Types of accounting software and which is right for your business

Managing finances effectively is a key part of running a successful business. Accounting serves as the backbone of financial health, enabling you to accurately track income, expenses, and cash flow.

Accounting is critical in enabling data-driven reporting and informed decision making.

• It guides your allocation of resources to provide stability and growth.
• It supports compliance with tax and legal obligations, reducing the risk of fines or audits.
• It enhances your credibility with investors, banks, and stakeholders, which is essential for securing funding or expanding operations.

Effective accounting is key to long-term success, which is why choosing the right software to enhance financial tracking, streamline business processes, and boost credibility is essential.

In this guide we will explain the types of accounting software available and show you the factors you should consider when choosing the best solution for your business.

What is accounting software?

Accounting software reduces manual work by automating accounting processes. It offers an integrated system and a set of apps for managing and processing your financial data. In doing so it streamlines your accounting functions and financial reporting, inventory management, expense tracking, online payments, and accounts receivable/payable.

• It collects the data needed for your accounts.
• Measures key performance indicators using real-time dashboards.
• And provides in-depth and transparent reports on the financial activity of your business.

This software is available in various formats, from cloud-based solutions to locally hosted applications, allowing businesses of all sizes and sectors to manage their finances more efficiently.

The benefits of accounting software – and the best solutions for your business – are explored in this guide.

The benefits of accounting software

Accounting software can deliver numerous advantages to your business. The main advantages are outlined below:

• Time savings: The automation of tasks like invoicing, payroll, and tax filings reduces the time spent on manual data entry and the burden of administrative work. This gives you and your finance team more time to review performance and focus on strategic decision-making.
• Improved accuracy: Accounting software minimizes the likelihood of human error with automated checks, real-time updates and standardized financial processes. This helps ensure greater accuracy in your financial reporting, which directly enhances compliance, boosts credibility with stakeholders and investors, and improves your understanding of business operations, as well as potential risks and growth opportunities.
• Up-to-date data: Enabling access to real-time financial information accounting software allows you to respond quickly and effectively to cash flow issues. By using dashboards and reports, you can adjust strategies based on the current financial health of your business. Find out how you can use tools like Worldpay analytics to gain detailed financial insights that enable timely and better decision-making.
• Enhanced security: The best accounting software options offer robust encryption, secure data backups, and multi-factor authentication to ensure your sensitive financial data is protected from unauthorized access or loss.
• Regulatory compliance: Accounting software is critical in enabling your business to maintain compliance with standards like PCI DSS. It automatically updates its operation according to regulatory requirements to reduce the risk of non-compliance penalties.
• Remote access: Cloud-based accounting software allows you to securely access financial data from any device, supporting collaboration across remote teams and locations. This is particularly valuable for businesses with multiple offices, distributed teams, or hybrid work arrangements.

Types of accounting software

There are various types of accounting software available, each offering different features to meet specific business needs. When it comes to choosing the right software for your business, here are some key factors that you should consider:

• Business size: One of the most important things to consider is the size of your business and the complexity of its internal operations. The size of your business will affect the scalability of your accounting solution and the features that it will require.
• Integrations: You must check that existing systems used by your business will easily integrate with the chosen software without affecting the data flow and accuracy.
• Accounting needs: Ensure you clearly understand what type of accounting approach will be required by your business, whether this be just basic operations or complex analytics.
• Budget: Accounting solutions vary widely in cost and functionality. You must match your requirements with your budget.

Here’s an overview of different types of accounting software and an indication of the sorts of businesses each is most suitable for.

1. General accounting software

With the essential features of invoicing, expense tracking, and basic reporting, this type of accounting software is suitable for businesses with straightforward financial needs.

These tools are often cost-effective and user-friendly, ideal for businesses that require standard accounting functions without extensive integrations or complex features.

Examples of general accounting software include Sage Accounting and Zoho Books, both of which provide easy-to-navigate tools for tracking expenses, managing invoices, and generating simple financial reports.

• Easy to use, especially for those who lack extensive accounting knowledge and experience.
• Affordable way to cover essential accounting needs for businesses that aren’t looking for anything more than standard features without advanced functionality.

2. Cloud-based accounting software

As this type of accounting software is hosted online, it allows businesses to access financial data from any location in the world.

Typically, this type of software is designed to be flexible to changing needs and scalable to adapt to growing businesses. It benefits from frequent updates and data backups that are provided as part of your subscription.

Cloud-based tools include services such as QuickBooks Online, Xero, and FreshBooks, all of which are popular for their accessibility and robust functionality that includes basic bookkeeping and advanced financial reporting.

• Facilitates remote access and collaboration between teams in different locations.
• Provides regular automatic updates that boost security, compliance and functionality without requiring manual intervention.
• Scalable to meet growing business needs.

3. Invoicing software

Invoicing software is designed to simplify the billing process for businesses with a high volume of customer transactions.

Its features include automatic invoice generation, payment tracking, and issuing reminders for overdue payments. Many services also provide features for setting up and managing recurring payments and allow for customizable invoices.

Popular invoicing software options are FreshBooks and Wave. They both offer specialized invoicing tools for efficient billing and payment processing which are ideal for service-based businesses, freelancers, and consultants with high invoicing demands.

• Automated billing for time-savings and reduction of late payments.
• Customizable invoice options for branding and recognition.
• Simplified tracking of payments and managing of customer accounts.

4. Enterprise Resource Planning (ERP) software

ERP software is a comprehensive business management tool that integrates the accounting needs of your business with other business functions, such as inventory management, HR, and customer relationship management.

It’s typically used by larger businesses with complex needs that are looking for a centralized platform for managing essential operations.

ERP solution providers include SAP and Oracle NetSuite. They combine powerful accounting and financial management capabilities alongside business management tools for other departments.

• Centralizes all business functions onto a single platform.
• Offers advanced analytics and reporting.
• Scalable for expanding and complex business structures.

5. Industry-specific accounting software

There are also accounting software services that have been designed to meet the needs of specific industries, such as construction, retail, or healthcare.

These solutions include features that are tailored to the needs of businesses in a specific sector. Construction accounting software (like Buildertrend) includes project costing, job tracking, and equipment management, while retail accounting software (like ShopKeep) provides inventory management and POS integration.

• Tailored to address the unique requirements of specific sectors.
• Offers features that general software may lack, such as project costing.
• Improves efficiency through a focus on industry-specific workflows.

Choosing the best type of accounting software for your needs is crucial for business efficiency, reducing errors, maintaining compliance and understanding your cash flow.

By using the right accounting software, you can take a large step towards optimizing your financial management and supporting the scalable growth of your business.

With solutions ranging from accessible cloud-based software to comprehensive ERP systems, it’s essential to choose a tool that aligns with your business's needs, budget, and complexity.

If you’re looking for ways to manage payments and gain insights into financial performance, find out how Worldpay IQ can provide real-time payment tracking whilst supporting accurate financial data management.