Accounting Software Buyers Guide
This detailed guide will help you find and buy the right accounting software for you and your business.Last Updated on February 16, 2023
1. What is accounting 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:
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).
2. Comparisons of top accounting software
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:
3. How much 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.
4. Accounting software features
|Core accounting||Core systems assist with the basic functions necessary to balance a business' books, including general ledger functionality, the ability to track accounting transactions including accounts payable (A/P) and accounts receivable (A/R), as well as cash flow, recurring invoices, fixed assets, and bank reconciliation. Every business requires these core functions for financial and project management. Bookkeeping software isn't meant to replace a bookkeeper, but rather provide them with a user-friendly online accounting solution and streamline their work come tax time.|
|Project accounting||This type of system helps project-oriented businesses maximize job profitability and efficiency by tracking detailed project costs. An accountant can use financial data to analyze past job costs and estimate future costs. This data will help them determine which jobs may be the most profitable. The accounting solution tracks financial data and project factors such as invoicing, time tracking, and expense tracking to improve decision-making.|
|Fund accounting||These software solutions support nonprofit and governmental entities in tracking their business finances and spending of funds. Nonprofit organizations can track their expenditures of donations or grants to make sure they meet fund provider requirements. These systems also allow government entities to make sure they meet unique Governmental Accounting Standards Board (GASB) regulations.|
|Inventory management||This type of software solution helps companies track inventory levels to maximize profit, avoid overspending and minimize the costs associated with inventory depreciation. The right inventory management system keeps information up to date by tracking product levels as well as orders, sales, and deliveries. The Generally Accepted Accounting Principles (GAAP) stipulate specific ways to account for inventory to ensure proper reporting of value for inventory that has depreciated or undergone other changes. Software with inventory management capabilities ensures this is done accurately.|
|Billing & invoicing||Invoice and billing systems automate the collection of payments from customers to enable timely and consistent collection with minimal human error. There are many different types of billing and invoice systems designed to support the wide range of industries, business models, payment processing, and operational scales that accounting professionals deal with. There typically are add-ons for multicurrency and ecommerce support, sales tax calculations, credit card payment processing, balance sheet tracking, and bank feeds.|
|Budgeting & forecasting||Users can leverage budgeting and forecasting solutions to project a company's financial outlook from historical data and estimate future conditions. These systems are typically used in businesses that must consolidate multiple departmental forecasts and budgets and are most helpful where multiple variables drive the ultimate forecast.|
|Fixed asset accounting||This type of system tracks fixed assets by providing a central database of important asset information, including location, check-in and check-out, due date for return, maintenance scheduling, audit history, cost, and depreciation. Depreciation schedules are a core element of this specialty.|
|Payroll management||Payroll systems help businesses track and process employee payrolls. They also compose and print paychecks, automatically withhold and pay government taxes, and generate the necessary legal and tax reports on a regular basis. Automated payment reminders for required fees help businesses avoid legal penalties.|
5. 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.
6. Benefits of accounting software
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.
7. Accounting software market trends
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.