What accounting software should you buy?

There are several advantages to using accounting software to keep track of your personal and business finances. Before you purchase any accounting software, you should determine if the accounting software will increase your efficiency, lower your costs, give you greater accuracy, provide more timely reports and give you better control of your finances.

One of the biggest mistakes you can make is to believe that an accounting system with problems will get better by putting it on a computer. This isn't usually the case: basically, an accounting mess put into a computer can be worse than an accounting mess on ledger paper.

Before You Computerize An Accounting System

An important factor to consider before purchasing a computerized accounting system is your personal expertise or the accounting expertise of your employees. Remember that people, not computers, do accounting. Computers add up numbers very quickly and allow you to enter the numbers into the system once for it to appear in reports, journals and ledgers. However, a person has to decide where to enter that information and then to enter the data into the system.

You still have to understand debits and credits, decide which account to charge the transaction to, decide in an error was made and how to correct an error. Computerizing the accounting system does not automatically guarantee better accuracy or greater control. It is very important to have accurate, up-to-date beginning balances to enter into your accounting software. For businesses, many choose to enter data starting from audited financial statements to get accurate numbers at the very beginning.

What To Look For When Selecting Accounting Software

One of the first considerations is to know what type of accounting reports you want the software to produce. Be aware that every document the accounting system produces can be considered a report. Some of the following reports are often useful for both personal accounting and small business accounting.

A printout of your general ledger with details of each transaction posted to each account
A printout of a consolidated general ledger
A bank reconciliation format that shows monthly receipts and disbursements
Balance sheet information for your personal accounts or business
Income and expense statements
A budget to actual comparison

Ability to keep prior months open and flexible reporting periods
You might find it convenient to make changes to prior months and then re-issue statements for those months. An important feature is the ability to select months you want to compile for reports. Some accounting software will not permit you to make changes or access data in previous months.

Exporting data to other software programs
It is desirable to be able to transfer accounting information directly from the general ledger into a spreadsheet software like Excel for more flexible reporting. The advantage to exporting directly to other software you avoid mistakes form re-entering the data into the spreadsheet.

Cost of the accounting software
The cost of the software you purchase will vary depending on your accounting needs. Personal or small business accounting software is usually lowest cost and comes in a single package with limited functions. More sophisticated high-end accounting software is much more expensive and consists of separate modules for each accounting function.

Additional accounting software factors to consider
When you are evaluating software packages, you may also want to know the following:
How many checking accounts are allowed?
Can the software easily handle payroll functions like W-2s and 1099s?
Is there room to expand into the accounting software as your business grows or becomes more sophisticated?
What type of security features does the software provide?
How difficult is the installation and is ongoing support available?
How long has the accounting software company been in business?
Are their user groups and support forums outside of the vendor?

Before you make the final decision to purchase your accounting software, be sure to spend the time to research your different options. Quality accounting software can be great for your personal and business accounts.