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An accounting software has become a basic need for every business. The alternative method of maintaining accounts manually takes you days of effort to record transactions, post them to ledgers, create a Trial Balance and finally, prepare financial statements. Imagine the time and cost savings if you can automate all these tasks. An accounting software empowers your accounts team in minimizing errors and focusing on high-impact actionables. In this article, let us understand the accounting software modules that can help your business.
The chart of accounts is the complete list of your ledger accounts. These are arranged based on whether they are assets, liabilities, capital, incomes or expenses. The chart of accounts gives an overall view of your business accounts. An accounting software should have an auto-created chart of accounts, based on the ledgers you use in your business.
Whenever you make a sale, there is a need for a bill or invoice to be given to the customer. These bills should be accurate, detailed enough to contain all the information required and should be compliant as per the laws of the country. Issuing bills manually is not a feasible task for any business. An accounting software should capture the details required in an invoice from the transaction you’ve recorded, thus helping you eliminate any manual effort required for billing.
The Balance Sheet and Profit & loss account are the two major financial statements of every business. The Balance Sheet shows you the assets and liabilities of your business, which indicates your financial position. The Profit & loss account shows you the expenses and incomes of your business, which indicates its profitability. An accounting software should generate these financial statements for your business, based on the transactions you’ve recorded. You should also be able to analyse these reports, with the help of facilities to compare, group and expand the details.
Monitoring the cash flow in the business is an important activity for every business owner. Doing this manually is generally a time-consuming process and hinders your ability to take quick decisions. An accounting software should be able to prepare a cash flow statement for your business, based on the transactions you record. On the same basis, it should be able to project your cash flow for the coming months and quarters.
Managing credit optimally is an important skill for every business. In our article ‘Importance of credit management’, we have explained the reason why effective credit management is important. An accounting software should help you manage your receivables and payables. It should help you define credit limits and credit period for every customer and alert you when you inadvertently cross the credit limits. It should also help you analyse your credit trends and arrive at meaningful decisions on reliable customers, ideal credit limits and credit period.
Managing banking tasks is an integral activity for every business. This can include managing your bank accounts, cheque books, and reconciling bank statements with your books. Automating these tasks can provide great relief to your accounts team. An accounting software should be able to automatically reconcile your bank statements with your books and create records of transactions that have been missed from being recorded. Another good feature to look for is the ability to print cheques for payments, minimising your efforts to write the cheque and possible chances of errors.
Using an accounting software can be a great investment for your business today and for your future. It can help you vastly minimize manual efforts of accounting as well as give you extra analysis and insights which would be difficult to get otherwise. Look for the above modules when you evaluate and buy an accounting software, to get the maximum mileage from your investment.
Best Practices to Evaluate, Purchase and Implement Business Accounting Software