Chapter 10

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.

A bookkeeper at a desk with a coffee cup and a laptop

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 stock, 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, stock 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.

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.

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