How to choose the right accounting software for your business
A lot of people in business forget the purpose of accounting. It’s supposed to be for leadership, not for the government or taxes. Your accounting process should help you understand how your business is performing and drive better business decisions.
The accounting software you choose should support that purpose.
If you’ve typically relied on your accountant to choose the finance tech stack for your company, or let an external accountant use a tool people within your company don’t even have access to, it’s time to update your methods.
Here’s how to choose accounting software that works for your business.
Choosing accounting software is a business decision
Your finance stack is not just a financial decision. It’s a business decision, because the data you glean from these tools can help you drive better business outcomes.
Talk to the business team
The most important step in choosing accounting software is that the business team and leadership take part in the decision.
The key question you should be asking your accountant is not, “How can I pay less in taxes?” It’s “How will we communicate with each other?”
Your accounting process is key here, and the accounting software you choose is central to making that work. Your company should work with a solution that gives the right people across your business, sales, marketing, and finance teams visibility into performance while creating a channel of communication between you and your accountant.
Don’t leave it up to your accountant or your finance team to make this decision on their own. They should ask you what you need out of an accounting solution to drive better business decisions.
Reconcile business decisions with your accounting system
Where do you draw the information that informs your business goals, benchmarks, and other decisions? How do you know the long-term value of any given customer? Where do you keep track of costs like cost of goods sold and customer acquisition costs?
You should be able to point to your accounting system for all of these.
Instead of siloing information across systems accessed by different teams, choose accounting software that facilitates processes that involve all those teams. You should all be working from the same set of data to collectively make decisions that drive the business forward.
How to choose accounting software: 4 things to consider
Keep these points in mind when choosing accounting software.
1. Choose an open and interconnected solution
A closed ecosystem should be a red flag when you’re choosing accounting software. That means the tool is attempting to do everything on its own — which leads to being mediocre at everything instead of being the best for a single solution.
Look for accounting software that is open and compatible with a variety of other tools, because you don’t know what your business will require in the future. What you need today will likely not be what you need six months from now.
You can check this easily. Go on a company’s website to see how many apps they’re compatible with. Popular solutions like Xero and QuickBooks, for example, allow integrations with thousands of third-party apps to allow the solution to grow and change with your business.
2. Compliance with local law
Your accounting solution needs to gather and store information and facilitate reporting in accordance with financial and tax regulations in your country and state.
In this case, your accountant is the best person to weigh in on whether certain software meets your requirements, but here are our recommendations for SMBs:
Overall, choose a tool that’s most widespread in your country or region of the world, because it’s most likely to be tailored to your regulatory needs.
In addition to looking for an open ecosystem and software that can grow with your business, consider the functionality you need in accounting software to support your business's success.
- Features: Which features do you need — i.e. basic accounting, bookkeeping, invoicing, inventory management, payment processing, payroll, project management, multi-currency support, automation, a large number of users?
- Format: Will you choose a cloud-based solution for greater accessibility or desktop software for increased security?
- Customization: Which options for integrations and add ons do you require?
You do need to consider your budget and look at all costs of a tool before deciding which one is right for you.
A tool like QuickBooks is relatively cheap and a good tool to start with as a small business. You may consider making the switch from QuickBooks to a more robust tool like NetSuite down the line as your revenue grows — but this isn’t a simple process. You’re best off choosing a solution early that can grow in the direction you plan to grow your business, considering:
- Integrations you may need to add functionality in the future.
- International growth that’ll require additional regulatory compliance.
- The ability to add features and customizations as your needs change.
When reviewing pricing, look at all the costs, not just the monthly or yearly subscription fee. Is there a set-up fee? Do you have to pay to download software? What will you pay to enable add-ons and integrations? Do you run the risk of an exorbitant monthly cost to accommodate the number of users your team needs?
Types of accounting software
Depending on your business needs, you’ll choose from among these common categories of accounting software for your business:
- Pure players: These solutions specialize in invoicing and meet the needs of a range of businesses. Examples include Chargebee, Stripe, Zuora, and Recurly.
- Accounting tools: These tools combine invoicing and accounting to reconcile the two functions in a single platform. Examples include some of the most popular accounting software for small businesses: QuickBooks, FreshBooks, Sage, and Xero.
- All-in-one: These solutions cover invoicing and accounting and are integrated with a larger software suite that includes functions like a CRM and sales and marketing tools. Examples include Zoho and Salesforce.
- ERP software: Enterprise resource planning software includes functions to manage all operational needs for medium-size businesses, including an adaptable invoicing model. Examples include Oracle, Sage, and SAP.
Bottom line: Don’t reinvent the wheel
Don’t bang your head against the wall or expend resources trying to find the perfect solution for your business. You’ll just run into a lot of sales pitches going that route. Instead, talk to people.
Consult folks in your industry who are a few years ahead of your business. Ask about the challenges they face, what’s been working well for them, what hasn’t worked well, and what they wished they knew when they were at your stage.