Five Core Functions of Accounting Software

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What is accounting software? The best accounting software for your business will address each of the five core accounting functions, i.e., accounts receivable, accounts payable, general ledger, purchase order management, and billing management. It must be fully integrated into the company’s IT systems for maximum returns and savings.

#1. Accounts Receivable Software

The accounts receivable ledger contains the detailed listing of customers and the amounts of money each owes the company, as well as other information, such as the date incurred, address and phone numbers. Any business considering the implementation of accounts receivable management software should research each alternative solution to ensure it includes the key capabilities that to enable the accuracy and integrity of its financial reporting.

The right accounts receivable software solution has the ability to update the ledger with appropriate transactions in real time. Invoices must be added and customer payments towards outstanding invoices must be deducted. The software must be able to check that a payment has been applied to a specific invoice or recognize that it covers multiple invoices.

Reports, such as an accounts receivable aged listing in detail, must be generated on a regular basis so that customers at risk of defaulting can be identified. When a customer is close to default, the ability to generate mail-merge collection letters reduces costs and allows staff to be more productive, in addition to the assistance it provides in collecting past due debts. There are a number of other capabilities found in all popular software solutions that are nice to have, but that are secondary to those listed above.

#2. Accounts Payable Software

The best accounts payable software solution for the company will provide a rapid return on investment. Key features in accounts payable that increase the payback include early payment alerts that enable the company to take advantage of discounts offered so that supplies and raw materials are purchased at the lowest possible price and the company does not miss discounts or incur late fees. Also, the ability to write checks to vendors in accounts payable, and have the correct debits and credits applied to the company account, makes balancing the books easy.

#3. General Ledger

Software solutions for the general ledger are crucial since it is the business’ main accounting record. Key features most companies will seek from general ledger accounting software are the ability to track budget and financial data to produce accurate financial statements, such as the income statement, balance sheet, and general ledger report.

By choosing the best general ledger software, year-end reports and statements can be quickly and accurately developed. Data is automatically passed from subsidiary ledgers, such as accounts payable and accounts receivable, for quick and accurate double-entries and a balance sheet on which assets always equal liabilities plus owner’s equity.

#4. Purchase Order Management

An effective purchase order management system keeps track of the business’ customer sales and its purchase order details. A system that can effectively process and maintain inventory details is also required for most manufacturing companies. Of course, security is also a concern in PO management as a compromise in this area can lead to the theft of inventory or loss of income. It should easily generate financial transaction reports so that managers have real-time insight into how the business is performing.

#5. Billing Management Software

The fifth core function of an enterprise accounting software system is billing management. The most effective billing management solutions monitor inventory quantities and value, generate financial transaction reports with ease, and safeguard against unauthorized user access. It should also track customer, vendor, and inventory records and store those in one place for accuracy and efficiency.

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