Small business tips: Determining the right accounting software for your needs
Guidance to better understand general accounting software options so you can choose one that meets your small business needs
When it comes to accounting software for small businesses, there are several things to consider. Common factors business owners take into consideration are the environment of the accounting software and your record keeping needs.
Which Environment Best Suits Your Business Needs
The first thing we need to discuss is which environment will be best suited for the needs of your business. So we’ll briefly explain two popular options:
- Local environment
- Virtual/cloud environment
One option is to use a local environment which means installing the accounting software on your own computer or network. The main offerings for this type of environment are QuickBooks Desktop and Sage 50 Accounting.
Pros: The pros of having a local environment are cost and user interface (UI).
The cost of the software is typically a one-time payment at purchase and the software can be used for multiple years before an upgrade to a newer version is absolutely necessary. The UI is also very well designed because it has been refined over years of operation.
The other option is to use a virtual/cloud environment which means paying a provider to host a program on their server. The main offerings for this type of environment are QuickBooks Online, Xero, and Sage Intacct.
Pros: The pros of having a cloud environment are accessibility and consistent software updates.
Cloud environment software allows you to access your books and records from just about anywhere that has an internet connection. Also, since they are internet based, the software is consistently updated over the course of a year without the need to purchase a new version.
Record Keeping Needs
The next thing to keep in mind is what kind of record keeping needs the company needs right now, and what needs will the company have in the following year? The nature of owning a business is that your needs change as consumer behavior changes. Unforeseen factors such as a shift in the economy force companies to revise what they need and how they need it.
QUICKBOOKS, XERO, AND MORE:
Both QuickBooks and Xero do a fine job of keeping basic and intermediate accounting records for small businesses. This includes daily operations, accounts receivable, and accounts payable. They can track income and expenses by customer, job, or classes.
If you need to track your data at a level beyond that, you will likely need more powerful software, such as Sage.
If you do not know the record keeping needs of your organization, it can be helpful to consult an accounting professional.
The main things you want to consider when it comes to understanding your record keeping needs are as follows:
- Reporting requirements for Income Tax
- Are there multiple states?
- Reporting requirements for Sales Tax
- Are they multiple localities?
- Are there multiple states?
- Contract or grant reporting requirements
- Interim period reporting requirements
- Are your records going to be subject to review/audit by an outside accountant?
- Are there bonding requirements to maintain?
- What kind of detail tracking do you want for analysis or forecasting?
In Conclusion: The Software You Need Is Based On Just That — What You Need
Both the environment and your record keeping needs are two crucial items that you’ll need to address in order to help you determine which basic accounting software is the best option for you.
If you’re looking to consult with an accounting professional on determining which accounting software to select, contact our office at 909-307-2323 or email us at firstname.lastname@example.org.
Carlos Carazo, EA, CPA Supervisor