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What Is Accounting Software?
Accounting software streamlines financial management by automating transaction recording and reporting. Ideal for businesses of all sizes, it reduces costs, minimizes physical storage needs, and enhances audit accuracy, thereby enabling better financial decision-making.
The functionality of accounting software differs from product to product. Larger firms may choose to implement a customized solution that integrates a vast amount of data from many different departments. Small firms often choose an off-the-shelf product.
Key Takeaways
- Accounting software facilitates the recording and reporting of financial transactions for accountants and bookkeepers, streamlining these previously manual tasks.
- Different-sized firms may require varying levels of accounting software, from off-the-shelf solutions for small businesses to customized programs for larger enterprises.
- The adoption of accounting software reduces the need for physical storage space, contributing to cost savings on office space.
- Accounting software enhances the efficiency of audits by enabling easy access to past financial data for both internal and external auditing processes.
How Accounting Software Streamlines Financial Management
Accounting software is an invaluable resource for modern businesses. The software allows detailed tracking of financial transactions and near-instantaneous reporting and analysis. Before accounting software, these tasks had to be performed by hand, using large transaction journals.
Ad hoc reporting was generally impractical due to the labor involved in consolidating the manual entries. Accounting software automates these tasks, reducing the costs of accounting and allowing better financial decision making through timely reporting.
Accounting software also allows for storing numerous amounts of data without having to take up physical space. This results in companies needing less office space because they no longer need large file rooms to store binders of data. Less office space allows for cost savings.
The ability to easily access accounting information through accounting software makes it easier to complete audits, particularly those that require evaluating information from years prior. This not only assists with internal audits but also assists external groups, such as the Internal Revenue Service (IRS), in case they need to investigate financials for tax purposes.
Selecting the Right Accounting Software for Your Business
There are accounting software packages for all companies, from Intuit’s Quickbooks for small to midsize businesses to offerings from Microsoft, SAP, and Oracle for large enterprises. Some of the distinguishing features are functionalities in expense reporting, last in, first out (LIFO) and first in, first out (FIFO) inventory reporting, point-of-sale integration, batch management, document management, and multicurrency transaction recording.
Also important is where or how the accounting software is deployed: on-premises, hosted as software as a service (SaaS), or in the cloud. There are generic accounting software packages that can be used right away for all types of companies, while other packages require customization for the specific needs of an industry or business. As with other types of software packages, pricing for accounting software can take the form of a flat rate (e.g., a monthly subscription), time-based, per-user-based, and tiered rates depending on the level of service.
Depending on the accounting software chosen, representatives from the software company may visit a customer’s office and demonstrate the accounting software as well as implement it properly and securely within the firm’s accounting department.
How Do Businesses Benefit From Accounting Software?
Accounting software allows detailed financial transaction tracking and nearly instant reporting and analysis. These tasks previously had to be performed by hand, using large transaction journals.
Does Accounting Software Save on Office Space?
Yes. Data can be stored without having to take up physical space. If companies no longer need large file rooms to store data binders, then they need less office space and have cost savings as a result.
Does Accounting Make Auditing Easier?
Yes, for both internal audits and external audits, such as those conducted by the IRS. Easily accessing accounting information through accounting software makes it easier to complete audits, particularly when evaluating information from years prior is required.
The Bottom Line
Accounting software assists accountants and bookkeepers in recording and reporting a firm’s financial transactions. The functionality of the computer program differs by product, depending on the firm’s size.
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