18 Feb, 2024

What Are the Different Types of Accounting Software?

Discover the different types of accounting software available and find the best fit for your financial needs. From basic to industry-specific, every business has a type of accounting software.

Monitoring the financial heartbeat of any business is vital for growth and success. For scaling companies, more than spreadsheets and gut-instinct decision-making is required. Automating accounting workflows with software provides structure, accuracy, and insights for better planning. This guide examines popular accounting software types by business size, features, and deployment models and offers an analytical framework for selecting the right platform.

Key Takeaways

  • Saves time over manual processes and spreadsheets by automating key accounting workflows like invoicing, reporting, bank reconciliation, and payroll.
  • Available in different editions to match needs - entry-level, small business, mid-market, enterprise, and industry-specific.
  • Cloud-based systems enable access anywhere, while on-premise systems allow more customization.
  • Conduct a thorough evaluation of features, scalability, integrations, analytics, security, and ease of use before selecting.
  • Treat software selection like any significant business investment with strict criteria and re-evaluate as needs evolve.

Different Types of Accounting Software by Business Size

The accounting needs of large conglomerates differ from those of small startups. Segmenting target users by size/complexity helps entrepreneurs zero in on systems matching their requirements and budgets.

Entry-Level Accounting Tools

Focusing on solopreneurs and microbusinesses, entry-level software delivers straightforward functionalities like invoicing, basic reporting, and cash flow views. Systems like Jaz provide affordable options starting at $30 a month. For freelancers and contractors making under $100k in annual revenue, these appropriately light options reduce manual paperwork so you can focus on selling. But limited capabilities mean upgrading as operational complexity grows.

Best For: Freelancers, contractors, solopreneurs, and startups doing under $100k annually.

Sample Capabilities: Invoicing, estimates, bank integration, mobile access, basic reporting.

Small Business Accounting Platforms

For growing small companies making upwards of $100k yearly, tools like Jaz provide a complete accounting for inventory management, payroll, custom reports, and more. The optimal balance between utility and simplicity allows for efficiently handling operational accounting needs up to about $5M in annual revenue.

Best For: Startups and SMBs with 2-50 employees doing under $5M annually

Sample Capabilities: Invoicing, inventory management, budgeting, purchase orders, bank reconciliation, payroll.

Mid-Market Accounting Systems

Once small businesses transition into mid-sized enterprises managing multi-entity locations across regions, operational needs demand customization, automation, and deeper analytics from accounting platforms. With revenue allocation, global consolidations, and complex reporting handled in customizable dashboards, data-driven insights guide management strategy.

Best For: Mid-sized businesses with 100-1000 employees doing $10M - $500M in revenue

Sample Capabilities: Advanced custom reports, revenue recognition allocation, multi-entity consolidations, fixed asset depreciation.

Enterprise Accounting Software

Large multinational conglomerates running complex operations require specialized accounting tools. Handling millions of transactions across subsidiaries while delivering financial insights demands elevated sophistication. With needs from automated supply chain processes and inventory valuation algorithms to global regulatory compliance, predictive planning, and blockchain support - these heavyweight champions have it all. However, overkill capabilities can complicate operations unnecessarily for all but the largest or most regulated corporations.

Best For: Large enterprises with 5000+ employees doing over $1B annually

Sample Capabilities: Global consolidations, advanced manufacturing, financial modeling, predictive planning, blockchain ledger, supply chain automation.

Industry-Specific Editions

Accounting needs also vary significantly across business niches-

For Nonprofits: Specialized to satisfy nonprofit accounting standards like FASB with fund-based reporting principles.

For Software Companies: Handles intricate revenue recognition allocation principles.

For Retail: Advanced inventory and Point-of-Sale integrations

For Manufacturing: Costing visibility for warehousing and shop floors

For Professional Services: Sophisticated time and expense tracking

Choosing industry-specific tools aligns your workflows with both operational accounting and niche reporting. Ask vendors to demonstrate capabilities customized for your sector during platform evaluations.

Cloud vs. On-Premise Deployment

Location-agnostic availability is a key virtue of modern platforms. Comparing cloud versus on-premise systems on five core aspects clarifies the better fit.

Parameter Cloud/SaaS On-Premise

Accessibility Anywhere via browser Office network only  

Initial Cost Low. Subscription model High for licensing  

IT Needs Vendor managed Internal IT responsibilities  

Customization Medium Very high  

Famous with Smaller firms, mostly Large regulated enterprises

Cloud accounting systems win hands down on convenience. Entry-level solutions from Jaz cost just a few dollars monthly to get started.

Even mid-size platforms like NetSuite and Intacct run on cloud infrastructure yet support customization, compliance standards, automated reporting, and advanced analytics functionalities required by sophisticated industries. For most entrepreneurs, cloud accounting software is the fastest and most convenient route to modernizing finance management minus upfront investments.

On-premise installations still have niche advantages for highly regulated sectors within banking, pharma, and government agencies that manage ultra-sensitive data, like customer social security numbers, requiring air-tight security. Cloud systems are adequate, affordable, and the norm for the generalized accounting needs of small and mid-size players.

Why Businesses Need Accounting Software

Without financial visibility, companies operate blindly. But manual bookkeeping using old-school ledgers and spreadsheets has endless pitfalls:

  • Tedious and prone to error
  • No bird’s eye view of profitability
  • Delayed snapshots of bank balances
  • Minimal compliance and reporting
  • Difficult fraud detection

Integrated accounting software eliminates these problems through automation. Beyond recording transactions, advanced analytics, and drill-down reporting unlock powerful perspectives to shape strategic decisions. Modern systems seamlessly handle invoicing, expense claims, payroll, tax filings, and more in one unified platform accessible via the cloud.

Understanding essential capabilities matching business needs is step one towards buying reasonably priced accounting tools to optimize workflows.

Popular Features and Capabilities

Accounting software has extensive options, from basic expense trackers to performance dashboards leveraging AI. Most provide these foundation capabilities, beyond which more advanced or industry-specific features can be added:

  • General Ledger: Tracks revenues, expenses, and account balances
  • Invoicing & Estimates: Creates, sends, and manages invoices and quotes
  • Accounts Receivable/Payable: Records money owed to or payments due from customers and vendors
  • Bank Reconciliations: Imports and synchronizes bank transactions
  • Budgeting: Plans budgets and controls organizational spending
  • Reporting: Visual profit and loss statements, cash flow reports, and balance sheets indicating company health
  • Payroll: Pays employees and handles taxes, deductions, leaves, etc.
  • Sales Tax: Automates tax rates and calculations for domestic and global transactions
  • Mobile Apps: Access critical accounting data and workflows on smartphones
  • Inventory: Tracks inventory stock items, costs, and quantities.
  • Analytics: Identifies trends and drills down into detail data to unearth insights
  • Workflow Automation: Pre-defines rule-based steps for transaction processing and approvals

Advanced systems have premium features like revenue cycle automation, global consolidations, predictive planning using AI/ML, and much more.

How to Methodically Evaluate Accounting Platforms

With clarity on software types, features, target company sizes, industry requirements, and deployment models - entrepreneurs must still carefully evaluate multiple vendor offerings to identify products closely aligned with organizational growth plans and IT capabilities.

10 Key Factors for Software Analysis

Here are crucial aspects to assess during test drives of shortlisted accounting solutions:

1. Scalability

Most vendors promise seamless upgrades. Verify documented scale ceilings before deciding.

2. Data Accessibility

Can authorized remote employees readily access software functionalities easily?

3. Inter-departmental Workflows

How easily does software facilitate workflows between finance, inventory, fulfillment, etc?

4. Ease of Customization

Evaluate how easily dashboards, workflows, and reports can be tailored for business needs.

5. Implementation Time

The faster the rollout, the quicker the ROI. Compare deployment timelines.

6. Level of Support

Evaluate the availability of customer support for implementation queries.

7. Training Needs

Complexity demands greater employee training time and costs.

8. Potential Integrations

Review tool compatibility for automating multi-platform workflows.

9. Reporting & Analytics

Verify how easily insightful reports and financial ratios can be generated.

10. Security Standards

Rigorously validate vendor security policies, controls, and compliance guarantees.

These parameters provide comprehensive visibility before committing business-critical financial data into any accounting system for long-term usage.

Streamline Your Business Finances With Jaz

Automating accounting, reporting, and analytics unlocks substantial productivity gains and informed decision-making capacity for companies. Carefully choosing the right platform aligned with organizational growth plans saves money and headaches down the road. Leverage the software selection best practices outlined here to make the healthiest long-term technology decision, driving operational efficiency and strategic insights for your growing business.

Jaz is the all-in-one accounting solution and one of the best accounting software built to simplify and automate your most complex accounting tasks like invoices, bills, bank reconciliations, payments, and more so you can get back to growing your business or serving more clients.

Get Started for free and take control of your financial operations with Jaz.

Frequently Asked Questions (FAQ)

1. How do I choose the best accounting software for my business?

When choosing accounting software, consider the size and specific needs of your business, the accounting capabilities required, and whether you need additional features such as payroll software or invoicing software.

2. What is the purpose of commercial accounting software?

Commercial accounting software is designed to streamline and automate the accounting process for businesses, providing features for financial statements, billing, invoicing, and managing the financial health of the business.

3. What are the benefits of custom accounting software?

Custom accounting software allows businesses to tailor the software to their specific accounting needs, ensuring that it aligns with their unique processes and requirements.

4. How does accounting software help in managing business finances?

Accounting software allows you to monitor and manage various accounting functions, track financial transactions, generate reports, and gain insights into the financial status of your business.

5. What are the different types of software that can be integrated with accounting software?

Accounting software may integrate with various management software such as inventory management software, CRM software, and billing and invoicing systems to streamline business processes.