Accounting software can have several positive effects on your business if you choose to incorporate it into your financial management workflow. However, with all the options on the market, it can easily get overwhelming. So how do you make sure you’re choosing the right product for your business needs?
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If you’re lost in the accounting software marketplace, we’re here to help. In this article, we’ll go over some of the most important accounting software requirements that businesses can’t do without. We’ll also cover some purchasing considerations that may influence your decision.
What This Article Covers
Key Requirements
Here are a few key accounting software features and requirements to keep in mind when deciding which software solution is right for you.
1. Asset Management
Managing assets with accounting software means monitoring the status of tangible and intangible assets your business is handling on behalf of a customer, helping them make decisions based on asset value and tracking how much they appreciate or depreciate over time.
Asset managers typically evaluate an asset’s suitability and whether it will boost a customer’s portfolio. They also perform asset revaluations, depreciation ciphering, fixed asset tracking and amortizing intangible assets.
An example of an asset management dashboard. Source
- Amortization of Intangible Assets
- Asset Revaluation
- Depreciation Calculation
- Fixed Asset Tracking
2. Banking Management
For your own business’s financial needs, banking management functions can help minimize physical trips to the bank or credit union while still allowing you to conduct operations from within the software. Using these accounting modules means handling reconciliations, moving funds between accounts, setting up automatic alerts and defining rules to put transactions into specific categories.
A preview of a banking management screenshot. Source
- Automatic and Manual Bank Transaction Management
- Bank Reconciliation
- Bank ReconcAmortization of Intangible Assetsiliation Summary Report
- Bank Rules to Automatically Categorize Transactions
- Bulk Reconciliation of All Transactions
3. Budget Management
Every business needs a budget to ensure their spending is kept in check, and both accounting software and standalone budgeting software can provide you with powerful budget management tools. From graphing business spending over time to automatic alerts when you’re in danger of going over budget, these tools are essential to optimizing your finances.
If you’re a manufacturing business, for example, your budget management tools can help you calculate how much your materials and manufacturing facilities cost and how they correlate to the return on your investments. This can help you identify where costs can be cut.
An example of a budget management screenshot. Source
- Budgetary Control Framework
- Budget Creation
- Budget vs. Actuals Report
- Rolling Forecast
- Scenario Modeling
4. Estimate and Invoice Management
When your business needs to give out quotes and bills to customers, you can use an invoicing solution to easily create and personalize both while also tracking their statuses and processing payments. Invoicing modules can also automatically convert quotes and estimates into payable invoices upon customer approval.
A preview of an invoice management system’s interface.
- Accounts Aging Report
- Automated Payment Reminders
- Convert Estimates Into Invoices
- Credit Notes
- Customer Portal for Downloading Invoices and Making Payments
- Estimate Creation
- Estimate Tracking
- Invoice Creation
- Invoice Reporting
- Partial Invoice Payments
- Point-of-Sale (POS) Sync
- Recurring Invoices
- Retainers
- Sharing Invoices
- Various Payment Modes (i.e., cash, check, cards, ACH and more)
5. Expense Management
Expense management is a necessary part of any business if you want to make sure your employees’ expenses are handled properly. Using this module will allow you to approve or deny expense requests as they come in, as well as assess company and employee spending to ensure it aligns with established policies.
If you send an employee on a business trip, the expense management tool can accrue all fees, including flight tickets, hotel rooms, car rentals and more. If additional fees don’t align with company protocol, you can quickly deny those expenses.
An example of expense management software. Source
- Automate Employee Expense Reimbursement
- Billable Expenses
- Expense Categorization
- Expense Forecasting
- Expense Receipt Attachment and Scanning
6. Financial Statements and Bookkeeping Services
Any business performing accounting operations needs to have accurate reports and statements when it’s time to share information with other businesses or governing bodies. The reporting handled by this function can include:
- Cash Flow Management
- Balance Sheets
- Profit and Loss Statements
- Change in Equity
- Income
- Stakeholders Equity
- And more
The most essential of bookkeeping functions are standard in accounting software as well: general ledgers, accounts payable and receivable, and charts of accounts, for example. The software makes these processes even simpler by automating data entry and copying it across databases, ensuring accuracy and minimizing the risk of errors.
A preview of a bookkeeping solution.
- Balance Sheet
- Bookkeeping Automation
- Cash Flow Statement
- Chart of Accounts
- General Ledger
- Journal Entries
- Profit and Loss Statement
- Recurring Journal
- Trial Balance
7. Inventory Management
This module is practical for more than just the manufacturing, supply chain management, distribution and warehousing industries. Any business should have tools in place to view real-time snapshots of available stock and establish minimum quantities for resupplying to avoid stockouts.
An example of an inventory management interface.
- Customizable Pricing Rules
- Inventory Closing Calculation
- Inventory Item Information
- Inventory Reports
- Inventory Tracking
- Reorder Alerts
8. Payroll Management
Opting for a payroll management module in your accounting software means keeping payments in-house and allowing workers to log their own hours. This gives you a more direct line to your employees, speeds up the conversion of hours to paychecks and improves the efficiency of any support requests made by employees.
Some benefits of investing in this component are:
- Happier workers
- Boosted revenue
- Simple customizations
- Improved compliances
- Enhanced communication
- Adapting to different work types
A preview of payroll management tools.
- 1099 Report
- Direct Deposit
- Garnishments and Deduction
- Payroll Report
- Payroll Tax Processing
9. Project Accounting
When your business is focused on multiple specific projects, project accounting modules help you devote resources to them and differentiate between their needs, including costs, budgets, profitability and reporting.
Project accounting helps you drill down into project specifics, improving communication and making it easier to share information with teams.
Other benefits include:
- Enhanced resource allocation and management
- Precise information for customers for billing and monitoring project growth
- In-depth insights for drafting prospect project bids
An example of a project accounting tool. Source
- Add Billable Hours to Invoices
- Project Budgeting
- Project Costing
- Project Time Tracking
10. Revenue and Billing
Billing and invoice software can cover every aspect of customers owing you money, from the design of bill and invoice documents to the processing of payments. Using this module can help upkeep company revenue and inform you on how much your organization garners every month, quarter and year. It also helps analyze customer demand, trends, sales spikes and so on, helping you make well-informed business decisions.
A preview of revenue management software. Source
- Aged Payables Report
- Bill Creation
- Bill Transaction Approval
- Cash Discount Calculation
- Check Printing
- Landed Costs Allocation
- Recurring Bills
- Revenue Contract Creation
- Revenue Forecasting
- Revenue Recognition
- Vendor Credit
- Wire Transfer Automation
11. Tax Management
Tax management tools automatically update as tax rates change, making it simpler than ever to calculate what percentage needs to be paid out to governing bodies. This software also helps you file taxes when it’s time, helping you maximize your deductions and avoid audits.
An example of a tax management software interface. Source
- Sales Tax Report
- Tax Adjustment
- Tax Audit Report
- Tax Calculation
Purchasing Considerations
Here are a few questions to ask in order to help you calculate any accounting software platform’stotal cost of ownership (TCO).
How big is your company?
Different accounting software platforms are built for different sizes of business, and you’ll want to make sure you choose something that fits your needs to minimize costs. For example, you won’t need an enterprise-level platform if you’re a small business. However, if your company has significant projected growth, you’ll most likely want to invest in a solution that can accommodate your company increasing in size and reach.
Which deployment option is best?
There are benefits and drawbacks to each kind of deployment. Whether you choose on-premise, cloud or hybrid, you’ll need to weigh which is best for you. On-premise deployment gives you complete ownership of the software, but typically costs more and requires you to do your own maintenance.
Cloud or SaaS deployment enables you to access the software and information through a vendor’s server, making access on multiple devices easier and offering lower upfront costs. However, these subscription costs can sometimes add up, and some businesses might prefer not to outsource their software ownership or IT.
Hybrid options merge the best of on-premise and cloud. Discuss this deployment’s capabilities and perks in detail with vendors because it varies across providers.
Do you need add-on modules or new software?
One of the easiest ways to lower costs when shopping for software is to look for add-on modules that meet your specific needs rather than an entirely new system. If this is the case, you’ll want to research how well different modules can integrate with the system you’re currently using.
On the other hand, if it’s within your budget and you need to upgrade everything, it may be worth investing in an entirely new system or suite to replace what you’re currently using.
How big is your budget?
Many of the cost concerns above can be mitigated if you have a well-planned budget and if you do plenty of research into hidden costs. You’ll want to be sure the accounting software you choose balances the capabilities you need with a price you can justify to maximize your return on investment (ROI).
Software Selection
When shopping for software, there are several ways you can go about your search. If you need guidance, SelectHub recommends the Lean Selection Methodology to make the process easier.
Here’s a brief rundown of what this methodology entails:
- Establish: Ask yourself why you need new software and what you want it to accomplish or improve.
- Collaborate: Put together a team of stakeholders, project managers and employees who will be affected by the new software in order to draw up a project charter.
- Define: Write down an explicit list of the software requirements you need and want as a business.
- Distribute: Figure out which vendors meet your requirements and eliminate the ones that don’t.
- Justify: Make a decision on whether to move forward with new software or stick with your original software if it meets your needs adequately enough. If you’re moving forward, be sure to make a further decision as to whether you need an entirely new system or add-on modules.
- Prove: Contact the vendors you intend on pursuing and test out their software using demos and guiding questions.
- Rank: Organize your top two or three solutions based on their TCO, overall requirements and demo scores.
- Negotiate: Discuss contracts with your top vendor and have the terms reviewed by your legal department. If this doesn’t work out, move on to the next vendor in your list.
- Sign: Review and sign the vendor contract that you agree with and set up implementation steps.
Next Steps
Accounting software can have massive benefits to your business, but it can be difficult to figure out exactly what you need. We hope this article has helped you make sense of those requirements and features.
SelectHub has plenty of other resources to help you along your way. accounting requirements template lets you prioritize which software modules and features you care about to find products that are the best match, and our free accounting software comparison report lets you compare different vendors on a feature-by-feature level.
What accounting software requirements are most important to you and why? Let us know in the comments!