Accounting software
Learn what accounting software is, what it does, and how to choose the right tool for your business.
Published Thursday 23 July 2026
Table of contents
Key takeaways
- Accounting software is a tool that records, stores, and manages a business's financial transactions in one place.
- Most modern accounting software runs in the cloud, so you can check your numbers and work from anywhere with an internet connection.
- It automates routine work like invoicing, bank reconciliation, and reporting, which saves you time and cuts down on manual errors.
- For Canadian businesses, the right software helps you stay on top of GST/HST and keep records ready for the Canada Revenue Agency.
What is accounting software?
Accounting software is a tool that handles a business's accounting and bookkeeping tasks. It stores financial data and helps you record and manage business transactions.
Most accounting software today is cloud based, which means it runs online rather than on a single computer. You log in through a browser or app, and your financial data is stored securely on remote servers you can reach from anywhere.
Instead of tracking income and expenses by hand or in spreadsheets, the software does the heavy lifting for you. It automates repetitive jobs, keeps your records organized, and gives you a clear view of how your business is doing. Good software also supports everyday bookkeeping so your books stay accurate throughout the year.
What does accounting software do?
Accounting software brings your core money tasks together in one place. Here's what most tools handle for a small business:
- Creating and sending invoices, then tracking which ones are paid
- Matching your bank transactions to your records through bank reconciliation
- Recording and categorizing business expenses and receipts
- Running payroll and keeping employee pay records in order
- Producing financial reports like profit and loss, balance sheets, and cash flow
- Calculating and tracking GST/HST so your sales tax is ready at filing time
Types of accounting software
Accounting software generally falls into two types: cloud based and desktop. The main difference is where your data lives and how you access it.
Cloud accounting software
Cloud accounting software runs online and stores your data on secure remote servers. You can log in from a laptop, tablet, or phone, and your information updates in real time, so you and your accountant always see the same numbers.
Desktop accounting software
Desktop or on-premise software is installed on a single computer, and your data is stored on that machine. It works without an internet connection, but you're usually tied to one device, and you handle your own backups and updates. Many small businesses now prefer online accounting software for the flexibility it offers.
Benefits of accounting software
The right accounting software takes routine money work off your plate so you can spend more time running your business. Here's how it helps small businesses:
- Save time by automating invoicing, reconciliation, and reporting
- Reduce manual admin so you're not stuck re-keying data
- Cut errors that creep in with spreadsheets and paper records
- See your cash flow in real time to make confident decisions
- Make tax time easier with organized, up-to-date records
- Work from anywhere using cloud based access on any device
Who uses accounting software?
Accounting software suits businesses of almost any size, along with the professionals who support them. It's built for a few main groups.
Small businesses
Small business owners use accounting software to invoice customers, track expenses, and stay on top of cash flow without a full finance team. It keeps their books tidy and their records ready for tax time.
Sole traders and solopreneurs
Sole traders and solopreneurs often manage their own finances alongside everything else. Accounting software helps them handle invoicing and expenses quickly, so they can get back to the work they started their business to do.
Accountants and bookkeepers
Accountants and bookkeepers use accounting software to manage several clients from one platform. Shared, real-time data makes it easier to review the books, spot issues, and give timely advice.
How to choose accounting software
The best choice depends on your business, but a few criteria matter for most Canadian owners. Weigh these factors before you commit:
- Ease of use, so you can get set up and stay on top of your books without a steep learning curve
- Features that fit your needs, like invoicing, payroll, and reporting
- GST/HST and PST support, so your sales tax is handled correctly
- Compliance with Canada Revenue Agency requirements for record keeping
- Data security, including how and where your financial information is stored
- Room to grow, so the software scales as your business expands
Manage your small business finances with Xero
Accounting software brings your invoicing, expenses, and reporting into one place, so you spend less time on admin and more time on your business. With cloud based access, you can check your numbers from anywhere and keep your records ready for GST/HST and the Canada Revenue Agency.
See where your business stands in real time and manage the day-to-day money work with less manual effort. Get one month free when you sign up today.
FAQs on accounting software
Here are answers to some frequently asked questions about accounting software to help you decide what's right for your business.
How much does accounting software cost?
Most cloud accounting software is sold as a monthly subscription, with tiered plans based on the features you need. Costs vary by provider, so compare plans against the tasks you want to automate.
Is cloud accounting software safe?
Reputable cloud providers protect your data with encryption, secure servers, and regular backups. Your information is often safer in the cloud than on a single computer that could be lost or damaged.
What's the difference between cloud and desktop accounting software?
Cloud software runs online and lets you access your data from any device, while desktop software is installed on one computer. Cloud tools update in real time, so you and your accountant see the same numbers at once.
Does accounting software handle GST/HST?
Many accounting tools calculate GST/HST on your transactions and track what you owe or can claim. This keeps your sales tax organized and ready when it's time to file with the Canada Revenue Agency.
Do I still need an accountant if I use accounting software?
Accounting software handles the day-to-day record keeping, but an accountant adds value with tax planning and advice. Many owners use both, sharing their real-time data so their accountant can focus on guidance.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.