What are the different Types of Accounting Software?

There are many types of accounting software applications on the market today. Some applications are intended to perform accounting functions for large corporate organizations. Others are meant for personal use. Still other applications fall somewhere in between, performing functions suited to small businesses, as well as those suited to the average person. Available software ranges from the very simple to the very complex, with much variation in price as well.

Accounting software can be useful in such functions as recording and processing accounts receivable and accounts payable transactions. Some software applications can be used in payroll processing, the documentation of tax transactions, and the creation of related reports. Accounting software can also be used in billing clients and customers and debt collection. Some accounting programs even provide for timesheet record keeping, useful for professionals who need to keep track of the hours they work.

Accounting software that is designed for home use is often referred to as personal accounting software. This type of software is used mostly in managing household budgets and expenses. Some personal accounting software makes it possible to download bank account information directly from the Internet for use with the software.

Low-end accounting software is generally used by smaller businesses and can typically be found for sale by a variety of retailers. Usually, software in this class is not highly specific and can be used for a wide range of businesses. This type of accounting program is usually adequate for such uses as generating invoices, reconciling accounts, and handling payroll.

The next step up in the realm of accounting software consists of applications capable of performing a variety of functions important to business accounting. Referred to as mid-market software, accounting applications in this class perform general business accounting functions and frequently include integrated management information systems. Many software applications at this level are capable of providing for accounting in several different currencies. Mid-market accounting software is usually purchased from a dealer.

Higher-end accounting software is more expensive than other types and is usually much more complex. Generally designed for use by large businesses with millions of dollars in transactions, high-end accounting programs usually have very sophisticated features and options. Software in this class also allows for a high level of customization. Typically, higher-end software is sold through a dealer.

Some companies choose to develop their own accounting software, gearing it completely towards their unique needs. Other companies choose to purchase ready-made software packages. Many organizations employ a combination of the two, purchasing software and applying local modifications to make it more efficient.

Types of accounting software

There are many different types of accounting software packages and applications currently available today. To select the best accounting product you will first need to decide your individual and corporate needs. Small business accounting software functions much differently in many respects that accounting software manufactured as an enterprise resources planning solution for example.

If you are a large enterprise or firm you will want to investigate a comprehensive enterprise solution that offers multi-user capability. Some examples of popular software programs in this field include Oracle People Soft Enterprise One and mySAP All-in-One. If you are looking for a basic accounting software package you may opt for SAP Business One or Microsoft Great Plains software.

Small Business Software and Personal Accounting Software

Small businesses can usually get away with a more basic program like QuickBooks Enterprise or Professional or MS Small Business Financials. If you are looking for an accounting software application for personal use, a basic accounting software program like quicken or QuickBooks or even Peachtree should easily accommodate your every need. Most of these software programs come equipped with accounts payables, account receivables, payroll and general ledger features. Most will also generate basic reports, invoices and keep track of other expenses, assets and small financial items you may want to keep track of from day to day.

The primary difference between these smaller software applications and larger enterprise solutions is the smaller applications won't necessarily integrate to serve multiple operations like manufacturing, marketing and engineering. Most ordinary people or small businesses however will not need this capability in a software accounting package.

Tips on how to choose the best accounting software

There are thousands of accounting software packages in the marketplace today. Each one of these packages offers unique features and capabilities that are to be commended, admired, and sometimes applauded. However, upon close inspection, it is easy to see that most of them suffer from obvious problems such as older technology, proprietary technology, lack of support, lack of an adequate size customer base, lack of a distribution channel, poor performance on a local area network, bugs, missing modules, missing key features, lack of capital, etc. We strive to weed out the lesser players and concentrate our web site on the better-known, widely-deployed, well-proven solutions.

In our opinion, there are only a handful of accounting software solutions available today that offer a proven and complete solution for this market. These products all share the following attributes:

• The product must have good, clean, stable code

• The product must have good underlying technology

• The product must have a good company & leadership behind the product

• The product must have strong financial reporting capabilities

• The product must have a sizable customer base

• The product must have strong customization capabilities

• The product must have a well-developed and knowledgeable VAR channel

• The product must have a wide breadth of modules

• The product must have a well-developed offering of third party add-on products

• There should be a minimal number of missing features

• There should be no significant problems (such as missing modules, etc)

What is Accounting Software?

Accounting software is application software that records and processes accounting transactions within functional modules such as accounts payable, accounts receivable, payroll, and trial balance. It functions as an accounting information system. It may be developed in-house by the company or organization using it, may be purchased from a third party, or may be a combination of a third-party application software package with local modifications. It varies greatly in its complexity and cost.
The market has been undergoing considerable consolidation since the mid 1990s, with many suppliers ceasing to trade or being bought by larger groups.

Modules

Accounting software is typically composed of various modules, different sections dealing with particular areas of accounting. Among the most common are:

Core Modules

• Accounts receivable—where the company enters money received
• Accounts payable—where the company enters its bills and pays money it owes
• General ledger—the company's "books"
• Billing—where the company produces invoices to clients/customers
• Stock/Inventory—where the company keeps control of its inventory
• Purchase Order—where the company orders inventory
• Sales Order—where the company records customer orders for the supply of inventory

Non Core Modules

• Debt Collection—where the company tracks attempts to collect overdue bills (sometimes part of accounts receivable)
• Electronic payment processing
• Expense—where employee business-related expenses are entered
• Inquiries—where the company looks up information on screen without any edits or additions
• Payroll—where the company tracks salary, wages, and related taxes
• Reports—where the company prints out data
• Timesheet—where professionals (such as attorneys and consultants) record time worked so that it can be billed to clients
• Purchase Requisition—where requests for purchase orders are made, approved and tracked

(Different vendors will use different names for these modules)

Categories

Personal Accounting

Mainly for home users that use accounts payable type accounting transactions, managing budgets and simple account reconciliation at the inexpensive end of the market suppliers include:

Low End

At the low end of the business markets, inexpensive applications software allows most general business accounting functions to be performed. Suppliers frequently serve a single national market, while larger suppliers offer separate solutions in each national market.

Many of the low end products are characterized by being "single-entry" products, as opposed to double-entry systems seen in many businesses. Some products have considerable functionality but are not considered GAAP or FASB compliant. Some low-end systems do not have adequate security nor audit trails.

Mid Market

The mid-market covers a wide range of business software that may be capable of serving the needs of multiple national accountancy standards and allow accounting in multiple currencies.

In addition to general accounting functions, the software may include integrated or add-on management information systems, and may be oriented towards one or more markets, for example with integrated or add-on project accounting modules.

Software applications in this market typically include the following features:

• Industry-standard robust databases (eg PostgreSQL, MySQL, Microsoft SQL, Oracle, Pervasive)
• Industry-standard reporting tools (eg Cognos, Crystal)
• Tools for configuring or extending the application (eg an SDK, access to program code, the ability to be controlled via Visual Basic for Applications (VBA))

High End

The most complex and expensive business accounting software is frequently part of an extensive suite of software often known as Enterprise resource planning or ERP software.

These applications typically have a very long implementation period, often greater than six months. In many cases, these applications are simply a set of functions which require significant integration, configuration and customisation to even begin to resemble an accounting system.

The advantage of a high-end solution is that these systems are designed to support individual company specific processes, as they are highly customisable and can be tailored to exact business requirements. This usually comes at a significant cost in terms of money and implementation time.

Vertical Market

Some business accounting software is designed for specific business types. It will include features that are specific to that industry.

The choice of whether to purchase an industry-specific application or a general-purpose application is often very difficult. Concerns over a custom-built application or one designed for a specific industry include:

• Smaller development team
• Increased risk of vendor business failing
• Reduced availability of support

This can be weighed up against:

• Less requirement for customisation
• Reduced implementation costs
• Reduced end-user training time and costs

Some important types of vertical accounting software are:

• Banking
• Construction
• Medical
• Nonprofit
• Point of Sale (Retail)
• Daycare accounting (a.k.a. Child care management software)

Hybrid Solutions

As technology improves, software vendors have been able to offer increasingly advanced software at lower prices. This software is suitable for companies at multiple stages of growth. Many of the features of Mid Market and High End software (including advanced customization and extremely scalable databases) are required even by small businesses as they open multiple locations or grow in size. Additionally, with more and more companies expanding overseas or allowing workers to home office, many smaller clients have a need to connect multiple locations. Their options are to employ software-as-a-service or another application that offers them similar accessibility from multiple locations over the internet.

ps*credit to Wikipedia