The basics for your accounting package
In this final post of our series of becoming more financially literate about your business’ finances, we look at how to go about choosing an accounting package that suites your needs.
It is not just about accounting
As a management accountant, I get excited about the data that underpins financial statements. One of the most important aspects of choosing an accounting package is the type of information that you want to store and retrieve. It is not just about accounting – and you need to bear this in mind from the very beginning. Even though accounting for your daily transactions is the reason you want an accounting package, does not mean that you need to limit your decision making to accounting only. Remember, what you put in is what you get out!
The basics – or not so basic
Every accounting package comes with the basics, that differ slightly from one another – but essentially serve the same purpose. Most accounting packages come standard with the below modules, and others sell them separately, depending on your requirements.
- General Ledger – the backbone of your accounting system – a grouping of your income and expenses, assets and liabilities. This will be included in all accounting packages.
- Customer module – this is where you can invoice your customers and receipt their payments. There are some cool integrations from developers in this module where some accounting packages make communication with your customers as efficient as possible, like emailing an invoice to your customer, directly from your accounting system – and then automatically reminding your customer to make payment if they are overdue.
- Vendor module – the opposite of the customer module, this is where you capture your expenses – from the monthly rental of your offices, down to the teaspoons for your canteen. There have also been some incredible innovations in this space. Things like manually capturing bills from your suppliers is becoming a thing of the past. You can now email; scan, upload or take a picture on your phone of a bill from your supplier, send it to your accounting package, and it automatically detects who the supplier is and captures the purchase transaction automatically, leaving you to only review and post.
Type of business
The first step to guide your decision making is the type of business that you run. Each industry has different requirements, and each business will differ from the other. Having an appropriate accounting system that gives you the ability to invoice faster or order stock on time, could be the difference between your business and a competitor. If the accounting package cannot handle your needs, you may need to look for a third-party application that can. For businesses that have a large or complicated stock system, it may be worth using a system that is specifically designed to manage stock, and that integrates with your accounting system. The same goes for businesses that use a point of sale system. As a business owner, you need to balance the cost of third-party applications that can integrate with your accounting system against the time saving and value add.
The second step is defining how you want to access your accounting system, and where you want the information stored, backed up and protected. If you choose an accounting package that can only be loaded on your machine, you will only have access on that machine. If your business grows and you hire a bookkeeper, getting a second instance that links to your data can become quite messy. Rather consider cloud accounting software – your information is securely stored, and you can access it from anywhere at any time, even from your phone!
Ease of use
The final consideration is the ease of use. Some accounting packages are built for accountants, and others are built for small business owners. You want an accounting package that you are able to use. An easy way to determine a system ease of use is to look at their training resources – the more complex, the less easy to use.
Don’t rush the process – take your time in making the right decision – you do not want to have to change your accounting system 6 months down the line. Rather do in depth research and get the right solution. Here are some of things that you can do to aid your research:
- Use the free trial offered – and do not drag your feet on it, 14 or 30 days ends quickly.
- Watch any demos that you can find, or even better – set up a demo with the software service provider if they offer it. Most new software companies do.
- Have a look at their development pipeline – this will give you an indication of how committed they are to enhance their product features, but more importantly – what their system currently lacks you don’t know what you don’t know – this is a good place to find out.
- Google the reviews of the system – especially the bad ones and be cognisant of why the bad review is there – is it really a system limitation, or is it a user issue?
- Review the community forum of the software that you are interested in – here you can see any issues that other like-minded business owners have, and if they can be resolved.
Finding the right accounting system is integral to the success and future of your business. It will also play a fundamental role in the development of your financial literacy.
At 118, our mission is to support entrepreneurs to grow and scale their businesses. We do this by using the latest in cloud accounting tools and machine learning to get the basics right as efficiently and effectively as possible. Reach out to us now, so that we can help you make the right decision!