Accounting and bookkeeping are of vital importance to proper business functioning. They refer to the recording of transactions and financial management in all its forms. Without a well-established accounting system, companies face difficulties with financial
analysis, planning, and reporting - to say nothing of performing routine transactions.
A business can find it inconvenient to carry out its financial operations manually. Firstly, it’s challenging for self-employed individuals and small businesses, where one employee, as a rule, performs a large variety of job duties. In such a situation,
this employee can get easily confused by multiple figures or get stuck on annual reports. Secondly, recording journal entries manually takes away precious time that could be otherwise spent on business meetings, creating new projects, or corporate planning.
Lastly, manual accounting requires punctuality in observation of financial laws. Ignorance or simple forgetfulness in submitting reports or tax returns leads to penalties and reputational damage.
Of course, a company can outsource its bookkeeping and accounting to an external agency. However, if a business owner wants to keep a hand on the current financial condition of their enterprise, outsourcing may not be the right solution. Moreover, no outside
agency is ever so interested in making the best financial plans for a company as its manager. And that is possible only when the manager is familiar with the flow of funds within their business.
Accounting software automates the core accounting tasks, such as journal entries, reporting, analytics, and forecasting. It simplifies the accounting procedures
and makes them clearer, even to nonprofessionals. An automated system computes the numbers for a balance sheet and other reports. Moreover, it presents the data in cutting-edge easy-to-read formats that are handy to send and easy to read.
Accounting systems possess a number of valuable features. They keep the financial data safe by introducing access privileges and other security solutions. Accounting apps make the information available when needed due to its clear structuring and cloud storage.
These apps provide companies with an understanding of their current financial state, help them perform analytics and forecasting, and strengthen credibility among their partners and clients.
The basic accounting software programs usually include the following functions:
1. Maintenance of accounting records
Creating entries in ledgers in accounts payable, accounts receivable, purchases, and inventory is one of the essential features of accounting applications. The system then automatically shifts these data to a general ledger and makes necessary calculations.
This forms the basis for profit and loss statements, balance sheets, and other regular reports.
Digitalization of such processes gives stakeholders flexibility in terms of resource management. Automation
of the accounting process, generation of reports, and analysis of the company’s assets will no longer require plenty of human time. This, in turn, will make it possible to manage company employees more competently, assigning them to key tasks.
2. Billing and invoicing
Automated systems make it easier for accountants to issue invoices and monitor payments. Thus, the companies have better control over incoming payments. Accounting apps also send notifications to counterparties, reminding them to pay.
Custom accounting software creates tailor-made invoices that are suitable for the specific needs of each business. Doing this manually can be tiresome and slow. Moreover, software of this kind will help eliminate the human factor that can cause reputational
damage to the business.
3. Report generation
Accounting apps produce all kinds of reports, granting business owners real-time information on their companies’ states. Custom financial analysis software focuses on the reports that are significant to a company and its partners, such as reports on particular
departments’ performance. In addition, the reports are drawn up in usable formats and can be instantly sent to the parties concerned.
4. Financial projections
Custom financial planning software enables businesses to track performance indicators that are of the highest relevance to them. It also performs various types of planning - depending on whether the managers want to estimate profits, count on taxes, or evaluate
5. Asset amortization
Company assets are subject to depreciation. These calculations can be automated as well. Such an approach is advantageous for facilities owning manufacturing equipment, vehicles, machines, and other assets. Accounting software will help to avoid risks associated
with human factors and speed up the process of calculating the amortization of assets.
6. Bank reconciliation
The interconnection of an accounting system with a bank allows firms to reconcile their financial records with bank statements. This ensures the accuracy of separate journal entries and the entire monthly or yearly reports generated by the app.
7. Tax administration
Financial analysis software is capable of accommodating itself to the latest changes in tax legislation. Moreover, it calculates taxes with respect to the contractor’s location and displays the amount of various taxes based on the company’s income and expenses.
8. Payroll accounting
Automated systems handle payroll for staff, considering all due deductions. Accounting software is in line with mandatory insurance and pension fund contributions. It also takes into account each employees’ leave allowance, salary bonuses, sick leave, and
family status. All this allows companies to be precise in paying wages to their teams.
The complexity and function set of accounting software vary from business to business. It depends on whether the user is an individual entrepreneur with a need for a simple single-entry platform or a huge corporation implementing a comprehensive solution.
Accounting software development can be adjusted to the needs of every single company by adding industry-specific modules and tools. Accounting apps vary in usability, cost, number of users, and transactions available.