How to Create an Accounting Software for Your Business
Introduction
If you run a business, you, or persons assigned by you to perform this task, certainly are familiar with accounting as you track your business receipts and expenditures. This is relevant in all cases – if you are a small family company, a startup, or a big corporation – because all businesses need to control their financials properly for further taxation and reporting needs.
Just a decade ago, all accounting was mainly manual and on paper – all those general ledgers, accruals and withdrawals, credits and debits were maintained on paper by accountants manually. However, as the technologies evolve and as the software becomes more and more targeted and intelligent, the accounting now is shifting from a conventional approach to a digital one, when computers perform all the routine operations.
This our post is intended to shed some light on computerized accounting and dedicated accounting software solutions, on how it helps businesses to perform more efficiently and save a lot of resources, both human and financial. We will also tell our readers about different types of accounting software, about the difference between commercial accounting software and custom accounting software, and, generally, about the most important things owners and top managers of the businesses need to know about accounting software applications.
Types of Business Accounting Software
With the software development industry constantly growing, there are also a high number of accounting software solutions available for businesses that want to increase their accounting units efficiency and improve the overall performance of their operations.
DIGIS carried out a brief analysis to find out how accounting software falls into types. The results of our investigation are provided below.
Spreadsheets
The simplest and the cheapest type of accounting software, ideal for simple task management and, respectively, for small companies. Google Spreadsheets and Microsoft Excel are good examples of simple small business accounting software. Being simply electronic tables where accountants enter such data as sums, payments, taxes, allowances, deductions etc., desktop accounting software for small business do their job well and allow accountants to do simple calculations or aggregate data from multiple feeds. Due to a limited functionality these solutions are not the right choice for larger companies.
Commercial Solutions
These are the solutions which are ready-made and sold ‘as is’, that is with a developer-defined set of functions and features. Usually, commercial accounting software works great for small and medium businesses which want to get maximum at the lowest possible price. Commercial software let accountants compile and dispatch tax reports, track changes in applicable legislation, and even keep a sharp eye on the audit procedures. Great examples of this type of accounting software are TurboCash and QuickBooks, which even have some visualization functionality achieved by means of graph and chart creation.
Enterprise Accounting Software
Unlike accounting software for small business, large company accounting software is a sophisticated means connecting accounting to other services, for examples to workflow management, project planning and so on.
Large business accounting software is distinguished by a more complex architecture and algorithms and has a substantially wider set of built-in functions and features that can be configured based on an enterprise type and scale. Such additional configuration is possible in customized accounting software, that is the software that is slightly modified by its users on-site or by its developers upon request of the users.
Accounting software for large businesses must be capable of processing high volumes of data without any flaw as even the minor mistake can lead to sensitive data loss and, as a result, to material damages to the business.
To see how accounting software for enterprises looks like, check out Oracle or SAP.
Custom Accounting Software
This type of accounting software covers those solutions which are created for a certain company and focused on performing a certain scope of tasks with a certain set of functions and features. Custom accounting solutions are built when there’s no suitable commercial software available that can satisfy the business needs. Custom solutions can include accounting software for large companies as well as home business accounting software. These solutions include only that functionality which is needed for a company to monitor its financial health and cope with all accounts-related matters, be it taxes, payments, credits or anything else. Buying a custom accounting software, the company gets what it has paid for and does not pay for expensive but unneeded features.
Must-Have Features of Accounting Software
After familiarizing you with the types of accounting software, it is now the right time to talk a bit about which features are more or less mandatory for a good business accounting software.
Accounts Payable Management
The more vendors (suppliers) a company has, the more difficult it is to manage relations with them. Under “manage” we mean create, edit and maintain proper records of the suppliers, calculate and schedule payment dates, notify about suspicious payments (for example, several back-to-back payments to the same supplier), attach AP documents (vendor invoices). Well-thought accounting software has all the tools providing for the fulfillment of the above tasks.
Accounts Receivable Management
Best business accounting software undoubtedly allows to manage all the relationship with a company’s clients. It means there are appropriate features to create invoices to the clients, calculate sales and other taxes, copy old invoices into the new ones, create, edit and maintain client records etc.
Inventory Management
Well-tailored accounting software enables the company to track all items on its stock in a proper manner. Thanks to it, the stock replenishment will occur on time with no merchandise deficit leading to the business idle time and resultant losses. The software also allows to manage the prices using a system of presets. The solution will also allow to track expiry dates to avoid situations when the goods are past their best-before dates and have to be wasted.
Employee Management and Payrolls
Accounting software that is intended to increase the business efficiency needs to be able to track the company’s employees attendance and settle their payrolls. It also can have various incentives tools to promote the performance of the employees.
Analytics and Forecasting
Accounting is not possible without analyses, so the good accounting software MUST include advanced analytics and forecasting functionality. These functions are used to visualize the company’s past performance and forecast how it will perform in the future. Various charts, graphs, trends and so on can be used for this purpose.
Multi-User Support
Distribution of responsibilities is not possible without multi-user support and adequate permissions policy. Role-based authentication is a must for high-quality accounting software as it provides specific users with access to a specific set of functions and tools according to the level of their permissions.
Cloud Support
Cloud support nowadays is an absolute must for any software. It is because the business goes mobile and business owners need to access business-critical data from any place and at any time. In the worst case scenario, accounting software needs to be able to export data to a secure cloud. This feature ensures perfect data protection against its loss and at the same time enables access to it for a circle of permitted roles. There are even fully cloud based accounting software that performs all the operations and stores all the data in the cloud. However, the larger part of cloud accounting software is subscription-based, so it must be considered at the stage of software selection.
External Integrations
Accounting software today is not an isolated thing. It works as a part of the whole ERP ecosystem and, therefore, must have links to external software solutions. Such integrations are needed to export or import data, set appointments, manage client and vendor records and so on. It can be also integration with bank and tax systems to exchange financial data and send reports.
Security
Financial data is a matter of extreme sensitivity and must be protected accordingly. Accounting software handles financial data and, respectively, must provide for such data security. Any loss or damage to financial data can have an adverse effect on the whole business and may even lead to loss of profit, interruption of business and other material risks.
Hence, it is necessary to arrange the relevant firewall protection and anti-virus mechanisms in order to exclude data thefts and similar incidents.
It is also necessary to think about data encryption. If it is implemented then even in case of a data theft it cannot be used, so sensitive information will remain protected and neither vendors nor clients will face any damages.
We have already mentioned role-based authentication as one of the means to ensure data and software security. Another option to even enhance the security is to implement multi-factor authentication – password plus security code sent to a user’s phone.
These are the basic security measures to be considered when you plan to purchase or develop your accounting software.
What Do You Need to Know before Developing Accounting Software of Your Own
If you plan to develop an accounting software of your own, you must first to make sure it will help you achieve the goals you have set.
First of all, accounting software saves not only your money but also your accountants’ time. It is achieved by means of automating certain routine operations. Good accounting software hosts sophisticated algorithms which do not need attention of human accountants.
Secondly, accounting software ensures faster data processing thanks to prompt access to the needed information.
Thirdly, accounting software eliminates human factor, that is reduces the number of errors occurring because of accountants’ mistakes. Computerized calculations are accurate, numbers are in place, and everything matches everything.
Next, accounting software handles huge data volumes and provides quick and easy access to them at any time at an eye blink. This capability ensures a substantial increase in business efficiency.
Finally, prior to the beginning of your accounting software development, you must foresee its maintenance in the future. We mean that you need to consider its future scalability, addition of new features or modules and so on. Be sure to work through these things with your software developer.
How Much Does It Cost to Develop an Accounting Software
We say it time and again: cost of custom software development depends on a variety of factors. In case of custom accounting software, the cost of its development will depend on functions and tools this software must have – the more functions and tools you need, the more money you will need to pull out of your pocket.
Another contributor to the price is duration of the development, as the longer it takes, the more expensive it is.
Finally, and it’s basically the most substantial contributor to the software development cost, the price will depend on developers you contract to build your accounting software.
Below is a table showing some approximate figures as regards the hourly rates of various specialists of software development.
From our experience, DIGIS anticipates that average cost to develop custom accounting software will start from as low as USD 10,000 for a solution for small companies. The peak price tag is not limited and may go as high as up to USD 300,000 for an enterprise-level accounting system.
Wrap-Up
As you can see, accounting software is not a piece of pie but a heavily sophisticated piece of technology that helps businesses of all types and sizes to benefit from technology advancement. Custom accounting software is even more special as it is developed to solve specific tasks of a company. With so many options of accounting software available on the market it is absolutely easy to get lost and have no clue which one to choose. Hundreds of solutions, thousands of features and functions… And no confidence that you will need all the functions of a solution of your choice.
That’s the real problem, which, however, can be settled by going the custom development way. In this case, you will be in full control of the software development schedule and budget, and software functionality. If you have been thinking about developing your own accounting software to increase your business efficiency but not sure what to start with, feel free to contact us. We will be proud to advise you on all the peculiarities of custom accounting software development and all its benefits and bottlenecks.
