Accounts software helps you track and manage your company finances, ensuring you keep on top of your business accounts.
It can save you time and money by automating tasks and allows you to understand and predict your cashflow.
Do you need accounting software?
Unless your business processes very few transactions (ten or fewer a month), you will probably benefit from using accounts software rather than doing your accounts on paper.
Accounts software eliminates the need to enter information more than once and carries out laborious calculations automatically.
What accounts software can do
Accounts software can be used to perform these core accounting tasks:
- Creating invoices, estimates and other documents for customers. Most accounting software makes it very easy to raise and send invoices.
- Bookkeeping. Maintain sales and purchase ledgers, carry out invoicing and track payments.
- VAT calculations. Automatically calculate the VAT your business owes at the end of each VAT period.
- Management reporting. Generate reports to help you understand the state of your finances.
- Tax calculations. Generate and submit tax returns to HMRC automatically.
- Credit control. Examine which customers have missed payments and send out reminders or charge them interest automatically.
More advanced business accounting software can carry out additional tasks like running payroll, stock control and recording purchases made through a retail point of sale system. These functions often require the accounts software to be integrated into your other business systems.
For instance, an accounts package could be tied into your website to record online sales, or could link to your customer relationship management (CRM) software so you can see which customers are most profitable.
Types of business accounting software
Accounts software can be divided into three broad groups:
- Solo accounting software is designed for use by a single person. These basic packages may contain all the functions a sole trader needs, though most are designed for personal and not business use. They tend to be cheap – often less than £100 - and are a good introduction to accounts software.
- Small business accounting software can perform most or all of the core tasks listed above. These packages are more expensive (over £100) but will meet the accounting needs of most small businesses. Most companies start with software of this type.
- Advanced accounts software usually comes as a series of modules, each designed for a particular function. You choose which you need. This gives you possibilities for expansion, but costs more (£500+).
You can opt for traditional desktop accounting software (which you install on your computer), or online accounting software, which you log in to through a web browser. It's a form of cloud computing and a good way to get the benefits of accounts software with lower management costs. It also has the benefit that you pay on a monthly basis and can spread the cost rather than paying up front.
Online accounting software is inherently more flexible, because you can access it from any internet-connected device. Many packages can also be accessed from mobile phones.
However, it requires you to save your financial data to a remote server operated by another business – so it's vital they are trustworthy. You may also find that desktop packages offer more advanced features.
Get the right accounts software
When choosing business accounting software, build a set of finance software requirements. Consider what you want to do with the package, but also make sure it will be compatible with your existing business computer systems.
For example, will it run on the operating system you use and be able to link to your customer database? How much training will your staff need?
Accounts software publishers often produce other business software, like customer relationship management packages. These programs may be designed to link together, so consider picking a single software company and sticking with them.
If your business uses an accountant, consult them before choosing your office accounting software. It may be advisable to find a package which can integrate with your accountant's systems.
Finally, remember that your accounting software requirements will probably change as your business grows. Look for a package that can be easily upgraded as required.