets.
Most mobile accounting apps offer basic features, such as invoicing and expense tracking, while advanced features include bill reminders, mobile wallets, and bank transfers. Mobile access to accounting apps has become especially important as many people continue to work from home or in hybrid work models.
Using Optical Character Recognition (OCR), accounting software can convert images into readable and editable text, and many companies have implemented this technology in their accounting processes. OCR also eliminated the need for handwritten forms, checks or printed receipts, by uploading all handwritten receipts to an online accounting platform and extracting the relevant text and data at the same time.
AR and AP
Business accounting software can include many basic modules and functions to support the basic financial processes needed to run a business.
One such module is AR, which is money owed to a business by outside entities, such as customers. This includes payments for goods or services, which are usually sent to customers in the form of company-generated invoices. AR is included in the balance sheets as an asset.
The software improves the AR process by automatically tracking money owed to a business. When a business invoices or receives a payment from a customer, the application records the transaction. The software enables businesses to automate AR workflows, such as creating quotes, purchase orders, and invoices; record customer payments; and deposit payments in a bank. Keeping accurate records of AR transactions is essential to creating financial reports for tax purposes.
Another module is AP, which is the money companies owe to outside entities, such as suppliers and service providers. The software displays this as a liability on a company’s balance sheet.
Accounting software for corporate clients automates the processes involved in accounts payable, including approval of invoices received from suppliers, recording of data in invoices and payments. Similar to AR, the software automates AP workflows, such as creating purchase orders, receiving inventory from a vendor, entering invoices against inventory, and paying invoices.
Big general book
The general ledger serves as the backbone of an accounting system. GL includes all transactions related to a company’s assets, liabilities, equity, income and expenses.
The GL serves as a central repository for accounting data from all modules, such as AP, AR, Cash Management, Fixed Assets, and Purchasing. In some accounting software packages, reports or dashboards highlight financial performance through a combination of metrics. This gives managers quick access to the information they need to make decisions.
Payroll is another key function that business accounting software can improve. Payroll is the list of employees in an organization, along with data about each employee’s salary, bonuses, and tax deductions. The term can also refer to the total amount of money paid to employees. Accurate payroll tracking is essential as it usually has an outsized effect on the net income of the organization, which must also comply with many payroll-related regulations.
Accounting software helps business customers manage payroll and pay employees accurately and on time, while withholding taxes accurately. The payroll module also helps to accurately calculate paychecks and payroll taxes and establishes parameters such as pay rates and direct deposit processing. It is often paired with modules that track employee time off and provide healthcare and retirement benefits.
These are just a few key examples of how business accounting software can help companies improve their financial processes. Other areas covered by these software include purchase orders, accounting, budgeting and forecasting. Considering how important all of these functions are to a business and ensuring the accuracy of related data, it’s easy to see why selecting the right accounting software should be a priority for any organization.