Accounting software is a software application that helps you in the accounting process. Accounting software is perhaps one of the first applications to be addressed and implemented as far as businesses are concerned. This is because every business needs to perform accounting tasks at some level.
How it Works
The accounting software helps in recording and processing the transactions that take place in the business. It, more or less, seeks to mimic the manual method, but automates the process to reduce manpower requirement and ensure efficiency. Therefore, you will find the functional modules of accounts payable, accounts receivable, payroll, and trial balance, thereby functioning as an accounting information system.
There are basic functions that any accounting software should enable a business to do. Some packages, like QuickBooks, start with a basic set of features and then have add-on modules that can be acquired and integrated into the basic QuickBooks functionality.
You also have the option of developing accounting software in-house or purchasing it from a third party and modify it to suit the specific requirements of your business. Whatever be your choice, the application should match your business's current as well as future requirements.
A small business just starting might use a paper method based on its bank statement. Most businesses will grow to the point of having their taxes done by a preparation service or a certified public accountant (CPA), before they realize the importance of accounting software. This software automates the accounting process reducing the time, effort, and manpower requirement, yet making it more efficient. The software can make the tax preparation process a lot easier and error-free to a large extent.
The cost of acquiring accounting software wholly depends on its functions and features. For the low end businesses, many inexpensive applications are available that will take care of most of the business accounting functions prevalent in the businesses. However, they are very basic and may not have adequate security features and any specific functions your business may require.
The high-end application software may range from ones with extensive set of features to ones exclusively designed for specific industries. When buying these products, you also need to take into account the cost of implementation at your site because unlike the off-the-shelf programs, they require considerable time and expertise to be installed and monitored for proper functioning.
The cost of acquiring and installing an accounting application may seem as a considerable amount, but in the longer run, it will help you save on the dedicated manpower as well as any accounting errors that may cost you considerably.
When to switch over to accounting software from the manual process is purely dependent on the business requirements and decision of the management. However, with the dominance of information technology and businesses spread across multiple locations spanning countries and continents, it is worth thinking about accounting software right at the outset of the business itself.