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Which Type of Accounting Software Should Your Startup Use?

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Businesses of all sizes should be using accounting software to manage their bookkeeping and accounting, and keep their financial information organized. And many are. But we’ve seen that not all businesses choose the right type of accounting software for their business. Picking software that is the wrong fit for your company could mean wasting money on features you don’t need, or struggling to manage complex finances in a platform that’s too simplistic. So what is the “right” accounting software for startups? Many early stage startups use spreadsheets as DIY accounting tools to handle their first transactions. Spreadsheets are inexpensive and easy to use, but they are not a type of accounting software and they can only handle very basic finance records. As your startup’s transaction volume increases and you have more complex accounting needs, you’ll need to make the switch to using accounting software. There are three main types of accounting software that offer different features and services; only one is a good fit for most startups. Let’s take a look at the different types of computerized accounting software, including the best accounting software option for startups, and my advice for founders who are picking an accounting software provider. The 3 Types Of Accounting Software 1. Commercial Off-The-Shelf Accounting Software (COTS) There are lots of COTS accounting software options on the market: You may recognize popular online accounting software brands like QuickBooks, Wave Accounting, Zoho Books, and Xero. Unlike more complex software options, which include tools for functions like supply chain management and e-commerce, COTS systems are focused on accounting tasks like recording transactions, organizing financial data, and generating financial statements (like your P&L, Cash Flow Statement and Balance Sheet). Almost all startups should be using COTS accounting software as part of their financial management process. There are several inexpensive COTS options that suit startup budgets (some even offer free trials to start!), and most COTS accounting systems are user-friendly enough for startup founders to track their own finances. Pros: Most COTS accounting solutions integrate with popular finance tools, including payroll providers, bank accounts, credit cards, accounts payable, and accounts receivable platforms. This allows you cut down the time you spend on bookkeeping entries by automatically syncing as much data as possible. It’s easy to find accounting firms and freelance accounting professionals that have experience working with the popular COTS platforms, and can help you get maximum value from the software. Because COTS accounting solutions take a consumerized approach to their accounting software, many offer mobile apps and comprehensive customer support options to help users work with the platform more effectively. Cons: Some COTS features may not be advanced enough to handle more complex needs as your business continues to grow. You’ll still need to work with multiple tools in order to get a complete finance management system, which means paying multiple subscription fees. 2. Enterprise Resource Planning Software (ERP) ERP software (also referred to as enterprise accounting software) is a more sophisticated platform that consolidates many different functions […]

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