Things you need to consider when purchasing accounting software

Selecting the right software for your business is vital to your success and growth.

We recommend that you install an accounting software package designed for small businesses. Whether you pay a bookkeeper or do your books yourself, having accounting software for a small business will keep you in control of your finances. This is so important. However good you are at what you do, being in control of the numbers and cash flow could make the difference between whether you succeed or fail.

If you take the plunge and start off using accounting software, you will be able to use your valuable time to run your business and make it flourish, instead of struggling with your books.

But which accounting software for small business should you use? Will it meet your needs? Just because your business is small, don’t feel you have to compromise.  There are plenty of software companies out there fighting over the accounting software for small business market.  This competition is good for the consumer.  It means that there is a product out there which will meet your needs, at a price you can afford.

Here are the 10 things to think about when choosing your accounting software for small business:

1    Decide exactly what capabilities you need from your accounting software

Accounting software applications can have different levels of functionality to support different sizes and complexities of businesses and industries, and they can also be highly configurable. It is up to you to decide on the exact functionality you need – what is a must have for you; what’s nice to have; what you’re never likely to require.

Not all packages are fully functional. Some are geared for cash accounting, which tells you what you have been paid and what you have received, but to really be in control you will also need to know what you owe and are owed.   This is vital for projecting your cash flow.  It is called the ‘accrual accounting’ system.  This package will include branded invoices, an easy way of managing the purchase invoices you owe, banking, reporting, VAT returns (if you are registered for VAT), expense claims, credit notes and managing contacts.

Does the solution need to handle some or all these criteria, either today or in the medium or long term – multi-company? multi-currency? multi-language? multi-user – with the potential for different types of user with distinct access rights and functionality needs?

If you’re not sure what functionality would be useful talk to your accountant or bookkeeper to ask their advice, then contact several software vendors to get an overview of their products. Accounting software can’t make you an accounting expert, so if you are looking to be completely self-sufficient and not use the services of an accountant or bookkeeper, your software will need to have the functionality to enable you to submit annual statutory accounts and your corporation tax return.

2    Ease of use

We think this is probably the most important of all. Look out for an intuitive, easy to use dashboard or home page.  This should tell you at a glance what your bank balance is, what you are owed and what you owe, and what your sales and costs are.  Ideally there should be an area which you can flag up accounts which you always want to see, such as your year to date sales, which will give you an up to date snapshot of your business.

Navigation and data entry should be easy. You should be able to find your way around easily to the features you need to use, after all, the whole idea is for the accounting software to free up your time for running your business. If you make a mistake, will it be easy to correct?

All this may be too much trouble; if so ask your accountant what they recommend and why. If they say ‘Because that’s the package we use’ get another accountant!  It isn’t about making your accountant’s life easy – it’s the other way round. They should ask what numbers you want to know and how often, who will be keeping the books (you or a bookkeeper), how familiar you are with accounting, how often and from where you want to access your books and so on.

3    Cloud or Desktop?

Should you be looking for a desktop or cloud solution? Some cloud solutions may provide fewer features which exactly match your requirements than systems installed on a desktop computer, which can be configured specifically to meet your own needs. However, cloud solutions may be better at enabling online collaboration with your bookkeeper or accountant which may be important for your type and location of business.

For example, with home working becoming more popular, many businesses require access to their financial information from a variety of locations.  You may want your accountant or a business partner to have access to the information, and buying multiple licences can get expensive.  This is where online accounting software comes into its own.  Secure access at anytime and anywhere that has an internet connection. This also means that the clever accounting software developers take care of all the messy updates, so you never have to worry again whether you are using the most up to date version.

These two types of solutions often have significantly different financial models, with desktop costs often being more ‘upfront-loaded’ whereas cloud solutions are often more spread over the lifetime of that solution, so consider which type best fits your finances.

4    Are integrations between several applications needed to run your business?

Do you use further software to manage other aspects of your business (e.g. invoicing; receipt capture software)?  Does the accounting software you’re considering link directly to these applications to avoid you having to manually re-enter data? A lot of businesses now use separate systems, for example for invoicing, collecting contractors’ hours and expenses, accessing product and pricing information and so on. It is important to be able to link these systems to your accounting package seamlessly to avoid the need for multiple data entry.

Apps are now being developed to use for bank reconciliations, creating your branded invoices and doing expenses.  What do you think of the idea of being able to check your up to date bank balance every day from your phone? This may be something you would like, or not important at all. Either way, if it matters make sure it links to your chosen package.

5    Reporting

Easy to use reporting is essential so you can see how your business is doing and so you can easily get your business numbers on a regular basis.  For this, reports should be available in a format that you can easily see on the screen, download and print.

6    How big an issue is data transfer?

If you are moving from an existing package or manual system, what processes will be needed to transfer the data and required historical information? If you have high volumes of data this may be a major effort. Does the software provider also offer a data transfer service or work with partners that do, or will you need to manage this internally – potentially by the manual rekeying of data? Make sure you are able to meet legal requirements for how long records are held and can answer internal or external requests for historical data e.g. from potential investors or auditors.

7    Data feeds from bank accounts

Many accounting software products allow you to import your bank transactions and reconcile them with the data you hold. This very useful feature is available from an increasing number of packages and is a system that connects to your bank so you can see your bank transactions automatically appear every day, saving you time, and taking away the chore of manual data entry.  With automatic bank feeds, it’s easy to keep the books up to date regularly, proving a real time view of the business, so that you are always in control. This is particularly useful if you have a lot of bank transactions and  avoids having to manually enter banking data. Does your preferred software provide these capabilities?

8    HMRC interfaces

Does the software support interfaces to HMRC, especially for submitting VAT Returns? Is the software compliant with HMRC’s Making Tax Digital (MTD) initiative or does the software provider have a clear timescale for becoming MTD compliant?

9    Understand what’s included (and not included) in the price

What is included in the price? Will you need any additional functionality via “add-on modules” at additional cost, for example expense recording or project accounting? What are the costs of upgrades if the business grows or there are changes to legislation? Does the package include any limitations to the number of users or transactions that can be processed?

Will you pay monthly; quarterly or annually? What is the cancellation/termination policy? What additional technical infrastructure might you need to provide? Also check the scale and type of access that your colleagues need too.

10 Technical support and training

Does the software provider offer technical support? Who is there to support you when things go wrong? Is it a telephone number? Will you need to send an email and wait for the response? Some systems have a support forum where you can post questions. Is this an email-only  service? When is support available (office hours only, evenings, weekends)?  Is support and training included in the price of the software or are there additional charges? Are there various levels of support packages offered with different charges? The main thing is that you are satisfied that if you have a problem it will be dealt with.


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