Accounting Software: Frequently asked questions about accounting software
Over the years, I've found that people always seem to have the same questions as they start the process of considering the installation or use of new accounting software. Here are those questions:
Where do I start the process of selecting accounting software?
On the Overview web page I mentioned the four tasks that accounting software performs for businesses. I won't repeat that discussion here, but let as mentioned there, two of the things that accounting software does is (1) produce the business forms you need, and (2) keep detailed records of important assets and liabilities.
These two accounting software duties typically tell you which accounting software you should consider. You want accounting software that lets you keep good detailed records of the assets and liabilities you need to track in detail. For example, if you buy and sell inventory in your business and you need to keep good detailed records of your inventory, you need accounting software that supplies that level of functionality. Similarly, if you need good-looking professional invoices in your business, you need accounting software that produces those types of forms.
To summarize then, to start the process of looking for accounting software, make a list of the business forms you need and a list of the assets and liabilities for which you need to keep detailed records. Then compare these lists to the features offered by various accounting software vendors. You can cross off the list any accounting software program that doesn't produce the business forms or detailed recordkeeping required.
Should I use industry-specific accounting software?
For small businesses, this is always the question. Firms typically choose between an inexpensive general accounting software that has tens of thousands, hundreds of thousands or even millions of users... or an expensive industry-specific accounting software that has only a few hundred or a few thousand users but that does more accounting or does better accounting for businesses in your industry.
As an accountant, I think the most important factor when you think about industry-specific accounting software is how you'll get better profitability measures. In other words, the really important thing is which accounting software lets you more accurately and more easily figure out whether your business is making money or not. For many businesses, paying even a few thousand dollars more for software that provides better profitability information is well worth it.
How long does it take to set-up accounting software?
Well, the answer is, "It depends." Simple personal computer accounting software that you buy down at the office supplies store can be installed in a few minutes (just like any other software program).
Getting the accounting software working, however, typically requires more work. Typically, to begin using installed accounting software, you need to tell the accounting software what the starting trial balance is. (A trial balance is a list of the assets, liabilities, owner equity, and year-to-date revenue and year-to-date expense account balances.) And you need to load master files that describe your inventory (if you have inventory), your customers, your vendors, and your employees.
This extra setup related to the trial balance and the loading of the master files can take anywhere from several hours to several days to in special cases several weeks (if the "old" accounting system has been a mess.)
Do I need a consultant's or CPA's help to install accounting software?
No, you don't an outside expert's help to install accounting software. But you'll probably find the process much, much quicker if you do use an outside expert. You'll also less likely to make mistakes.
By the way, one thing that I really encourage readers of my accounting software books to do is get an hour or two of training from their CPA if they can't get their accounting system to run right. No kidding, often all it takes is an hour or two for someone to get productive and comfortable.
How much does accounting software cost?
Simple accounting software programs (which often work fine for one-person service businesses) can be purchased for less than $100. Sometimes for less than even $50. And sophisticated accounting software can cost millions.
That said, most of the people reading this web page will probably spend a few hundred dollars on accounting software (because they'll select one of the general-purpose accounting software programs like QuickBooks, Peachtree, or M.Y.O.B.). And a handful of the people reading this web page will spend a several thousand dollars on accounting software (because they'll want the extra functionality that comes with an industry-specific package).
What's the big accounting software mistake that people always make?
Accounting software isn't difficult to use (although people often require a bit of training to get comfortable). But the accounting software often is a lot of work to get set up correctly. As I mentioned earlier, it's commonly several hours (at least) to get things up and running. The mistake people often make is in underestimating this time requirement of installing and setting up accounting software.
Where can I get more information about accounting software: