Today, technology plays a significant role in ensuring streamlined business operations. From business process automation to data-driven decision-making and the use of machine learning to forecast business performance, the use of smart software solutions and intelligent tools has infiltrated all aspects of business.
Therefore, using the right software solution for your business is key to long-term operational efficiency and overall business success. This is especially true for critical business functions such as lease accounting, bookkeeping and financial planning.
Accounting software can be a fantastic tool for managing your company’s financial records, staying in control of your cash flows, and streamlining day-to-day bookkeeping tasks. However, if you don’t choose the right accounting software, the same tools can become a nuisance, potentially leading to inaccurate reporting, discrepancies in financial records, and increased complexity in your routine accounting procedures.
While there are many off-the-shelf accounting tools available for businesses of all types and sizes, it’s important to choose a solution that fulfills your business needs and seamlessly blends with your existing accounting procedures. But how can you know which accounting software is perfect for your company? Keep reading to get the answers and discover various factors you should consider before choosing accounting software for your business.
1. Does the Software Comply with Accounting Standards?
For any business, it’s important to comply with industry-specific accounting and financial reporting standards. These standards provide a uniform framework for globally consistent financial reporting.
For instance, accounting standards like GASB 96 offer guidelines to government entities on how to represent subscription-based information technology arrangements (SBITA) in annual reports. For this purpose, government entities must choose accounting tools that help with GASB 96 accounting. Selecting accounting software that aligns with industry-specific standards ensures accurate record-keeping, facilitates efficient financial analysis, and promotes better decision-making within the organization.
If accounting software fails to comply with essential financial reporting standards, it can lead to legal repercussions, financial penalties, and reputational damage for the business. So, make sure that the software you choose for your accounting operations complies with accounting standards and ensures consistency and transparency in financial reporting.
2. Does It Offer Compatibility with Your Existing Enterprise Solutions?
Since accounting serves as a backbone for all business processes, you need to make sure the accounting software you choose is compatible with existing software solutions. If your business is already using enterprise solutions or smaller business modules, accounting software must be capable of communicating effectively with other applications or seamlessly integrating with the existing databases. This way, each time your business makes a sale, purchase, lease payment, or salary disbursement, the transaction can be instantly posted to your accounting software’s journal.
3. Does it Offer Scalability?
When your business is expanding or downsizing, you’ll need an accounting system that can keep up. An increase in a business’s operational scope typically increases the amount of financial transactions, especially during the initial phases of business expansion or diversification. For this purpose, you may require an additional workforce to deal with day-to-day bookkeeping tasks and a multi-user accounting system to cope with the increasing technology needs.
In such a scenario, a single license accounting system may prove inadequate and costly. This is why you must choose accounting software that offers the flexibility of increasing or decreasing the number of users, storage capacity, and functional capabilities as per your business needs. Before choosing accounting software, look into what upgrades you’ll need to handle your company’s future growth, as well as how much each upgrade will cost in the long run.
4. Choose Between Software-as-a-Service and Desktop Software
When choosing accounting software, you must decide between a SaaS-based system and a desktop application. Desktop applications usually have a single-user license and require a dedicated local area network and application server.
Cloud-based accounting software, on the other hand, doesn’t require dedicated machines and costly setups. Moreover, these systems offer the flexibility and convenience of accessing solutions from any device, whenever and wherever needed. This is because the software solution is provided by a third-party service provider operating from a remote location. You only need a device connected to the internet to access the web-based SaaS solution without the need for exclusive installations.
Since SaaS-based solutions are subscription-based, businesses can scale up or down their user subscriptions whenever they want. However, cloud-based systems require uninterrupted internet access, and you may sometimes need to pay for software features you don’t need. Compare the advantages and disadvantages of both types of software before making a decision and choose a software that fulfills your operational, financial, and data security needs.
5. Does it Offer Customization/ Industry-Specific Functionality?
Businesses operating in various industries have different operational needs, and bookkeeping requirements vary accordingly. For example, a retail business selling pre-manufactured products has different accounting requirements compared to those that manufacture products on a wide scale and calculate the cost of goods sold (COGS) regularly.
Moreover, if your business has a large lease portfolio to manage, you may require custom lease accounting features and reports and compliance with industry-specific standards like ASC 842 and IFRS 16.
Businesses need customized features and reports based on the nature of the business, finance-related activities, and the industry in which they operate. So, instead of opting for an off-the-shelf accounting system, make sure the software solution you choose caters to all your business needs.
Final Thoughts
Technology has the potential to optimize business operations and maximize efficiency, productivity, and profitability. Accounting tools that fulfill all your operational and financial needs not only help you gain control over your finances but also maintain credibility in the eyes of customers, investors, and stakeholders. While the benefits of accounting software are far-reaching, you should consider the above factors to choose the right software solution for your business.
