Searching for the best accounting software for your business?

There are many small business accounting and financial management solutions, sometimes called bookkeeping software, on the market today. Some of these tools come with specialized functionality for almost any industry or size of organization.

As a small business owner, you'll need to think about your business and the specific type of accounting functions that your tool will need to perform to keep your bank account healthy.

Business accounting software, standards, and compliance requirements are constantly changing as technology evolves, and this can make the process of choosing small business or enterprise accounting software tricky for business owners.

This buyers guide is intended to make the process of finding an accounting tool much more bearable.

Here’s what we’ll cover:

• What is accounting software?
• A comparison of top accounting solutions
• What does accounting software cost?
• Overview of accounting features
• What type of buyer are you?
• Benefits and potential issues
• Market trends you should understand

What is accounting system software?

Accounting software is a tool used by businesses to track financial statements, cash flow, invoicing, bank accounts, and purchase orders. Most accounting software options offer a core package that can handle the following accounting tasks:

• General ledger
• Accounts receivable
• Accounts payable
• Bank reconciliation
• Payroll services
• Financial reports

These systems occasionally come with specialized functionality for particular business sizes such as the self-employed or freelancers, small businesses, or enterprises. Because the accounting solution serves a critical business process, a small business owner may often view it as a central component of an organization's enterprise resource planning (ERP).

A comparison of top accounting solutions

There are many popular accounting solutions on the market, and it can be hard to know what distinguishes one accounting software product from another and which is right for you. To help you better understand how the top accounting software tools stack up against one another, we created a series of side-by-side product comparison pages. These will break down the details of what each solution offers in terms of pricing, accounting features, ease of use, customer support, and more:

What does accounting software cost?

Accounting software costs vary depending on the platform and number of users who will be using it. Costs begin around $5 per user per month for more basic platforms, and can cost a flat rate of $1,000 or more for a more advanced system with many users.  There are some free and open source accounting software options out there, and paid options sometimes offer free trials.

Depending on the vendor and your business needs, the software can be deployed on-premise or provided as a Software-as-a-Service (SaaS). You can review the pricing of popular accounting products in our accounting software pricing guide.

Overview of accounting features

What type of buyer are you?

Before evaluating your options, you must determine what type of buyer you are. Over 90% of buyers fall into one of these three categories:

Growing small-business owners. These businesses are on the verge of upgrading basic systems, such as QuickBooks Desktop and QuickBooks Online, to more robust small-business accounting systems that will support premium functions (such as demand forecasting, intercompany accounts, increased data storage, multiple users and more). Growing businesses upgrade their systems for a range of reasons. Industry-specific functionality will become important when a small company reaches a certain size threshold.

Enterprise buyers. These buyers represent businesses and organizations that need the functionality of a full enterprise resource planning (ERP) suite. Usually, these systems will include functionality for multi-company consolidation, international operations and foreign currency, and other concerns relevant to large entities. Seamless integration is usually more important than specific features; however, there is considerable differentiation in both of these areas, and buyers should examine both.

Best-of-breed buyers. These buyers are focused on specific functions. For example, nonprofit organizations need to look specifically for accounting software for businesses that can perform fund accounting. This method tracks funds in such a way that different grant providers can see the right report on how each fund amount has been used. Meanwhile, in education, universities and colleges often need software specific to higher education, for uses including the disbursement of financial aid. Construction companies or engineering firms, on the other hand, usually need a system that can break down costs by each project and location, as well as other characteristics. For best-of-breed buyers such as these, accounting features are often more important than integration.

Benefits and potential issues

The key benefits of financial management systems are clear: Better visibility of costs and expense management, improved inventory tracking, and real-time purchase orders, which leads to more financially responsible decision-making. In addition, systems can generate financial reports in a variety of ways to summarize this information cleanly for the right audience.

For example, nonprofits can generate reports specific to a particular grant provider, detailing exactly where every cent of the funding ended up. This allows an organization to be accountable to investors, donors, and lenders, maintaining trust and avoiding financial damage. These systems also allow companies to ensure compliance with reporting standards and federal requirements.

There are a number of issues that should be avoided when selecting a software solution. Buyers in certain vertical industries must make sure the appropriate modules are included in the system they purchase. For example, engineering firms and construction companies should choose a system with a project accounting module.

Another issue is a company's rate of growth; the buyer should consider how fast the company is growing at the time of purchase. This way, the company will not grow out of a system immediately after investing considerable time and funds in the selection and implementation processes.

Market trends you should understand

As you evaluate accounting software packages, consider these current market trends:

Software-as-a-Service (SaaS). SaaS, or cloud accounting software, is picking up speed as buyers realize the advantages of lower upfront costs and quicker implementation time. NetSuite is a prominent example of a SaaS system: In fact, it is available only as a SaaS offering.

Mobile apps. Mobile applications are gaining popularity across the board, and accounting is no exception. Check to see how each vendor is innovating on this front and ensure their mobile app is compatible with the Android or iOS devices you use.

Increased specialization by industry. Increasingly, consumers are demanding more industry-specific features, and vendors are listening. Products that were once "horizontal"—such as Sage MAS 90/200, QuickBooks, and Microsoft Dynamics—are increasingly adding new vertical features to cater to buyers’ specific industries. Make sure to keep a lookout for features that fit your particular industry when investigating tools and solutions.

Business intelligence. Interest in business intelligence is on the rise. Business intelligence takes massive amounts of data and organizes it into reports designed to support business improvement. Many vendors are now integrating business intelligence into their ERP accounting and financial management systems.

Note: The applications selected in this article are examples to show a feature in context and are not intended as endorsements or recommendations. They have been obtained from sources believed to be reliable at the time of publication.