Accounting software – Advantages and Disadvantages

When it comes to managing finances, understanding the accounting software advantages and disadvantages is crucial for any business owner. In today’s fast-paced business environment, these digital solutions have become essential tools that streamline financial processes, enhance accuracy, and save time.

While the benefits of using accounting software are numerous, there are also some drawbacks to consider. In this blog, we will explore both sides to help you determine if accounting software is the right fit for your business needs.

Businesses Keep Accounts In Different Accounting Software:

• Businesses will get their accountant to do it.
• Will keep accounts manually using pen and paper and special accounts books.
• Use a computerised version of this such as an Excel spreadsheet to help with all the adding up and so speed up the process. There is of course the danger of incorrect formulas in the spreadsheet and they are not specifically designed to be accounting systems.
• Use accounting software which can be the most efficient method of keeping accounts if used correctly. This could also be online.

Here Are Some Advantages & Disadvantages of Accounting Software

Advantages Of Using Accounting Software

Advantages of accounting software include:

• Only having to enter information once, The software does the double-entry.
• Management of your debtors and creditors.
• Automatic sales invoice generation.
• Provision of financial management reports of all types to help you manage the business.
• Automatic calculation of VAT Returns
• Easy production of final accounts.
• Some have forecasting and budget facilities built in to help you manage.
• They can integrate with other software such as stock control and payroll.

Disadvantages Of Using Accounting Software

Disadvantages of accounting software include:

• The learning cost and time of using and setting up the software.
• The cost of purchase, support, and maintenance although there are several low-priced packages on the market suitable for small businesses.
• Whilst a general package will work with most businesses, the package may need adapting or not be suitable to some particular types of businesses

How to Choose the Right Software

You need to compare the needs of your business against what different packages offer.

Of course, the software must enable you to meet your legal tax and accounts obligations but it is usually your own commercial needs that help decide which is the right package for you.

Whilst you may start with some general needs, you need to also ensure that specific detailed needs are met. A cash business will have different needs for a non-cash one. Choosing the right package can be a complex business and getting it wrong can cause you major headaches.

Talking to your accountant is a good place to start. It certainly helps if your accountant is familiar with the package you are using so they can provide any help you need and they will be able to help advise on accounting software advantages and disadvantages.

A consideration of what other support is available for the software is also a critical consideration. Sometimes it is necessary to adapt to how you work to meet the software but ideally, the software already matches how you work.

You Need To Consider Factors Such As Do You:

• want real-time access from your accountant or access from anywhere? If so, an online package may be the solution.
• have employees and so need a payroll package to go with the software and if so is it accredited by HMRC?
• have enough transactions to warrant using accounts software?
• need several people to be able to access the software at the same time over a network?
• What is the set-up of your computer system and is the software designed to run on it? A Windows-based PC will give you the most options.
• need to monitor debtors and creditors?
• require it to do invoicing and tailor the appearance of the invoices and be able to print in the format you want, perhaps on multi-part forms on a dot-matrix printer?
• need it to keep track of VAT and do your VAT Returns?
• need it to produce management accounts?
• Does your accountant also have the software to allow easy production of your end-of-year accounts and sharing of data?
• need stock control?
• Is there a particular leading software for your industry?
• need it to deal with a particular type of VAT scheme such as cash accounting, the flat rate scheme, or a particular retail scheme?
• Will it need to handle foreign currency – these packages tend to be more expensive.
• Does it require you to integrate with your retail point of sale if you have a shop?
• Will it integrate with making online payments?

Implementation of the Accounting Software

Implementing accounting software requires some planning and consideration of the following:

Staff Training

To maximise the benefits of your new accounting software, it is crucial to provide comprehensive training for your staff. A well-structured training program helps employees understand the software’s features and functionalities, enhancing their confidence and proficiency. Consider the following strategies for effective training:

• Hands-On Workshops: Organise practical workshops where employees can learn by doing, which reinforces their skills.
• Online Resources: Leverage available online tutorials, videos, and documentation provided by the software vendor to supplement training sessions.
• Ongoing Support: Ensure that there is a designated point of contact for questions or issues that may arise during the initial use.

2. Initial Setup Details

Proper initial setup is vital for the successful use of accounting software. This includes entering key business information such as:

• Business Details: Ensure that all relevant business information, including name, address, and contact details, are accurately entered.
• Year-End Date: Specify the fiscal year-end date, which is crucial for generating accurate financial reports.
• VAT Scheme: Choose the appropriate VAT scheme for your business, as this will impact how transactions are recorded and reported.

Chart of Accounts

One of the most critical aspects of your software setup is the Chart of Accounts. This framework defines the categories and headings under which financial transactions will be recorded. It’s advisable to:

• Consult Your Accountant: Discuss your specific needs with your accountant to tailor the Chart of Accounts to your business operations. While the software may offer standard account structures, customising these to fit your unique requirements can improve financial reporting and analysis.

3. Historic Transactions

To achieve an accurate starting position, you may need to input historical transactions and current account balances. This process ensures that your financial data is complete and up-to-date. Consider these best practices:

• Timing: Initiate the software setup at the beginning of an accounting year or during a quieter period for your business. This timing minimises disruption and allows for a more manageable transition.
• Data Entry: Enter historical transactions carefully to avoid errors that could affect future financial reporting. Regularly cross-check balances with your previous accounting records to ensure accuracy.

Testing the Software

Conducting a parallel run involves operating both the new accounting software and your existing accounting system simultaneously for a limited period. This step, while requiring additional effort, can be immensely beneficial for several reasons:

• Validation: It allows you to verify that the new system accurately captures and processes transactions, giving you confidence in its reliability.
• Error Identification: Parallel running helps identify any discrepancies or issues that may need addressing before fully transitioning to the new system.
• Training Reinforcement: It serves as a practical training opportunity, allowing staff to apply their training in a real-world context.

5. Support

Investing in a support agreement with your software provider is often a wise decision, especially during the first year of use. Key considerations include:

• Responsive Assistance: Ensure that the support team is easily reachable and responsive to your needs. This availability can be invaluable as staff acclimate to the new software.
• Comprehensive Coverage: Opt for a support plan that covers installation issues, software updates, and ongoing operational questions to ensure a smooth experience.
• User Community: Explore if the software has an active user community or forum. Engaging with other users can provide additional insights and solutions to common challenges.

How We Can Help You

We can assist you with advice on choosing the appropriate accounting system for you, in helping you implement the system and training. Let our accountants in London make things easier to understand for you.

We’re friendly, proactive, young, and keep up with all the latest developments in your business to make sure you’re on top of your game.