What Does Accounting Software for a Small Business Do?

Do you know that around 53% of CEOs and CFOs operating their small businesses in the USA strongly believe in the need to integrate accounting software into their business operations?

In the world of software and technology, every business is in search of all-in-one accounting software that can manage all its accounting operations efficiently.

As per the statistics shared by the finance professionals in the USA, there are five significant benefits of integrating the accounting software into accounting operations that result in

✓ Avoidance of costly manual errors by 44%

✓ Improved the cash flow management decisions and operations by 31%

✓ Centralized tracking of the invoices and data increased by 38%

✓ Systematic and efficient technology that resulted in the free time for the accountant

✓ Improve the real-time reporting and tracking of the invoice and payments by 65%

Above that, many small business owners also mentioned that accounting software provides an integrated solution to the business owners because of its embedded features that make the software easy to use.

Accounting software provides the small business owners multiple benefits like managing their business finances, tracking the accounts receivable and accounts payable, understanding the profitability clearly and preparing themselves for the tax season.

With too many things already on their plate, small businesses simply don't have enough time to track the invoices and payments, manage the cash operations, or reconcile the accounting differences.

As time evolves and business grows, its accounting becomes more complex. This is why they need a one-stop accounting solution that can take care of all their accounting operations smoothly, accurately and efficiently.

Based on the capabilities, features and price ranges, there are different accounting software available for small businesses. The basic parameters that help the business owner choose the accounting software are the type of industry and the number of employees working with the same.

It is also recommended for small businesses to research the accounting software companies and evaluate them based on cost, ease of use, scalability, integrations and features.

Many accounting software is also made flexible, molding the business style and generating accurate reports as required.

As accounting software is able to provide a home of endless benefits, it is also crucial to develop an understanding of its operations and functions performed for small businesses.

In this article, we will be looking forward to knowing about accounting software and how it forms a crucial role in performing the different accounting tasks and jobs meant for ease of use for small businesses.

The article covers the following:

What is Accounting software?

Accounting software is a tool or solution used by bookkeepers, accounting professionals and small business owners to process the accounting transactions and manage the accounts.

Accounting software also helps you record the money flow and examine the business's financial condition.

An accounting software contains various sections and modules that deal with the specific parts of the accounting process and perform those functions accordingly.

The core modules can be described as follows:

General ledger to record and classify the transaction in companies' record
Accounts receivable for all the money that is yet to receive from debtors in the business
Accounts payable for all the money that the business owes to the creditor and are yet to be paid
Purchase order to keep a record of all the inventory orders in the business
Sales order to keep a record of all the orders received by the customers in the business
Bookkeeping to keep a record of all payments and collections paid and earned by the business.

In addition to major modules, accounting software also takes care of other models that can be added based on the business requirement and specifications.

These modules can be classified as below:

Evaluated reports for printing out the financial data based on various parts of the business
Payroll for tracking the employee salary and related taxes
Costing expenses for entering the employee's business-related expenses

Why do small businesses need accounting software?

Every small business has multiple things to manage and complete on an everyday basis. From purchases to sales, finances to accounting, there's a room of tasks pending behind a small business owner's back.

In between, it becomes impossible for them to keep a note of each and every minor detail, especially in accounting, where every transaction plays a crucial role in managing the business operations.

If they are stuck spending their time in these routine jobs, then how will they be able to expand and scale their business for future prospects?

This is why the need for accounting software comes into the picture that can help you to save a lot of time and perform the accounting tasks error-free, accurately and efficiently.

Let's take a look at the following five points that gives rise to the need for accounting software in the small business and how it can save much time, labor and cost by catering to various aspects:

Overcoming Manual Records
Ease in maintaining transactions
Preparation of reports and financial statements
Categorization of expenses and revenue
Increases Efficiency

1. Overcoming Manual Records

Accounting software helps you overcome manual work by inputting the data and transactions directly into the page. It also lets you get a daily update of all the transactions and a well-updated dashboard that provides real time look at your important metrics.

2. Ease in maintaining transactions

Accounting software helps you leverage the bank feed feature to connect your business bank and credit card accounts. Rather than copying and pasting the data from a spreadsheet to a spreadsheet, you get all the transaction information in one place.

Alongside, you can also get to know what's being spent and what's coming into the business and from where you can get access to all information.

3. Preparation of reports and financial statements

Accounting software can help you create various reports and financial statements that small business owners need to request funding from any investors for future expansion.

Preparing the profit and loss statements and balance sheets manually is tedious. Still, with accounting software, you can get accurate information and compare transaction activity from prior months and years to your current months based on your growth, sales trends and other key metrics.

It can also help you to make informed and practical financial decisions suitable for business

4. Categorization of expenses and revenue

Accounting software keeps momentum by categorizing expenses and scheduling your bills, whether it needs to be paid online, by cheque, credit card or cash.

This saves a lot of time in managing the cash flow, and by using the accounting software, you can also record the payments you received in cash/cheque, create and send invoices based on dates, and receive the notifications so that you don't miss out on anything.

5. Increases Efficiency

Summarizing all the needs, accounting software helps you automate tedious and repetitive accounting tasks that increase the accuracy of the data and keep your bookkeeping efficient and error-free.

By leaving all your jobs to the accounting software, you can concentrate on major tasks that need your undivided attention.

Overall, accounting software serves the right purpose for small business owners to track down accounts and expenses, prepare for taxation and keep tabs on all the financials.

What are the salient features offered by accounting software for small businesses?

Now that we have become familiar with what accounting software is and why small businesses need the same, it is crucial to know the wide range of activities served by the accounting software to capture the business entire's financial picture.

Let's look at the top seven features of the accounting software for small businesses.

General ledger
Accounts payable and receivable
Banking links feature
Reconciliation feature
Employee payroll, time and expense management feature
Income statements feature
Inventory management

1. General ledger

Accounting software provides a single-shot platform to serve and manage all your accounting needs. You can also update and view the transaction in real-time entered into the ledger, including revenue, income, expense, assets, liability and equity.

As far as general entries are concerned, these are already automated as per the production of the financial statements and reports.

2. Accounts payable and receivable

Accounting software helps you track, categorize and automate the payments to the vendors and creditors. This feature enables you to create schedules and track and customize invoices based on dates and automatic customer reminders for late payments. It also helps you to remind for the invoice payments that need to be paid to the creditors such that you don't miss out on any deadline

3. Banking links feature

Another feature that accounting software serves to the business is linking the business bank account to track and make the payments in real-time. It can also import the financial data required to perform various business purposes

4. Reconciliation feature

Reconciliation is a significant feature that accounting software provides to the business. When comparing the internal records from the financial institutions or sources, any differences can be reconciled based on the money spent.

5. Employee payroll, time and expense management feature

Accounting software also allows you to set up employee management in relation to the calculation of variable wages that are owed to them, the different types of payment schedules that a business follows and entire compensation.

6. Income statements feature

Accounting software takes the load of preparing all the accounting-related statements, including profit and loss statements, balance sheets and cash flow statements. Also, if your small business requires a customized statement based on a specific number of days, months or years, then the accounting software has your back.

7. Inventory management

If you are a small business dealing in products, then the inventory management feature of accounting software will truly serve your purpose in many ways.

It covers everything from tracking inventory stock levels and trends to automatically placing the order and re-ordering the items.

What are the significant functions performed by accounting software for small businesses?

Accounting software acts as a 'Wonder tool' for small businesses supported by the significant functions performed by the same.

These functions can be listed as the primary purpose of accounting software's existence and what purpose this software serves for small businesses.

Let's take a look at the six key functions or roles of accounting software for small businesses:

Automated management of book of accounts
Anytime and anywhere, accessibility
Account Receivables and Payables Management
Flexible purchase and sales management
Global accounting standards support
Ease in Budgeting and Forecasting

1. Automated management of book of accounts

Accounting software ensures complete accuracy from start to end and keeps the manual data entry to a minimum. In return, it results in the increased efficiency of the book of accounts.

The role of accounting software is to figure out the features and understand your behavior to give out the actual results without any hassle.

As a result, it keeps the manual data entry to a minimum, and with the help of automated management of the book of accounts, small businesses can rely entirely on the accounting software and concentrate on their core tasks

2. Anytime and anywhere, accessibility

Like any other business, every small business looks forward to scaling and expanding its business exponentially. To meet this purpose, they tend to meet a lot of investors and stakeholders who might need access to company data and records. If the meetings are inside the premises, then records are easily accessible.

But there can be several instances where you would need access to this information lying back in your office, and you might end up panicking at that moment.

This is why remote access to data has become necessary, and accounting software provides you with this remote access capability to get the desired information on the go.

In addition, the accounting software also helps you define the specific controls based on users' specifications, to avoid any kind of data breach.

3. Account Receivables and Payables Management

Account receivables and account payables form a significant part of the accounting process. The cycle keeps on repeating and repeating throughout the year.

Account receivables refer to the amount a company is entitled to receive from its debtors, and account payables refer to the amount that a company is entitled to pay to its creditors.

Since both terms are used in terms of credit sales and purchase of goods and services, its entire management becomes a crucial part of any small business.

With the help of accounting software, debtor management becomes more accessible, can keep your cash flow up to optimum and manage the account receivable and account payables on an accurate basis.

Accounting software also helps you track down the invoices and payment dues in chronological order and push out notifications to the concerned people, which saves a lot of time and cost for employees who used to do these tasks manually.

4. Flexible purchase and sales management

Every small business is different!

Accounting software allows businesses to configure the features based on their requirements and configure the seamless transaction process.

Accounting software allows businesses to customize their plan as per their needs and provide them with the "Designed for you" precise software.

Small businesses leverage and quantify these benefits to a maximum level that provides them with specific and accurate software solutions.

5. Global accounting standards support

Accounting software has embedded features that are highly acceptable across the global market and as per the global accounting standards.

Irrespective of the currency, compliance or languages, accounting software provides you with the function to mold itself as per the business requirement.

It will perform all the specific actions per the country's law and gives you the flexibility to provide customized options to choose a predefined language based on suitability.

6. Ease in Budgeting and Forecasting

Budgeting and forecasting add to yet another significant function in the accounting system that calculates and interprets the financial performance for the current year of the small business.

Based on the current results, small businesses are in a position to estimate the budget for the upcoming year, which helps them to set feasible and optimistic sales targets.

All of these five major functions add to the roles performed by accounting software, which is genuinely marked as a gift of technology for small businesses.

What benefits does accounting software provide for small businesses?

With so much insight into accounting software's needs, roles and functions, let's look at how accounting software can benefit small businesses.

Following are the significant seven benefits of accounting software:

Automated invoices
Track expenses
It keeps you in good books with the IRS
Collaboration friendly
Managing inventory
Controlling the business finances
Reconciliation with bank statements

1. Automated invoices

Timely billing to keep your small business moving is extremely important. Creating recurring invoices and sending follow-up reminders on accepting digital payments directly is what accounting software is supposed to do.

2. Track expenses

Cash and cash flow are the ultimate kings for any small business. Even a single accounting mistake can cost you a lot, which can lead to a shortage of funds. With accounting software, you can prevent yourself from the scenario by automating the expense tracking. You can also scan and record the receipts and track those expenses incurred on behalf of clients.

3. It keeps you in good books with the IRS

Filing taxes for small businesses becomes challenging to maintain, considering the many complications. Accounting software helps you to make the job easier by preparing the sales tax and tax forms for you in advance that keeps you in the good books with the IRS

4. Collaboration friendly

Accounting software is well organized, providing your accountant easy access to the tools. It will be much easier for an accountant to understand the accounting software system and the functionalities that make the accounting software user-friendly.

5. Managing inventory

Inventory forms the base of any small business.

Whether you run a retail store or operate online, keeping a tab on the inventory is extremely important. Accounting software can help you manage inventory and the ordering process so that you don't fall short of goods. It can also take the load of tracking and running reports in which you can find out which type of goods are performing and what not.

6. Controlling the business finances

Managing personal finances seems to be accessible at the initial level. Still, as soon as the business grows consistently, you need something that can help you run and manage your finances effectively.

Accounting software can help you organize and store your financial data under one roof. Further, it can also give you access to your financial databases and information in real-time so that you can make your financing and investment decisions efficiently.

7. Reconciliation with bank statements

During the accounting process, you may find that transactions aren't reconciling with the bank statements. Rather than involving a lot of time and effort by manual checking, accounting software programs can do the job for you.

You can match and reconcile those banking transactions automatically and rectify them.

As small businesses grow, accounting needs to grow as well.

This is why every small business needs to consider these benefits of accounting software, which should be a complete must-have.

During the hunt for this software, a small business should consider all the points mentioned above that can help you narrow the search, compare and select the best one based on your needs.

What's the importance of accounting software for small businesses in the USA?

Many small businesses in the USA have already moved to smart accounting, where around 91% of the accountants rely on the software to increase productivity.

Accounting software not only helps you to streamline the business's financial records but also helps to manage the finances.

Following are the three major importance of adopting an automated technology for your small business:

Enhance business efficiency
Cash flow control
Efficient Credit control techniques

1. Enhance business efficiency

With the rapidly changing and evolving environment, every small business is bound to adapt to the software that is being used to run the business.

With accounting software, you can get things done quickly and easily that overall promoting the business efficiency

2. Cash flow control

An automated solution for bill receivable and payable management, bill tracking and management that can help you get paid faster and without hassle.

With optimized cash flow management, you will be at the top to make the confident decisions and plan the growth of your business well

3. Efficient Credit control techniques

To ensure a credit management system, you can use accounting software that can set the maximum credit limit based on the customer's credibility. In this way, you get direct control of your credit-related activities and will also be notified if the case is an overdue bill by your customer.

If you want to steer your business to success, then accounting software is the best fit and way to acquire your ideal goal.

What does an accounting software for small businesses look like?

If you are a small business owner looking forward to accounting software, then certain criteria need to be met to serve your needs and priorities.

These criteria help you to decide and put your money which is worth investing in

Following are six of the parameters that a small business should look for in accounting software:

Customization options should be available
Accounting Software should be easy to use
Safety and Security should be a priority
Reliable Support service
Level of connectivity and integration
Quality Level Pricing

1. Customization options should be available

Since there are different types of businesses, the accounting software is also based on the same. There is no one-size accounting system that fits all businesses. So, your accounting software should have a system that can match your business model and adjust your operations that can help you to grow your business

2. Accounting Software should be easy to use

The main objective of accounting software is to provide an intuitive environment to work in. Though this software involves the implementation of accounting knowledge, procedures and calculations, the system should be such that it can support functions that can be easily presented and available on a single dashboard.

With this, you can easily navigate the different operations and activities

3. Safety and Security should be a priority

Safety and Security are considered the most critical parameters for any business. Since the accounting software contains business' sensitive data, the system must have a bulletproof security mechanism.

4. Reliable Support service

Accounting is a continuous process and hence is the system of accounting software. The small business owner needs to check the after-sales service of the accounting software in relation to client queries and responses.

5. Level of connectivity and Integration

As a small business owner, if you take up any accounting system for your business, it should have a system of integration with the tools you might need. It means that the accounting software should have an array of software pieces and tools that can be combined to form a software infrastructure based on the needs of your program.

For example, if the business owner needs accounting software for invoicing and payroll, the company only offers invoicing services for the time. In that case, the accounting software company can approach any payroll service provider and integrate its services and charge together from the business owner.

It will help the business owner to reduce a lot of time in searching for another service provider for its requirements

6. Quality Level Pricing

What price of services should be paid for accounting services?

This is one of the most prominent parameters a small business owner needs to consider before selecting the accounting software. As the logic applies, the software that can perform maximum tasks with quality at an affordable price needs to be considered.

In addition, the accounting software is also considered based on the customer reviews to ensure that their promises are being matched with what the customer is experiencing. In addition, the accounting software should also maintain a good reputation in the market for which the businesses and people can voucher over the same.

To select the best accounting software for your small business, you need to look at these parameters and evaluate each factor in detail before choosing the right one.

The process might take a more significant chunk of your time. But in the end, selecting the right accounting software at the right time makes the small business stand high!

Until now, we have covered every aspect of accounting software and its significant role, need importance and functions for small businesses.

Let's look at the final set of frequently asked questions related to small business accounting software to summarize the entire guide.

Q1. Do I need accounting software for my small business?

If you look forward to saving time, energy and efforts to handle all your accounting needs, then you should go for accounting software.

Accounting software not only helps you to automate routine tasks but also provides you free time so that you can focus on strategizing your business plan and running it effectively.

Q2. Is accounting software secure for use?

Yes, absolutely, without any doubt.

The accounting-based software of standard security features like credential confidentiality and data encryption. It also helps you protect from any security breaches that make you confident in choosing the accounting software to keep your information safe and secure.

Q3. What are the types of small business accounting software available in the market?

As a small business owner, you can select the following accounting software based on your needs:

Billing and invoicing software
Payroll Management system software
ERP Systems Software

1. Billing and invoicing software

Billing and invoicing count as the essential functions of an accounting system. You can select the billing and invoicing software if you are a small business owner with small-scale operations.

The software will also serve the day-to-day tasks, including cheque writing and informing customers about the dues.

2. Payroll Management system software

Payroll Management system software is meant to manage the company's payroll. It performs different tasks like calculating the employee's salaries, depositing the compensation to staff members' bank accounts, cutting deductions and producing the tax forms and payslips.

3. ERP Systems Software

ERP stands for Enterprise Resource Planning, providing you with the solution to handle the operations portfolio by combining all the systems used in the business.

It includes product planning, inventory management, material purchasing, control, distribution, marketing, accounting, finance and human resource.

ERP system is highly recommended for business owners with high operations scalability and requires all-in-one software to manage its activities.

Q4. What is the type of functions offered in a small business accounting software?

Accounting software is in opposition to managing various aspects of small businesses.

It covers inventory management, bill receivable and payable bill management, payroll management, preparation of financial statements, and tax compliances to generate the financial reports.

Q5. What should be the ideal type of accounting software that suits small businesses?

First, accounting software should be considered under a lot of parameters, including pricing, Security, reputation and so on.

Overall, accounting software that suits small businesses should be able to adapt itself based on the company and expand itself based on the growth of the business. The software should not be limited to only handling the tasks but also offer the benefit of forecasting to make the right decisions, improving the efficiency of the business and managing it entirely.

Q6. Is there any significant disadvantage of using accounting software for small businesses?

Every story has a flip side, and how can accounting software be not a part of the same.

Though the accounting software is filled with benefits and pros, still there exists only one disadvantage of accounting software.

Mention, few of the accounting software is difficult to use and may not be a precise fit for the business. There also exists a problem of charging hidden fees that may upset the business owners.

But these cons are not permanent.

It can be overcome by taking out the right time to research the software based on the small business, evaluation of budget, need, size, growth and the market segment.

Bottom Line

Whether a small business or a large business, every company strives to improve efficiency, maximize the cost and simplify the complicated and routine tasks. Accounting software is one such blessing in technology that can help you achieve your goals by automating the manual processes from basics to advance and helps you serve an error-free accounting practice.

As a small business owner, you have multiple tasks from managing inventory, staff, human resource and their management. So why not ease your operations by providing real-time data that can be easily accessed at any place, any time, anywhere serving your purpose.

"Your business growth and success depend on many things, and along with the growing path,

you are going to have to concede certain responsibilities and activities whether for your accounting, production or day-to-day management."

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Key Takeaways

This article is a gold mine for any small business owner looking forward to discovering the needs, salient features and roles performed by accounting software that can help the business manage, automate and streamline the fundamental and complicated financial processes cost-effectively.

The small business owners operating on accounting software are already at a one-level advantage by competing and standing in the dynamic and increasingly complex market.

Let's take a look at the key takeaways of the article:

Around 53% of CEOs and CFOs that operate small businesses in the USA recommend the need to integrate the accounting software into the business operations.
Statistically, accounting software can help avoid costly manual errors, improve cash flow management decisions and promote systematic and efficient technology.
Accounting software is a tool or solution used by bookkeepers, accounting professionals and small business owners to process the accounting transactions and manage the book of accounts.
Accounting software contains various sections and modules that deal with specific parts of the accounting process, including general ledger, account receivable, accounts payable, purchase order, sales order and bookkeeping.
Every small business has multiple things to manage, which is why the need for accounting software comes into the picture that can help you save a lot of time and perform the accounting task error-free and accurately and efficiently.
Overcoming manual records, ease in maintaining the transactions, preparing reports and financial statements, categorizing expenses and revenue, and increasing efficiency support the need for accounting software in small businesses.
The accounting software covers a range of activities to capture the business's financial picture.
The salient features offered by accounting software for small businesses include general ledger, accounts payable and receivable, banking links feature, reconciliation feature, employee payroll, time and expense management feature, income statement feature and inventory management.
Accounting software acts as a 'Wonder tool' for small businesses that supports significant functions serving business purposes.
The significant functions performed by the accounting software include.

✓Automated management of book of accounts

✓Anytime and anywhere accessibility

✓Account Receivables and Payables Management

✓Flexible purchase and sales management

✓Global accounting standard support

✓Ease in Budgeting and Forecasting

There are seven ways in which accounting software can benefit small businesses.
The significant seven benefits of accounting software include automated invoices, expense tracking, good books with the IRS, collaboration friendly, inventory management, controlling the business finances and reconciliation with bank statements.
Business efficiency, cash flow control and efficient credit control techniques add to the importance of accounting software for small businesses in the USA.
Around 91% of accountants rely on the software to increase their productivity level.
As a business owner, it is important for you to consider the accounting software based on specific criteria that can meet to serve your needs and priorities.
There are six parameters that a small business should look for in accounting software, which includes

✓ Customization options should be available

✓Accounting Software should be easy to use

✓Safety and Security should be a priority

✓Reliable Support service

✓Level of connectivity and integration

✓Quality Level Pricing

The final set of frequently asked questions (FAQs) related to accounting software for small businesses covers

✓ the need for accounting software for small business

✓ the security features provided by accounting software

✓ The three types of small business accounting software available in the market are mainly billing and involving software, payroll Management system software, an ERP system software

✓ functions offered in a small business accounting software

✓ ideal type of accounting software that suits the small businesses

✓ significant disadvantage of using accounting software for small businesses

Accounting software is truly a blessing in technology that can help the business achieve its goals by automating the manual processes, maximizing the cost and improving the overall efficiency without any errors.