What is accounting software and how does it work?

What is accounting software? How does it work?

Accounting software is a tool that is used by businesses and organisations to manage financial transactions, account balances, reporting and other bookkeeping tasks.

Accounting software consolidates financial data into one system and enables the Finance team to automate and complete finance-oriented processes far more quickly and accurately. For example, paper invoices which used to be sent in the post are now replaced with digital ones which are sent electronically. Time-consuming processes such as quote to purchase order to invoice to payment reconciliation are all done through the system rather than as a series of individual manual tasks – again much quicker and more accurate, particularly as data is passed along the process rather than rekeyed at each stage.

Speed and accuracy are two of the most compelling reasons why cloud-based accounting software works so well for modern businesses. But there are many more including enhanced security and control of data, flexibility of user access and restrictions, improved visibility and business insight, and, ultimately, the ability to make more robust and informed business decisions.

For a quick overview, our article on finance management systems covers the main elements and the benefits of a digital solution for your Finance team.

What does accounting software do?

The main features of accounting software are designed to provide support and functionality to complete a wide range of end-to-end accounting processes. For example, that includes providing everything you need to do for all of the following:

• The advanced nominal ledger covers two entry segments, such as nominal code and cost centre, as well as 6 additional reporting categories.
• Total sales and purchase ledger management from invoices, credit notes and secure BACs payments to Direct Debit processing, payments, statements, and aged debtor/creditor reporting.
• Save time on queries and streamline data collection by allowing employees to input financial data, action approvals and view relevant reports using easy-to-use apps.
• Automatic bank reconciliation via secure open banking integrations and automatic transaction matching.
• Calculate tax and VAT on an ongoing basis, keep track of the tax liability, and submit tax returns digitally.
• Make changes and updates easily, including merging and amending account records and transaction details (all whilst maintaining a full audit trail) using digital corrections tools.

In addition to the above, if you choose a function-rich solution such as cloud-based Access Financials, you will also have a wide range of intuitive tools and features at your disposal including:

• The flexibility to report from every angle – such as branch, department, group, fund or project – using three-segment nominal code entry. This makes it possible to configure your accounts to match a preferred management reporting style.
• Easily manage intercompany transactions and multi-entity accounting consolidation and then generate single-entity and consolidated financial statements in an instant.
• Remove complexity and process VAT for EU and non-EU transactions with multi-currency accounting and automated currency conversion using up-to-date exchange rates.
• Tailor your system access and protect confidentiality with transaction level user security settings which restrict what individual users can view.

Learn more about how to choose the best accounting software, which includes the 4 key featured you need to look out for.

How to use accounting software effectively

It’s difficult to over-estimate quite how much of a difference it can make when a business moves away from a disparate and out-of-date finance system and invests in something far more modern and suited to the job at hand. Every business is different, so it’s also impossible to truly understand how accounting software works until it’s been implemented and is being used on a daily basis by your team. The fundamental difference for all is the ability to work more efficiently and effectively across every area of Finance and with every interaction the Finance team has with the wider business and with contacts outside of your organisation such as suppliers and customers.

Below are some typical examples of how common Finance requests can be met faster and with more confidence.

1. Respond to a stakeholder request by creating a customised and professional report that includes the most up-to-date information. As well as having complete confidence that the data is accurate, it’s also easy to conduct more detailed analysis, provide further insight and add value as required.
2. Provide slick and responsive service to suppliers or customers by enabling your Finance system users to quickly identify specific transaction details, locate the latest information, or offer answers to questions on contacts, payments, or any other financial oriented detail. As well as improving perceptions of your Finance team, it also speeds up interactions and eliminates query bottlenecks.
3. Support other business areas in a more streamlined and responsive way by answering queries such as ‘how much of my budget is left’ or ‘which are our most profitable customers in my region’ instantly. Alternatively, it’s also feasible to provide secure self-service access to relevant individuals and enable them to view their department or teams’ financial metrics as needed.

See how our business accounting software works

Our powerful accounting software is hosted in the cloud and is designed for medium business and Not For Profit organisations. It has everything you need to manage your accounts efficiently, giving you the financial reporting you need to make better business decisions.

The software is easy to implement and even easier to use, which is why thousands of businesses use it every day.

If you need further information about how accounting software works, our team is happy to discuss this with you - simply contact us to speak to a specialist.

If you'd like to see how our accounting software could benefit your business, book a demo with us. 

Alternatively, if you're not ready to book a demo. You can download our brochure to find out more about our accounting software.