9 Useful Features of Accounting Software for Small Businesses

|Updated on: May 22, 2024

Accounting software accompanies many useful features for small businesses. From automating accounting operations to managing inventory, accounting software has helped businesses evolve into fast-paced organizations with a complete view of all financial activities.

Have a look at 9 useful features of accounting software for small businesses:

1. Generates invoices

Small businesses tend to create invoices and bills manually. This means that for every sale they are liable to create an invoice to record the transaction. Since this process is done manually, it is quite possible that the data entered in the invoice is wrong.

With an accounting system, the process of invoice generation becomes automated. All you have to do is type in the name of the product/service sold and it will fetch the price along with GST details automatically, generating an invoice. A fully integrated accounting software can even help you generate an e-Invoice under GST.

2. Managing payrolls

Accounting software can calculate and process payments to be made to employees. It prepares and prints their cheques without delay and responds to all legal and tax commitments without errors. This will act as reminders for businesses of their responsibility to these financial obligations.

3. Asset management

Either as a separate tool or an inclusive module, the “fixed asset management” feature of an accounting software helps manage financial data much more accurately. The category here combines features such as maintaining history of audits, cost records, calculating depreciation, allocating resources to departments, etc.

4. Inventory management

An accounting software can keep track of stock held by the company to maintain optimum inventory levels contributing to inventory management. The software notifies businesses in the event of overstocking or understocking, helping businesses manage their inventory efficiently. For example, an advanced accounting software can help you record the entire manufacturing cycle from the dispatch of raw materials to finished goods, by-products and scrap yielded.

5. Financial reports

Today accounting solutions offer robust reporting and analytics tools which help in decision making regarding finance and cash flow. It provides accountants and finance managers with crucial financial insights and accurate financial information. These business reports are used for analyzing cash flow and trends.

6. Tax management

Tax regulations change over time and one fine example is the introduction of Goods and Service Taxes Act in India. Accounting systems can help you manage all those compliance requirements with automatic calculations on tax for sales (GST) and payments as well as on withholdings for employee payroll (ESI, EPF etc.,) and other direct tax taxation laws such as Tax deducted at Source (TDS).

As the accounting software keeps you updated and informed through automatic reminders and sorting everything, the risks of being penalized for late payments are also minimized if not eliminated.

7. Preparing budgets and forecasts results

This is a bundled feature that most accounting software offer with a premium subscription. This feature calculates and interprets financial performance for the current year and helps estimate the budget for the projected year using the data trend recorded from last year. Using this feature, companies can prepare their estimates and set up real and optimistic sales targets.

8. User-based access

Your accounting data is, after all, sensitive data about your business’s financial affairs. You wouldn’t want to make it available for all the users. Your data entry team, accounts team, procurement and inventory team, payroll team, top management, etc. would all need to access accounting data, but only for the specific information that they require.

An accounting software should give you the ability to set user-based access so they can only use and view specific features and reports. This will give you the freedom to restrict certain users from accessing sensitive data.

9. Prevention and detection of errors

A key reason for using an accounting software as opposed to performing accounting tasks manually is to minimize errors in accounting. The software that you select should prevent you from making errors by enabling you to pre-set majority of the details required in a transaction. Automatic calculations are also a feature which help you to avoid making errors.

Another important ability that you should look for is detection of errors. An accounting software should be able to detect the kind of errors that are dynamic and cannot be avoided by settings. An example can be alerts when you are trying to make a sale of an item which is not in stock at that time. Detection of errors in such cases will help you avoid larger mistakes and ensure credibility in front of your customers and suppliers. Prevention and detection of errors is an important feature to look for in an accounting software.

Choosing an accounting software depends on the features you are looking for in the software. Accounting software systems like TallyPrime can scale with the growth of the organization to provide more advanced features like GST return filing and cost analysis reports. It also accompanies a dashboard to give business owners an overview of cashflow and financial performance.

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