What is Accounting Software?

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

In short accounting software provides everything that accounting used to perform in business but in a digital format. Accounting software, in a nutshell, evaluates and manages a company's financial standing. This also does not require a bookkeeper or accounting knowledge to use, and most advanced accounting software can be used from any internet-connected device. It handles all these business processes:

Business Accounts: The primary function of accounting software is to manage your accounts. It handles accounts payable and receivable, assists you in interacting with banks, and displays all expenditures, revenues, obligations, and assets throughout a chosen time range.

Bills and Invoices: Bills and invoices are another important financial component of a firm. Accounting software assists you in sending invoices to clients and preparing bills for them automatically in minutes.

Tracking Sales and Daily Profit: Using invoices and bills, the system keeps track of the overall sales and profit, etc.

Inventory Tracking: Inventory control is a critical part of the business. Accounting software improves the situation of stock management by tracking inventory levels and giving you automatic low-stock alerts for each product.

Tax Submission: In addition to general financial reports, it handles tax administration. You can even pay your VAT returns to HMRC directly from advanced accounting software.

Performance Overview: It examines the papers in hand and compares them to prior ones, assisting in the creation of a new budget and further business decisions.

Accounting Problems Faced by Businesses in Past Decades

Think about the processes of your company in old times. There used to be paper and piles of files everywhere. Accounting and finance staff would put forth a lot of effort to finish processing everything. Management accounts would be ready 30 days after the end of each month, or they might not be ready at all. The first reliable profit figures for many companies wouldn't be ready for several months after their accountant was given a backup file from their accounting software to work his or her magic on. Some of the major challenges and problems reported during past decade in UK were:

• 40% of businesses in UK reported that once in their business lifecycle they faced sudden data loss.
• 36% of businessman thinks that their financial data is not accurate or trustworthy. 
• 40% of business owners do not have access to financial reporting processes.
• 34% more money is spent on tax preparation every year in UK.

Business Processes Revolution in UK

The use of technology and automation in today's businesses has resulted in significant changes to business processes. For example, you now digitally transmit invoices to your clients. Your suppliers give you digital versions of their invoices. This different wave of software retrieves and codes those invoices directly into your system, eliminating the need for any of your employees to re-key them. 

Invoices for expenses can be snapped on a mobile device and then uploaded in the same manner as before. Bank feeds are updates that are made straight to your accounting software on a daily basis. Even for very modest enterprises, it is now possible to view monthly accounts from any location, using any device, at any time that is suitable for the user. Now, people are well aware of technology and want to save more of their time using it. Most businesses in UK are shifting their processes to automation and software:

• 70% of businesses in UK shifted to some technology for tax preparation.
• 58% of businesses are using cloud-based accounting software over desktop software.
• 69% of businesses reported saving more money since they shifted to automation and technology for their daily repetitive processes.
• 80% of business owners want to constantly monitor their business, regardless of where they are.

Signs that Its Time to Shift Your Business to Online Accounting Software

When you're wasting time on manual, repetitive chores

As the owner of a small business, you are expected to wear all of the hats at your firm, bouncing between many responsibilities and competing objectives is just another day at the office.

Although administrative duties like maintaining inventories, processing transactions, and issuing invoices to clients are essential, they frequently involve repetitive processes and can be a significant time drain.

You will be able to automate the majority of these procedures with the help of accounting software. As a result, you will have more time on your hands, which you can devote to expanding your business rather than reading through various paperwork and spreadsheets.

When you notice increase in manual mistakes

It should come as no surprise, given that most spreadsheets contain errors, that the number of errors that occur may rapidly build up if the majority of your do work manually.

Suppose you are entering all of your invoice data into a spreadsheet by hand using a keyboard. When the invoice is paid in full, you will need to update the spreadsheet again, at which point you will need to note the date, the invoice number, the customer's name, and the invoice amount. That is a significant amount of data to enter in, which means there is room for error.

While apparently little errors are unavoidable, they can have a negative impact on your organization, such as erroneous statements or missed tax benefits.

When your business is growing fastly

Spreadsheets may be a useful tool when you are just getting started, such as when you are in the first phases of budgeting and planning out the financial aspects of your firm.

However, as your business continues, you will realize that it is not difficult for things to spiral out of control.

When you have to juggle between various spreadsheets and pieces of paper, even simple things like keeping track of invoices or cash flow estimates may be time-consuming and frustrating. In addition, there may come a moment when you need more than one person to manage your accounts. This may include employing an accountant or delegating some responsibilities to a member of your teams, such as the recording of new information, the generation of reports, or the authorization of payments.

In a scenario like this, advanced features of accounting software like user restriction settings and multiple device access that allow for different logins can be quite helpful.

When you want faster data access all the time

Over time, you will notice that you are processing a growing quantity of business data. 

If you simply rely on spreadsheets to manage this data, decision-making can become a difficult process since you are unable to analyze the financial status of your company in a timely manner. This can be a significant obstacle.

Sometimes you are out on some business trip or vacation, but for some reason, you need to access your business data and want to monitor your business daily. You will not have fast access to information, you will need to be comfortable with spreadsheet commands and formulae to gain insights from your data. And, unless you keep your spreadsheets up to date as new data comes in, the reports that are created may not provide an accurate financial picture of how your firm is doing. 

When something like this arises, it can cause delays in the way that you make decisions regarding your business, whether you are trying to determine the quantity of product that you need to order or how you should manage your cash flow.

Key Features of Effective Business Accounting Software

If you are the owner of a small business and are seeking to purchase accounting software, there are specific features and criteria that must be satisfied in order to meet your basic requirements and fulfill your top priorities.

Using these factors, you may determine where it is worthwhile to put your money and make your investment decision. Some of the must-have features in accounting software should be:

1. Bank Reconciliation 

The process of reconciling financial records is an essential function that is offered by all advanced accounting software. When internal data from various financial institutions or sources are compared to one another, discrepancies can be resolved depending on the amount of money that was spent.

Checkout: Why Bank Reconciliation and Why is It Important for Your Business?

2. Financial Reporting 

Accounting software prepares profit-and-loss statements, balance sheets, cash flow statements, and reports on sales, customers, etc. Also, whether your small business wants a statement based on a particular number of days, months, or years, the accounting software has you covered.

3. Invoicing and Billing Management 

Invoicing and billing are essential business operations that bring in income. Managing paper invoices is time-consuming and error-prone. It's not possible to produce actual invoices for recurring orders. Without automated tools, it's hard to manage invoices and remind clients of payments.

Accounting software can manage overdue bills, encourage clients to pay on time, and avoid missed payments.

4. Auto Inventory Management 

If you own a small business that sells things, the inventory management function of your accounting software will benefit you in several ways.

It includes tracking inventory stock levels and trends as well as automatically arranging orders and reordering products.

5. Tax Management 

A good accounting app follows local tax standards and simplifies tax preparation. Accounting software can help you calculate taxes faster and more precisely when working with numerous tax rates. It can help you keep organized and tax-ready by creating tax summary reports.

Benefits of Online Accounting Software in Your Business 

1. Improved Accounting Accuracy 

One of the major perks of using accounting software is an improvement in accuracy by minimizing or eliminating human calculation mistakes. The manual operations of bookkeeping require the completion of a significant amount of mathematical computations manually. A mistake in the computation made early on in the process might have a significant effect on the final result.

On the other hand, accounting software almost never commits these kinds of mistakes. It is also not completely immune to human errors, such as those resulting from incorrect data entry or interpretation. Inaccuracies in financial accounts might lead to crises that have an influence on the lifespan of your business, and accounting software has the ability to prevent these issues from arising.

2. Financial Data Security

Financial information is the most precious and must be protected from falling into the wrong hands or being misplaced. Accounting and financial handling systems do this for their users. The accounting software maintains the security of your financial data by keeping it in a centralized database secured by security systems. Thus, only those with authorized access can view the data.

3. Reduced Manual Processes

We are all aware that time is money in business. Business owners would rather focus on their work. Instead of manually entering company data. 

With little human data entry and automated bookkeeping, small businesses can rely on accounting software and focus on key duties.

Automating tasks can save the time spent billing clients and vendors, updating client information, documenting sales, and reconciling finances. 

Advanced accounting software like Moneypex also allows you to scan receipts and automatically extract and create invoices with a few clicks. This reduces expenditures for an employee whose job was data input. Which can lead to better company resource use.

4. Accelerate Working Speed

Businesses are able to handle their financial records more quickly with the assistance of accounting software than they could do it manually. 

In addition, accounting software gives businesses the ability to improve their productivity by automating formerly manual processes. Take for instance the requirement that a company must keep a record of sales tax for each and every transaction it does. Instead of having a member of staff manually compute the tax, the accounting software might be set up to execute that calculation automatically for each entry.

5. Reporting Automation

Accounting software offers a variety of data and reports at the push of a mouse. This keeps you updated about little details of your business.

Creating bespoke dashboards and standardized reports will help you comprehend your profit & loss, increase your profitability, and get insight into your expenditure and overhead. Because the data input into the software is handled and altered automatically, the resultant reports are far more accurate than reports that must be made manually.

Custom reports may also need manual configuration, and the software can save the report for future use. Reporting is a crucial instrument that will aid every company in planning and decision-making on its road to success.

6. Reduced Tax Filing Frustration

Accounting software automatically calculates tax from your financial data. It is available with a few clicks to make tax audits a breeze.

Tax preparation for your business may be a challenging procedure that requires you to maintain meticulous records of all of your company's financial dealings. One of the benefits of accounting software is that it makes this process simpler by ensuring that all of the financial facts of your company are stored in one location. This enables you to compute your return itself in a semi-automatic manner, saving you the time and resources that would otherwise be required to manually figure out the necessary details.

7. Mobility and Cloud

Cloud accounting let you access your accounts and financial data from anywhere. So, you can always check on the performance of your company.

When people used outdated computing systems that are based on a desktop, they were essentially confined to the workplace. Software, files, and account information are all stored on a local drive on a computer only. And because of this, the access they have to information about finances will be restricted.

But now we are liberated from this constraint when you use cloud-based accounting. There is no software application that you need to download since all of your data and records are encrypted and saved on a cloud server. Instead, you log in and work from your web browser anywhere you have access to Wi-Fi and the internet.

8. Save Money

Business automation reduces costs. Accounting software simplifies calculations and administrative tasks so you don't have to outsource.

Accounting software's speed and efficiency can minimize expenses. Using an accounting tool helps each member to achieve more in a given period, perhaps requiring a smaller team. It can also cut printing and distribution expenses because all data is stored digitally in a secure location.

Wrap Up!

We've discussed how accounting software helps company owners manage finances and do duties quickly and accurately. It doesn't replace accounting managers' function in arranging a company's finances but boosts their efficiency.

Without accounting software, business owners or accounting managers will spend too much time preparing financial reports or reconciling bank accounts and statements. Accounting software helps them acquire total financial visibility to make smarter judgments.

Moneypex offers comprehensive accounting software that has been customised to the tax systems of the UK. Our adaptable accounting system may be configured as an on-premise, cloud-based, or mobile app to meet the needs of any organization. Request your free demo now, to explore more about advanced features of Moneypex accounting software that can be beneficial for your business and automate most of your daily tasks.

Also read: Top 10 benefits of Accounting Automation