“Spend less time keeping records in books make more time making money”
In our above articles, we have already discussed what is accounting software? What are the accounting software reviews, their price, market score? Now we will move on towards how does accounting software work and what are the accounting software features?
There are several methods in which simple accounting software can optimize your business and hence results in positive outcomes. It depends on its accounting software features and objectives. Accounting systems come with all sorts of extras from simplified invoicing using the invoicing software to complex tax reporting that is not possible without an appropriate system.
Working of accounting software
Basically, the financial transactions of any accounting system are grouped into four major accounting cycles:
- Payroll, and
- General Journal
Accounting system transactions are then posted to the appropriate journals in various forms. It can be in the form of sales invoices, receipts, purchase invoices, checks, payroll entries, etc. At the same time, as a form of internal control, these postings are recorded in the general ledger(GL). General Ledger is a vital part of an accounting system. This is because it accumulates all transaction activities which are then organized by account class.
Different reports, involving financial statements, can be easily prepared from the data collected in the GL. Corrections or required adjustments are made to the general ledger by making adjusting journal entries, posted to the general journal.
Accounting Software Features
The list of basic accounting software features is given below:
Accounting – Accounting is the major component of each system under this category. Business accounting is important when one looks here and there in search of the most reliable solution. By ‘accounting’, we have one thing in our mind and i.e. general ledger, fixed assets, accounts payable & receivable, and many more. These are very basic and most crucial ones, on the other hand, advanced systems have much more bells and whistles as offers for their users.
Billing & Invoicing – Accounting systems that are exclusively devoted to online billing and invoicing are billing software and invoice software respectively. It helps customers in automating mundane collections, making an adjustment in operations to transform it into new and effective payment methods as well as industry standards. It also enables you to prepare accurate and in-time invoices for their clients.
Budgeting and Forecasting – It is a common bundled module in most of the accounting systems that can calculate and interpret finance performance for the recent year. It helps to determine the budget of the upcoming one. Companies can prepare their estimates and finally set up feasible and optimistic sales targets using this.
Management of fixed asset – Fixed asset management both as a separate tool or an inclusive module helps in managing the financial data much more efficiently and accurately. As a module, it combines features like audit history, cost records, depreciation calculation, resource allocation, etc.
Payroll management – Payroll management systems like QuickBooks Payroll Support enable you to calculate and process employee payments, make checks payable and print out without any delay. And then respond to all active legal and tax commitments without causing errors.
There are systems exclusively devoted to payroll management. These are used by enterprises as well as high-tier performers in order to remind them of their financial obligations.
Project accounting – Usually, the project accounting software is packed in individual systems representing the accounting version of vertical industry software. This software is most welcomed by construction operators as well as software developers.
Both costs and applicable rules vary from one project to the other. The major capability of this software is to estimate and manage the overheads and costs that are related to labor, material, and equipment.
Fund accounting – You will find these features of accounting that are specifically designed for government agencies as well as nonprofit organizations. It includes tracking donation expenditures, grant management, governmental accounting standards board regulations, a special suite of financial reports and many more.
Inventory management – Inventory management is a specific toolkit designed for stock control. It helps you to find all the required tools to give a higher shelf-life product line to your business. Hence, you will be able to take control of product availability and movement. It avoids all sorts of delivery issues whether overstocking or understocking.
Payment processing – Accounting systems provide a mechanism to pay bills electronically for all customers. There are many advantages for the vendor such as less staff time dedicated to checks processing or making bank deposits, greater payment security, and faster processing times. But, costs are involved in all this.
Some systems enable the direct deposits into your checking account. And there’s nothing quite like pouring the payments into your checking account that too automatically. It is done every month without making you wait for checks in the mail or running to the bank to make deposits.
IRS tax forms – Database of the most common tax forms like 1099 and 1096 can save you precious time. It is mainly beneficial if the system can input all the required data on the forms for a user and then filing them electronically with the IRS. Making electronic payment of taxes and filing forms can save you from the penalty of late payments.
Direct deposit – Direct deposit is essential these days because the paychecks of most of the people are deposited directly into their bank accounts. You know what the decent accounting software should enable you in setting up the scheduled direct deposit payment.
Automatic tax calculations – Here we will talk about tax management. It can vary from tackling the basic deductions to offering sophisticated tax tables and making printouts of the relevant forms. It helps to find out whether the system does new-hire reporting, W-4s, and W-9s.
Do many questions arise like does it handle monthly federal tax deposits and quarterly federal tax reports? Does it take care of yearly reports and returns like W-2, W-3, Form 940, and 1099? Will, it do state tax returns for income taxes as well as unemployment insurance?
Customizable reports – A system which activates customizable reporting options allowing you to create and collect any report of your choice. For instance, search for the systems letting you easily add or delete columns in standard reports, resize column width, or memorize a custom report. It can serve as a future reference.
Graph summaries – Sometimes report consists of long lists of numbers that can be difficult to interpret. Having the ability to translate the data into the pictorial form like pie charts, bar charts, and other graphs can help you to know where your money is exactly going. Search for color graphing capabilities as well as the ability to display previous years on the single graph for making comparison easier.
Cost predictions – Reports are good for helping you a lot to identify trends. But a system which can interpret data, analyze it statistically, and generate forecasts can enable you in making the financial decisions based on real facts instead of guesswork. You can search for systems involving budgeting, estimating, and other cost functions.
Subsidiary reporting – If you are handling multiple businesses, a system that can integrate certain financial aspects can be helpful in getting a better perspective on your complete portfolio, instead of estimating from individual financial reports.
Thus we are concluded that the best accounting software that you choose from the list of accounting software can handle various processes well beyond the financial management scope. There are many pros and cons of accounting software giving you a single platform to control all aspects of your business brightly and effectively. Understanding the need for accounting software and the accounting software features might be helped you in dealing with your business and GST return in a better way.