Bookkeeping Software Vs. Accounting Software

Bookkeeping Software Vs. Accounting Software post image

Accounting software should be seen as a more advanced version of bookkeeping software. Both are financial management solutions that can help your human resources and finance department automate processes. However, while bookkeeping focuses primarily on logging financial information, accounting software is concerned more with managing, analysing, and presenting financial data.

Most small and medium companies install accounting software as it provides better comprehension. Not only does it log of and manage critical data, but it also leverages this data to create projections, budgets, and forecasts.

Still, when it comes to buying new HR and financial software, it’s vital that you understand the nuances between the main software types – which is what this article aims to define.

What is bookkeeping software?

Bookkeeping software maintains records of all the financial transactions that your business carries out. This includes purchases, transactions, payments, and receipts. A bookkeeper tool also deals with key administrative tasks of a company, including the handling of both accounts receivable and accounts payable, as well as managing payroll and the balancing of ledgers.

Bookkeeping functions are now mostly automated. Gascoynes estimate that 97% of all bookkeeping tasks will be automated by 2027.

The main features of bookkeeping software

  • Online ledger – The main purpose of bookkeeping software is to provide you with a central log of transactions that can be accessed by all relevant parties. Partners and accountants can all contribute to this ledger via the software.
  • Classify transactions – As bills come in, bookkeeping software will organise and categorise transactions. It will also ascertain the validity of incoming bills before processing and organising them.
  • Invoice generation – This software can record sales and produce and send invoices for goods and services to relevant customers.
  • Quote generation – Before you even carry out a service or deliver a good, you can use bookkeeping software to generate a quote. This can then be sent to your prospective client for them to accept or reject.
  • Accounts receivable – Not only can you send invoices using bookkeeping software, but you can also receive notifications via the platform of when customers open and pay your invoice. You can also be notified when invoices exceed the due date.
  • Accounts payable – You can send all bills you receive from suppliers to the bookkeeping software via email.
  • Payroll – Some sophisticated bookkeeping software models come with payroll accounting, which allows you to calculate reductions and employee pay amounts automatically.
  • Dashboard – This software type should provide you with a dashboard which displays all your key data comprehensibly and in one place. This includes key stats like bills due to go out and money due to come in.

What is accounting software?

Accounting software is designed to perform the same tasks as bookkeeping software, in addition to the interpretation and analysis of financial data. It not only collects data, but also creates valuable insights in the form of forecasts, cash flow analyses, and financial statements. This comprehensive software type provides you with the bigger picture and a better understanding of your company’s financial health.

With this data pulled together and analysed, you can make data-driven decisions. You can determine how much money you’re spending overall and identify areas in your spending that could be improved upon. Accounting software is key to constructing your overall financial strategy.

The main features of accounting software

  • Bookkeeping functionalities – A comprehensive accounting software should be able to perform all the tasks that bookkeeping software can. This includes managing the general ledger, transaction categorisation, payroll management, billing, and invoicing.
  • Budgeting and forecasting – This software type can cross-examine real-time data with historical and future predictions to generate accurate budgets and forecasts. These forecasts are not only good for estimating how much to put into an upcoming business project but also good for conducting analysis after completion. If your company’s spending is far off the forecast, your finance department will be able to identify financial issues and work to rectify them.
  • Project accounting – Through real-time data analysis, accounting software can track expenses and revenue throughout a project. Not only is this great for budgeting, but it’s also good for making sure your company stays on track financially while the project is still ongoing. This helps you avoid reaching completion and only then finding out that you have overspent.
  • Reporting and analytics – Key financial metrics can be calculated and reported on instantly with the help of accounting software. This eliminates the need for manual calculations, which saves you a lot of time and resources. Income statements, balance sheets, and cash flow statements can all be updated automatically, as and when new data becomes available. This improves accounting automation and enhances reliability and accuracy.

Other types of accounting software

Besides bookkeeping and accounting software, there are lots of other platforms that can be utilised by bookkeepers and accountants to help make their job easier.

They include:

Billing software

Billing software is designed exclusively for the generation and sending of invoices. When bills are generated, relevant taxes will be applied and added to the invoice. Some advanced billing software types are also able to follow up on customers and collect payments from them.

Typically, the billing software will notify you when payments have been made and when they have run over the due date.

Billing software can also include some degree of reporting and analytics. Specifically, it can create revenue reports and earnings analyses.

Invoicing automation software

This software type automates invoice processing. Suppliers’ invoices are fed directly to this machine and a process known as “invoice capture” takes place. This sees the tool scanning the data presented on the invoice and capturing and validating the important data. Once validated, the information is sent to relevant locations, such as your accounts payable system.

Not only does this tool significantly reduce your invoicing time to completion, but it also increases the accuracy of your invoice processing. This increases the productivity of your finance department and removes the risk of human error. 

Payroll software

Payroll software automates the payment process, saving your HR and finance department a significant amount of time. Through automated payment, payroll software ensures that your employees get paid consistently on time. It can process tax, pay structure, and employee attendance to ensure that each member of staff is paid exactly what they are owed.

It also keeps track of all payments made, so that you can easily verify whether an individual employee has been paid.

Invest in new accounting software today

Regardless of your business size, you need to invest in fully comprehensive accounting software. This software should consist of advanced bookkeeping features, as well as built-in payroll and billing modules.

However, you may struggle to find a software solution that meets this criterion while staying within budget.

This is where YourShortlist comes in.

After a quick consultation with us, we’ll prepare you a free, no-obligation shortlist of accounting software that meets your needs and requirements.

Contact us today to get started!