What is bookkeeping software?
Bookkeeping software – also commonly called accounting software – is designed to record and process business transactions. Think of it as a smart electronic ledger that automates double-entry bookkeeping.
Many bookkeeping products can also usually handle (or help with) tasks like billing, payroll, accounts payable, tax filing, and financial reporting.
Online bookkeeping software vs desktop
Bookkeeping software comes in two forms. There’s the type you install on your computer (or local network server) and the type you use online. As with most software services, online comes with some built-in advantages:
- Data lives online, so there’s no need to back it up
- You can view or work on your books from any location or device
- You don’t have to email your ledger to your bookkeeper – you can both log in
- Transaction data can flow into the ledger from other online locations such as your bank
- Real-time reporting allows collaboration between you, your bookkeeper and your accountant
Online bookkeeping software also works well with other business apps. For example you can use third-party point-of-sale software to ring up a sale and the data will flow straight through to your online accounts.
What to consider before buying bookkeeping software
If you’re going to invest in bookkeeping software, you need to think about the following:
- Can you start off slow? What tasks are a priority for you? If you only need a few functions, then that’s all you should pay for. Make sure there’s some pricing flexibility.
- Can it grow with you? Will it still be the right system for you in two, five or 10 years? You may eventually want to add inventory, payroll, or ecommerce functions. Check it gives you room to grow.
- Is it secure and trustworthy? You’re required to keep some accounting records for years so make sure your software provider can keep and protect your data for the long haul.
- Does it fit with other business systems? Can it work with other business systems such as point-of-sale, time-sheeting apps, inventory control, or ecommerce? Can it accept data from your bank, and receipt scanners? Does your external accountant or bookkeeper know how to use it?
- How easy is it? Software should make your life easier. See what reviewers say about the products you’re considering. You don’t want to trade one problem for another.
- Do you get customer support? Is there somewhere to get help with queries? What’s the availability of support? Do you have to pay for ongoing support on top of the software?
- What’s the return on investment (ROI)? Work out how many hours it will save you each week, month, or year. A smart system should pay for itself many times over.
Bookkeeping software features to expect
Not sure what to look for when shopping for bookkeeping or accounting software? Here’s a checklist of useful capabilities to keep in mind.
Bank connections: Your business transactions will stream straight into your accounts
Online ledger: It’s easier to work with partners and accountants when there’s one single version of the books
Dashboards: Get a visual summary of things like money due to come in, bills due to go out, and more
Mobile notifications: Get alerts for things like overdue invoices or payments received
Quotes: Send professional quotes with an ‘accept quote’ button to make customers’ lives easier
Online invoicing and payments: Complete and send invoices with online payment options
Accounts receivable: Get notifications when customers open or pay your invoice, or if they go past the due date
Accounts payable: Enter bills into the system simply by emailing them to your software
Tax tools: Using smart reporting features can speed up tax prep and filing
Payroll: Automatically calculates pay and deductions, and produces payslips
Inventory: Keeps you informed about the volume and value of inventory and cost of goods sold
Integrates with other systems: Check that it integrates widely with other time-saving financial and business apps
Disclaimer: Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.
How to do bookkeeping
Bookkeeping includes everything from basic data entry to tax prep. Let’s look at the core jobs and see how they’re done.
- How to do bookkeeping
Small businesses can do their own bookkeeping or outsource to professionals. We look at how to find a good balance.
- Setting up a chart of accounts
Stepping up to do the bookkeeping in a new business? You may have to set up the chart of accounts. Let’s look at how.
- How to do bookkeeping data entry
Data entry is the foundation of bookkeeping. Enter the numbers right and you’ll learn exactly how the business is doing.
- How to do bank reconciliation
Humans aren’t always perfect at punching numbers. Bank reconciliation is a way to do quality control on your books.
- How to manage accounts receivable
Many businesses issue invoices, and those invoices need to be tracked. Learn how to manage accounts receivable.
- How to manage accounts payable
Paying bills isn’t glamorous. But they’re debts and need to be dealt with. Let’s look at how to manage accounts payable.
- Creating monthly financial reports
There are dozens of financial reports that you could create. But there are some monthly mainstays that bookkeepers love.
- How to do payroll
If all you had to do was pay staff, it would be easy. But there’s more to it than that. Let’s look at how to do payroll.
- How to prepare tax returns
Tax returns can be hard for small business owners. There are deadlines to make, and rules to follow. Let’s take a look.
- Using bookkeeping software
Whether you do a lot of your own bookkeeping or outsource it all, software can help you save your time and budget.
- Using professional bookkeeping services
If you don’t have the time or confidence to take on bookkeeping, a professional can help. Let’s look at what they do.
Download the guide on how to do bookkeeping
Learn about the eight core bookkeeping jobs, from data entry to reporting and tax prep. Fill out the form to receive the guide as a PDF.