Simple or Complex Accounting Software – Which Accounting Software is Right for Your Small Business?

It’s a common misconception that all small business accounting software is the same. This couldn’t be further from the truth. There are different products on the market to meet different business needs, all of which come at different prices and all have their own pros and cons. The goal of this article is to explain the different types of accounting software and enable you to make an informed decision about what type of accounting software best suits your business.

We will first focus on the term SME as we believe this best explains the three types of small businesses that exist – small, medium and large. While it is correct to group all these types of businesses together, they all have very different characteristics and needs. Depending on which of these classes your company is in will have different implications for your accounting software needs.

1) small business – are characterized as SMEs just starting out, freelancers or companies that have relatively small sources of income in the business. The owners of these companies are very focused on all capital expenditures and ensure that all expenditures are tangibly linked to driving business growth. Goals in this phase are sustainable income lines in the company in order to stimulate growth within the company.

2) medium business – Slightly larger SME company that is now generating sustainable revenue and has achieved solid growth. It’s likely that medium-sized companies hired some staff to facilitate the new level of work to be done. Midsize businesses are looking for more structure to their financial management and a way to monitor costs and expenses as the company’s workforce grows.

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3) corporate business – This is the largest type of SME company. Companies of this scale have tended to grow in size, stature, and operational complexity. Departmental structures have now taken place, business administration has increased, and human resources management is becoming increasingly important in the company. The additional size and complexity in the company increases the need for support in increasing process efficiency in both financial and operational management. The larger, more complex accounting products meet these requirements at an additional cost.

Looking at the above 3 types of business, it becomes clear that it would be virtually impossible for a software company to create a general purpose small business accounting software system that would fit all budgets and needs. A small business would need a significantly less complex product than a small business. This may seem like a pretty obvious statement; However, there are many SMB owners who still believe that when they buy a small business specialty generic, they are getting a great product designed for their business. Because of this, I wanted to clarify the two main types of accounting software that exist.

1) accounting software – Accounting software packages perfect for a company that wants to easily manage its inputs and outputs in an effective and compliant way. They allow an owner to enter important sources of information such as sales proceeds, purchase expenses, cash and bank transactions. The accounting software takes this information and automates the principles of double-entry bookkeeping, creating simple accounts payable, accounts receivable, and general ledger accounts. These basic accounting software features are more than enough for an SME owner to understand their financial position and prepare the financial statements.

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2) Sophisticated accounting software solutions – The large small businesses probably want their accounting software to do more than just do their balance sheets. Due to the added business complexity, accounting software features such as asset register, inventory/stock control, job costing, and payroll become attractive. All of these features allow a small business to manage its business more effectively by managing its assets, providing assistance in managing inventory control effectively and managing human resources. These additional features enable a company not only to manage its financial accounts but also to increase efficiency within the company.

The mid-size small business falls between these two types of accounting software. Choosing the right accounting software for a medium-sized business depends entirely on the specific needs of the business at the time of purchase. There are many accounting software products on the market that cater to the mid-sized business market, all with pros and cons in terms of features. Some have a greater focus on HR-related functions, others have greater financial forecasting and modeling capabilities. The only way to ensure the right product is being purchased is to thoroughly map products to business needs.

Regardless of the size of your business, it’s critical that you base any decision to purchase accounting software on the unique needs of your business. Don’t be swayed by brands or endorsements, do thorough requirements tracking and use those requirements as a guide to your purchasing decision.