Not all small business owners are accountants by trade. At some point, they all grapple with the nuts and bolts of accounting — a vital process that allows them to monitor the financial health and profitability of their business. From identifying cash flow activities to measuring financial performance and communicating economic information, accounting in general involves a series of complex tasks that help businesses understand and take action on their finances.

The good news is, accounting software solutions are here to help small businesses get back on track and understand their company’s current financial situation at a glance. In this article, we’ll discuss the nitty-gritty of how an accounting software works and how it benefits small businesses in general. To help you make the most out of your accounting software, we’ll also share some of the best accounting features that you should consider before investing in an accounting solution.

What Is an Accounting Software Used For?

First and foremost, accounting is a crucial process that allows owners, managers, investors and other stakeholders to keep track of the company’s financial health. Without the proper delegation of accounting tasks, businesses run the risk of having accounts that are paid late or not settled at all.

As such, an accounting software is a tool that helps small businesses manage accounts and simplify financial-related tasks. Small businesses make use of accounting software to streamline accounting processes, from recording transactions to analyzing and interpreting financial data. By implementing an accounting software, small businesses can easily monitor their company’s financial activities and improve their cash flow.

Small businesses also use accounting software to keep track of their cash flows and examine their financial health. It eases and accelerates a wide range of financial-related activities, including bookkeeping, AR and AP management, invoicing, and tax compliance. With an accounting software, businesses can easily record and analyze financial transactions in their books of accounts.

Accounting solutions are also built to automate a number of accounting tasks and reduce time-consuming and manual processes. It increases the efficiency of small businesses and keeps manual data entry to a minimum. By simplifying accounting processes, accounting solutions provide businesses with more time to focus on the administration and execution of their business strategies.

Benefits of Accounting Software for Small Businesses

There are plenty of ways in which small businesses benefit from accounting solutions. Aside from streamlining financial-related tasks, accounting solutions are also widely known for their capabilities to perform all the functions that a manual system does. Calculations and data entry are also done automatically by accounting software, making the entire accounting process much more simple.

Given its benefits, a majority of businesses in all parts of the world have turned to accounting solutions to eliminate the complexities behind accounting processes. According to a recent report, 82% of small businesses are already using cloud-based accounting solutions.

Today, plenty of small businesses are using technology to improve their team’s efficiency, especially when it comes to financial-related tasks. Here are some examples of how small businesses can take advantage of accounting platforms.

Automating tasks

One of the greatest benefits of using an accounting software is that it automates numerous tasks, such as recording financial activities, creating purchase orders, generating reports, invoicing, and billing. It also serves as a useful tool for automatically updating and approval of journal entries in the general ledger. Instead of manually inputting data and transactions, businesses can simply connect their bank accounts to their accounting system and reconcile accounts.

Making financial data accessible

Cloud-based accounting solutions make financial data readily accessible at all times to small business owners. With an accounting system in place, businesses can easily access all reports and financial statements, including profit and loss reports and balance sheets, which are necessary to make smarter business decisions. Since accounting solutions record all financial activities within a company, small business owners can easily see which money comes and goes into the business, and they always know where to find this information.

Simplifying taxes

Most accounting systems are equipped with tax compliance features that allow businesses to streamline all processes related to managing taxes. To ensure that businesses are tax compliant, accounting tools provide myriad functionalities to simplify calculations and the filing of taxes. These tools also support electronic tax payments to ease the completion of tax compliance processes.

Analysis and reports

As the most sought-after functions of an accounting software, analysis and reporting capabilities enable small businesses to accurately identify and evaluate critical financial situations. By providing access to financial records, accounting systems allow business owners to facilitate the major tasks and meetings within organizations and come up with data-driven and informed decisions for their business.

Core Features of an Accounting Software

Not all accounting solutions available in the market today are created equal. In fact, each of them come with a distinct set of features and capabilities that may or may not be fitting for the unique requirements of different types of businesses. To give you a complete picture of how an accounting software enriches the financial performance of small businesses, here are some of the core features of an accounting software.

Core accounting

This includes all the basic accounting tasks — accounts payable, accounts receivable, and a company’s general ledger. With finance automation, small businesses can efficiently collect and submit payments on time. This feature also reduces manual data entry to make sure that all financial transactions are automatically recorded and kept accurate.

Bank reconciliation

Reconciling bank account statements is an important process to identify accounting and bank errors and prevent fraud. Most accounting systems have this feature, and it enables small businesses to ease the process of comparing bank statements to the financial transactions of the account holder. Aside from simplifying the import of bank statements, this function also helps businesses reduce discrepancies in their book of accounts.

Financial reporting

This feature helps small businesses track and visualize key performance metrics, such as profit and loss (P&L) statements, balance sheets, and expense reports. Most accounting systems today are also leveraging AI technology to provide businesses with more accurate forecasts of their financial growth. For a number of accounting firms, AI has proven to improve business operations, such as identifying trends and generating reports and data insights.

Billing and invoicing

Billing and invoicing are two of the most critical functions of an accounting system. Today, there are plenty of modern accounting software that support the creation and distribution of invoices, as well as more advanced sales processes, such as facilitating online payments for one-time services or recurring transaction types. These features help small businesses collect payments and ensure that their products and services are paid for on time by their customers.

Implementing Accounting Systems for Small Businesses

In the past, only large enterprises and corporations could afford to use costly and high-maintenance accounting systems. Thanks to recent technological advancements in the SaaS industry, we now live in an era where there are a great number of accounting software products specifically built to address the needs of small businesses.

These accounting systems for small businesses are often more affordable and easy to use, allowing small businesses to easily adopt the software and streamline complex accounting tasks. So whether this is your first time using an accounting software for your small business or you are upgrading your accounting system, remember that these tools are here to make your accounting processes much easier and painless.