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To make the best use of accounting software we must know how to use accounting software.
Accounting Software works to make all financial processes more streamlined, flawless, and faster. It enables the access to valuable data and insights. All of these enhance business performance.
In this article, we will learn about-
- What is an accounting application
- What is accounting software used for
- How accounting software works
- Why small businesses use accounting software
- Types of accounting software
- Detailed view of accounting software for small business.
What is an Accounting Software
Accounting software indicates the tools that can optimize your business activities and make them easy and efficient.
Businesses use accounting software to do work such as invoicing, reporting, tax calculations, and so on.
Accounting software helps to do finance and accounting activities in an errorless way. There are many complex things related to business activities that need to be dealt with properly to run a successful business.
Automating financial tracking and reporting is a very effective thing to save time, cost, and effort.
What are the Types of Small Business Accounting Software
There are 7 types of accounting software that can be placed in separate categories.
According to what tasks they do and their versatile features, there are many types of software.
1. General Accounting Software
General accounting software works to mix bookkeeping activities with accounting activities. To support a business’s financial process and make it easier, business software blends the recording activities related to financial transactions with the analysis of the bookkeeping activities.
General accounting software can save you valuable time through special features like automatic bank reconciliation, billing, invoicing expense tracking, and so on.
2. Billing and Invoicing Software
These are simplified and more Organized versions of accounting software.
All kinds of businesses from sole proprietors to joint stock or partnerships, every kind of business have to deal with invoicing and billing processes most of the time.
Rather than comprehensive accounting solutions, using accounting software that does the basic invoicing and billing software has more tools to keep your finances error-free and time-binding.
The basic billing and invoicing software includes features like expense tracking, project-based time tracking, and expense reports.
3. Enterprise Resource Planning Software
Enterprise resource planning is another answer to what does accounting software do.
Enterprise resource planning software helps facilitate connections between different departments of the business organization and manage personnel at different levels.
ERPs offer tools such as basic accounting solutions, that range from general ledgers to billing and invoicing.
ERPs also support accounting activities on a greater scale by offering features supporting sales activities, inventory, service supply chain personnel, and other kinds of management activities.
4. Payroll Accounting Software
Payroll accounting software includes services such as basic payroll, employee profiles, hiring and onboarding, health insurance, employee financial benefits, time tracking, project management activities, costs related to the workforce, and many more.
Payroll software is mainly used for managing employee payments and wages. Sometimes, payroll software is considered as a different software entity that directly works along with the existing accounting departments.
5. Small Business Accounting Software
Small business accounting software can be used by any SMBs, startups, independent workers, freelancers, or simply any kind of person who is even slightly related to business or similar activities.
This accounting software handles income and expense information, invoices and payments, tax calculations, and financial reporting.
It also provides other services like receipt capture, cash flow, inventory management, sales and tax, estimate creation, contractors, dealers, bill management, automated time tracking,
portfolio accounting management, Business analytics employee expenses, workflow automation, data restoration, and many other things are related to this type of accounting software.
6. Spreadsheet Accounting Software
Spreadsheet software such as Excel and Google Sheets can be used as your operating accounting software option.
But these are sometimes hard to operate for large numbers, so these can be used when simple accounting activities such as simple bookkeeping, basic double entry, general ledger, and things like these
7. Custom Accounting Software
You always have the option to have a custom accounting software which is specifically made for your own company.
For building a custom accounting software system, analyze do you need in accounting software, then you should estimate what tools you need how much it may cost, how long will it take to be built, and so on, finally, you should design, develop, and ultimately maintain.
Through this system, you will be able to have a more secure system. Besides, if you have a unique business then you can go for a custom option.
What are the Key Functions of Accounting Software
Many of you often have the query about what is accounting application, what is accounting software used for or how does accounting software work.
To answer all these you need to have a clear idea about the functionality of accounting software.
The key functions are to record, manage, and report financial transactions. It can automate tasks, reduce costs, and provide timely and accurate financial data.
There are many functions that accounting software accomplishes are given below:
1. Error-less Report
One of the key functions is that it creates different types of financial reports.
Accounting software works for making error-less reports which is difficult if the process is done through manual system.
2. Sales and Purchase Ledger
There is another ledger which is the total sales and purchase ledger. This one manages invoices, salary payments of the employees, receipt of credit and debt payments, and so on are some of the usages.
3. Systematic Data Processing:
Accounting software also provides a systematic data processing system.
It allows the employees to properly input financial data, process them, and output the financial report of the company in an organized and disciplined manner.
4. Automated Bank Reconciliation
Another function of accounting software is, that it gives the facility of automatic bank reconciliation. These types of accounting software help to manage the bank transactions.
For the automation facilities, all the accounts are connected in an organized form so, when any transaction is done between the accounts, it is part of the system and everything can be managed centrally in a flawless way.
5. Calculating Tax and VAT Correctly
Accounting software also keeps track of sales tax and VAT.
It calculates the right amount of tax liability and is also able to send tax returns digitally.
6. Flexibility Ensuring
Flexibility is another benefit of using accounting software.
That is, it’s easy to change, update, or merge any account record or transaction information using the correcting tools.
7. Cloud-based System
Cloud-based accounting software is another type of accounting software that allows users to access their financial data from anywhere with an internet connection
8. Different Level Working Ability
Accounting software works at inter-company and multi-company levels.
Inter-company transactions and multi-company entity management are also very easy to communicate through cloud-based accounting software.
9. Multi-currency Transactions
In the case of multi-currency transactions, the automated accounting process can be very helpful.
10. Security Options
There is the chance to secure your data through user security options and thus, this process is very flexible and secure.
What is Accounting Software Used for
Accounting software is used to solve the difficulties that arise in our day-to-day financial data transactions.
To serve the purposes of accounting software, you need to know how to use accounting software properly.
The purposes that accounting software serves are-
- To help manage all kinds of assets, risks, liabilities, revenues, and other items.
- Proper reporting and analysis is another purpose of using accounting software.
- To avoid the pitfalls of the general systems, accounting software is used. Accounting applications help the maintenance of all the work related to business activities.
- Another reason why use accounting software is that it helps to get real-time, accurate financial data which will enrich your business.
- Accounting software makes the whole business process automated and thus, much error-free.
- Accounting software provides the scope of extreme scalability to business activities.
- Different types of accounting software are used for creating a complete financial management suit which is a great support system for the business.
- Accounting software also can work for disaster recovery through the ability to back up data, reducing the risks of disaster through forecasting options, and so on.
- Proper risk management is another facility that is provided by accounting software and also a great purpose of accounting software.
- Accounting software also serves the purpose of compliance standards.
- Another purpose served by accounting software is that it gives the benefit of working from anywhere, so work is flexible in using accounting software.
- Another great purpose of using accounting software is cost efficiency. The manual process is both time and cost-consuming. However, the digital process will help your business be cost-efficient and thus gain more competitive advantage.
About Financfy
Financfy is a company that provides accounting software for small businesses.
Through the software, you can get the benefits of efficient daily transactions, encompassing payables to receivables, analyzing the financial statements in-depth, handling tax expenses properly and invoicing activities, and a comprehensive range of activities.
To get the best small business accounting software, contact us.
Final Thoughts
Accounting software works as a life savior for small businesses in the present time.
If you look at the above portion of the article, you will get to know how accounting software works and what is accounting software in a detailed form.
Also by looking at different functions, you can expand the services of your accounting software and make it an upgraded version.
Thus your business can be successful through the use of the right accounting solution for serving the business purpose.
