How Accounting Software Is Levelling The Playing Field Between Small Business And MNCS

How Accounting Software Is Levelling The Playing Field Between Small Business And MNCS
by John Carlucci - June 16, 2022

What Is Accounting Software?

Accounting software is a computer system that accountants use to store and analyze the financial data of a company. Accounting software is used to store a business’s income and expense transactions. For example, accounting software will take note of the date, amount, and product name if a shoe store sells two pairs of shoes to a customer. 

Accounting software is unique from a simple Excel file because it allows accountants to generate financial statements such as income statements and cash flow statements. These reports are very important to the management and the balance sheet and the cash flow statement are often looked at when deciding on business strategies. It is important for these financial statements to be generated precisely by a computer program because a miscalculation could result in huge consequences. For example, a miscalculation in the balance sheet could result in the company not having enough funds to make payroll at the end of the month.

In addition, accounting software is different from an Excel file as it restricts users from doing certain things. A basic example is that all assets need to balance out with liabilities and equity. Every income and expense category is linked to its respective asset and liability category. Also, accounting software has useful features such as multi-currency conversion and reconciliation to ensure that all data recorded is up-to-date and accurate.

How MNCS Have Previously Used Accounting Software

Historically, Multinational Corporations (MNCs) adopted accounting software before small businesses. This is because MNCs had larger budgets and could afford to hire a team of software developers to build a custom-built accounting system specifically for their business. For example, many constructions and retail MNCs needed accounting software with an inventory management functionality but service companies like law firms didn’t.

Additionally, it used to be very expensive to set up and maintain an accounting system. Before cloud computing, companies had to purchase an IBM mainframe and hire a full-time software engineer to maintain the server and accounting software. Today, a software engineer can deploy his application to AWS and pay a much smaller downpayment and a monthly fee to keep his accounting software application running.

How Small Businesses Did Accounting Before Accounting Software

This will make an accounting graduate gasp – but accounting used to be done by actual bookkeepers before accounting software. The bookkeeper would use a physical journal to record every single financial transaction of the company. The bookkeeper would then need to add up everything and make sure that the credits matched the debits. A lot of time was spent going through every transaction to find a mistake whenever the entries didn’t balance.

Accountants also had to add up all the debits and credits for each income, expense, asset, liability, and inquiry category in order to generate the financial statements. This required a lot of work and checking since these statements were audited and needed to be submitted to authorities which meant that there was no room for human error.

Accounting Software Today

Fast forward to 2022, accounting software no longer has to be built from scratch and customized to each business individually. There are now a number of ERP and small business accounting software companies including Xero and Quickbooks. 

These off-the-shelf accounting software companies have a SaaS (Software As A Service) model where they charge businesses a monthly fee to use their accounting software. No expensive hardware or full-time software engineer is required. Anyone can set up a Xero account for less than a hundred dollars a month and start doing your accounting immediately.

And there are all sorts of integrations for your business as well. For example, most accounting software like Xero and Quickbooks have integrations with banks. This means that your bookkeeper no longer has to spend hours on manual data entry. Your accounting software will be automatically updated when your corporate bank account receives or makes a payment. All your bookkeeper will have to do is categorize transitions and upload receipts and invoices. 

Training your accounting team to use Xero or any small business accounting software is easy too! Aside from forums that provide free Q&As, documentation, and step-by-step guides, you have Xero accounting courses with trainers that will guide you through every feature.

Small business accounting software isn’t just for small businesses. Many larger businesses such as Raspberry Pi use Xero too. Many small business accounting software has inventory management extensions that retail businesses can use to keep track of their stock without having to pay for another service.

If you’re a small business owner who doesn’t need a full-time accountant doing your bookkeeping, you can hire a Xero accounting firm instead. This will save you time from finding and training an in-house accountant while getting the expertise and experience from an experienced accounting firm.

Vikki Gerrard La Crosse WI Explores Crafting with Upcycled Materials
Vikki Gerrard La Crosse WI Explores Crafting with Upcycled Materials
Do you ever take a good, hard look at all the items in your home that are no longer being used? Instead of letting those objects collect dust and occupy space, why not transform them into something new and exciting? ...
6 Reasons to Consider Outsourcing Order Fulfillment for Your E-Commerce Business
6 Reasons to Consider Outsourcing Order Fulfillment for Your E-Commerce Business
Outsourcing order fulfillment offers numerous advantages beyond merely not having to do the work yourself.   To run a successful business, you must meet your consumers’ requirements and expectations. Those expectations are high when it comes to order fulfillment. Delayed, missing, ...
Factors To Consider When Selecting A Location For Your Fulfillment Center
Factors To Consider When Selecting A Location For Your Fulfillment Center
You know what they say in the real estate realm,  location, location, location! This is particularly true when choosing the best site for your fulfillment warehouse.  Whether you're a large corporation looking for a new fulfillment warehouse or a garage-based ...
How Much Are Closing Costs
How Much Are Closing Costs?
One surprising statistic in the world of real estate is that the average homebuyer pays between 2% and 5% of their home's purchase price in closing costs. So, how much are closing costs really? And who is responsible for paying them?  As ...
What Is a One Time Close Construction Loan Exploring This Unique Home Loan Product
What Is a One Time Close Construction Loan? Exploring This Unique Home Loan Product
If you’re the kind of person who has always dreamed of walking into a home that fits you like a glove, then you’re likely interested in building a new home. Maybe you have a piece of scenic property that you’d ...
1 2 3 73
Prudential Cal strives to provide the most detailed information about the real estate industry. We assist people in making the best decisions possible by offering unique insights into the global real estate market and advice for both homebuyers and sellers.
Additional Information
Copyright © 2023 Prudential Cal. All Rights Reserved. Protection Status
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram