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Published November 19th, 2016 by

Kinds of Accounting Software and What Is Good for Your Business

Kinds of Accounting Software and What Is Good for Your Business

All businesses, especially those involved in sales, need some kind of accounting software. But this software is not one to fit all kinds of business needs so you should be selective on what you will use. The different kinds offer different features and uses. But generally, this software will help you monitor your business’ financial status.

This article discusses the kinds of accounting software based on its use, its server and the size of the business it caters.

According to Use

Accounting tools can be classified depending on where they are used. Here are three types of the most common accounting software based on their usage:

Payroll and Accounting. This software deals with automating the payroll process. Read here for six tips to implementing the payroll system successfully. The use of this software will reduce errors when making the payroll of employees. Here are five more reasons why your business needs a payroll software. It would also reduce the time it takes to prepare the payroll. Here are some of the software’s more detailed functions:

  1. Identify the deductions or withholdings of each personnel and calculate the salary.
  2. Automate depositing of salary to employees’ payroll or bank accounts.
  3. Generating tax reports and other forms.
  4. Facilitate printing of checks if needed.

Enterprise Resource Management. This is a type of accounting software that deals with almost everything in the business. Here are some of its functions:

  1. This tool allows the users to access a lot of connected software and networks within the business. This is to monitor how everything is working. The user is given one password that will allow him or her to access the networks.
  2. This tool manages all the resources and assets of the company. This includes all the expenses and receivables. With the sensitive data that can be accessed with this software, the access is only given to those with clearances.
  3. Basically, the job of this software is to streamline most of the processes in the company. Here you can read more about enterprise resource management.
  4. Purchasing materials and equipment and billing of labor.
  5. Management of customer relationship.
  6. This is where the standard tools for finances and reports come in.

Freemium. This is an accounting software that is offered for free on the internet. Though it is free, it has only limited usability. When you are just starting out with your business, there is nothing wrong with using the free online software. But as your business grows bigger, it would be prudent to invest in a more established and stable software. Having a free accounting application only offers limited features. Here are the basic features and functions that freemium offers:

  1. Account management. This is the most basic function of an accounting software, which is why even if it is free, freemium offers account management. This is the feature responsible for managing the sales of the company and taking care of the clients. So, they will continue patronizing your business.
  2. Expense tracker. This is tracking and documenting all the money that goes out of the business. Expenses could be categorized as utilities, bills, taxes, payroll, maintenance, capital expenses and others.
  3. This is issuing an invoice or receipt to those who avail of your services.
  4. This is keeping track of all the money that goes into the company.

According to Size of Business

Now that we know the kinds of accounting solutions based on their uses, we will now look at the kinds according to the size of the business it caters to.

Entry Level. This kind of software is best for those small scale businesses. The kinds that are micro-enterprises and mostly sole proprietorship with less than five employees. Here are some facts about entry level accounting software:

  1. They are the cheapest kind of accounting software because they only offer the most basic features. Features like the ones in freemium.
  2. Usually, businessmen only use this entry level accounting software as an addition to their already existing accounting systems.
  3. For small businesses the entry level is the best accounting software for their needs.

Medium Sized Businesses. This kind of software is best for businesses with less than 25 employees. These are the businesses that are not yet enterprises but are no longer considered small scale or sole proprietorship. Here are some facts about this kind of accounting software:

  1. It has the freemium features with added functions for more complex business operations. The added features usually include functions to help make inventory easier and more accurate. It also has a feature for human resources and purchases.
  2. This can allow up to 25 users to use the system at the same time. It can handle large volumes of usage as compared to the entry level kind.
  3. There are software providers that will allow an entry level software to be upgraded so that it is suitable for medium sized businesses. You can read reviews of accounting software to know which ones are scalable when your business also grows.

Enterprise. This is the kind that is best for big businesses. Those that employ more than a hundred employees and are mostly considered corporations and enterprises. They have more complex business operations, so they need a software that can handle that. Here are some facts about an accounting software fit for enterprises:

  1. Other than the basic features and other features offered, this software offers functions that handle the complexity of a big business. That includes management of the workflow, planning for projects and business intelligence.
  2. This kind of software can be expensive. Thus, you have to take a lot of steps to weed out the best software available. Researching thoroughly about the software you are considering is the first step. Next is trying out demonstrations or free trials. Lastly, reading reviews of accounting software and asking other users about their experience with the product.

Customized. This is the kind of software that is made by the business itself. If you employ an IT team and an accounting team, they can collaborate to make a software that is best suited for your business. Since this is customized, the features and functions will rely solely on the creator. But mostly it will still contain the same basic features as any other accounting software. You can check this article for more features of an accounting software.

The benefit of this software is that the creators have first-hand knowledge of what the company needs. So, they can make something that will perfectly fit that company. Another is that you don’t have to pay a monthly subscription fee for customized accounting software because it is already owned by your business. This software does not have to be built by your company. Though, there are also accounting software providers that offer custom built accounting applications.

According to Server

There are two kinds of accounting software according to its server. The first one is web based or otherwise called software as a service (SaaS). This is like a rental as compared to owning a software. You pay a monthly subscription rate or rent for the software that you will use and is good for small scale businesses. Here are five important reasons why small businesses should use a cloud-based software.

The second kind is on-premise where the server of the software is installed in a physical location. The software is installed and configured. This is more expensive because you will have to pay for the installation expenses. Also, you have to pay for the expense of keeping a place for the server. Maintenance of the software will also have to be taken into consideration.

Here are five things to be considered when choosing a web-based or an on-premise server:

  1. The sensitivity of data that will be stored. Although security on cloud or web based applications is taken seriously, they are still more at risk compared to an on-premise If you plan to store sensitive and classified data, it would be better to invest in an internal hosting.
  2. The security for web-based applications is tight but not as tight as those in on-premise servers. For cloud-based applications, you have someone else to handle security. While in on-premise, you have to hire your own team. You can read reviews of best accounting software. Do some research on how a cloud-based accounting software handles their security if you want to know more about it.
  3. Financial capability. Using an on-premise server is definitely more expensive than web based applications. If you have the budget for the on-premise and you have a big business with sensitive information, then go for this kind. If you have a limited budget and do not really have a lot of sensitive information to be uploaded, using a web-based application is the better option.

Now that you know the different kinds of software, you can choose which one will suit your business. If you can’t find one that is perfect for your company, you could always choose a customized accounting software.

Looking for an accounting software for your business? Read what others are saying at CrowdReviews.com.

John Tovar

John specializes in the creation and planning of business-centric mobile applications and mobile website design and development.

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