Chris Sibbet for eHads writes: Choosing the right accounting software for your small or medium business can be overwhelming if you don’t have a finance or technical background. Before you dive into the excitement of automating all your financial reports with one click, know that it won’t happen. These software will automate a lot of financial and business processes but you still need to understand the nitty-gritty of financial reporting to understand which product suits you.
So go and brush up your financial basics. It’s like learning to drive manual first before going for automatic transmission. In the meantime, it’s a good idea to get the big picture of what’s out there before deciding which accounting software product to buy soon. Here are four general types that are marketed today:
1. Payroll and accounting
These are one of the most popular accounting software that you can buy off the shelf or download online and install right in your desktop computer. They’re targeted at small and medium businesses.
The software products provide basic accounting tools and reports to create financial documents, saving you the time to compute data and write them in logical statements. Names like QuickBooks (Intuit), Simplify Accounting (Sage), and Denali (Cougar Mountain) are the more popular products in this category.
Many of them share the same ease-of-use features, such as cash-flow calculator, drag-and-drop formats, and multiple users. Likewise, they often feature modules specific to construction, distribution, and manufacturing. But they also provide paid add-ons such as for point-of-sale, retail and funding.
2. Business management
These accounting software products have more features that go beyond payroll and accounting. They are targeted at larger medium enterprises and big businesses. Like payroll and accounting, these products are readily available off the shelf or online, which you can install at once in your computer.
Aside from standard financial tools and reports, these software can feature all or any of the following: points-of-sale, inventory control, customer relationship management (CRM), billing, purchasing, and enterprise resource management. Often, these products are marketed as a complete solution to your accounting needs. But in reality you need to pay for add-ons to actually complete the system.
3. Web-hosted apps
They are also referred to as Software as a Service (SaaS) or cloud accounting. The main difference from the first two categories, of course, is that SaaS is a subscription-based model and accessible via the internet. This is the fastest growing category in accounting software today because of better cloud and internet infrastructure and the increasing confidence of big businesses to put their data in the cloud. Generally, you subscribe to a monthly fee per user to access the web-hosted system.
Cloud accounting’s most attractive benefit is the lower cost to use the system. Instead of paying a capital to buy license, hardware, and technical staff to run the software, you simply rent these out via the cloud. Of course, that is also its main drawback: entrusting your data to a third-party provider, the cloud accounting firm. Popular SaaS products include Quickbooks Online, Clarity Accounting, NetBooks, and NetSuite.
4. Free software
Approach these products with skepticism. Many of them appear “free,” but they capture your data to force you to subscribe eventually. Of course, not all products do that. The safe bet is to go for free apps by a major brand like QuickBooks. Big brands have a reputation to protect so you can bet they’re not out to rip you off.
Free software allows you to do the most basic accounting processes, such as, create invoices, print checks, handle payroll, and manage about 20 customer accounts. If you want to get more features, you need to pay (which makes going for a major brand logical since they’re likely to have more add-ons in their suite).
Having a general picture of accounting software products in the market today is just a starting point. You need to go deep into your operations and work processes and the products’ specifications to hope for a match.
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