19 Features to Consider When Selecting Small Business Accounting Software

When selecting accounting software for your small business it helps to have an understanding of what you want your accounting system to do for you.  This involves analysing the key aspects of your business, determining what you must have and what you would like to have.  Then, like any good cost benefit analysis, narrow it down to what works within your price point.  Below is a checklist of questions you should ask yourself about your business financial needs before selecting a software:

Cost:

Assessing how much the software is going to cost you is perhaps the most important consideration.  Some accounting software are free, some charge a one time fee and some are based on monthly or annual (recurring) billing.

Platform /Apps:

Determining whether you need your accounting software to work on a Windows or Mac platform or whether you would like to access it from the cloud can be an important consideration.  For example Quickbooks Canada does not currently offer their software for Macs or online.   

Country Availability:

Not all software is customized for all countries.  Many are built for US users, while others operate worldwide.  It is important to ensure that it is compatible with your physical location.

Online Banking:

Many accounting software interface with your bank and can be automated to download transactions.  This can greatly facilitate the bank reconciliation process.  While not a must have as this can always be done manually, it can be important time saver and is worth considering.

Accounts Receivable:

For businesses that have allow credit terms to their customers, it is important to select accounting software that provides reporting to amounts due from customers.  This reporting can be fairly elementary or more sophisticated depending on your needs.  Businesses with numerous customers may need detailed reporting that will allow for facilitation of collection efforts.

Invoice Customization:

To some businesses, invoice customization i.e. integrating your logo and design elements into the invoice is necessary.  Some accounting software have very limited customization, while others are far more flexible.  If you send out many invoices an accounting software that allows for optimum customization can greatly streamline your invoicing process.

Inventory:

Accounting for inventory is one of the more complex aspects of selecting accounting software.  Many small businesses have external systems , an excel spreadsheet or more sophisticated system, to keep track of their inventory.  If you currently track your inventory, ideally you want your system to integrate with your accounting software.  If you are planning to track inventory in the future, it is important to ensure that the selected software either supports it or allows for add-ons that can be integrated.

Accounts Payable:

Most accounting software allows you to track your bills and amounts owing to vendors and suppliers.  Some go a little bit further and allow you to reflect time based discounts and cash flow analysis that can help you optimize your payment decisions. 

Reporting Options:

The complexity of your business combined with your desire for analysis will be importing in determining the level of reporting sophistication that you require for your business. Well organized data allows for endless amounts of reporting and is limited to what your accounting software allows.  You also want to confirm whether the data is exportable to a spreadsheet like excel.

Payroll:

If you pay your employees or yourself a salary you have to evaluate whether you want your accounting software to do it or whether you are satisfied with your current system.  While this is a function provided by several accounting software, there are also add-ons that can be integrated. 

Foreign Exchange:

Dealing with customers and suppliers in different countries can be complicated and frustrating.  Accounting software can help alleviate this.  If you do anticipate that you will need help with determining foreign exchange it is good to assess whether the accounting software offers this feature.

Multi User:

Determining how many users will need access to the software is important to determine up front so that you can ensure that it offers multi user access and find out the cost.  It is also possible that you might need multi user access in the future in which case you should evaluate whether an upgrade is possible.

Simplicity:

There are accounting programs written for accountants and there are accounting programs written for non-accountants.  Many of them offer free trials, however, which allow you to play around and figure out which one you are most comfortable with using. 

Sales Taxes:

If you operate in the US, Canada, UK or Australia (that I know of) you are required to charge some form of sales tax.  It is therefore important to assess the software’s ability to both calculate these taxes on invoices and bills and generate reports that will facilitate government filings.

Security/Audit Trail:

Financial data is highly sensitive and as such, particularly in a multi user environment, you need to ensure that the software you select is able to maintain the security of this data.  This can be accomplished through different permissions for users and audit trails for any changes to made.

Time Tracking:

For businesses that charge based on time spent on a project, there are several accounting software that have this built in functionality.  This is one more way to consolidate and facilitate your financial processes and enhance reporting.

Budgeting/Forecasting:

Many businesses want to be able to make estimates for future sales, expenses and cash flow.  There are different ways of doing this (I tend to use excel ) however many accounting software offer this feature. 

Upgrade /Add-ons:

Many software offer different levels of functionality at different price points.  While a new small business’ needs may be quite simple, these tend to become more involved as the business grows.  It is generally easier to upgrade rather than change accounting software.  Alternatively software that allows for integration with other external software including inventory, budget and CRM systems should be looked into.

Credit Cards/Payments:

Having a credit card processing system that is an extension of your software or that can be easily integrated can be a real time saver and enhance reporting.

Conclusion:

Choosing a software does not have to be difficult especially when you know what you are looking for.  The checklist above can be a useful guide whether you are choosing for the first time or thinking of upgrading.  As always, if you have access to an accountant, you should consult with him or her as he can often provide with you with greater insight into your requirements and help you set up your accounting software so that it serves your needs more optimally.