How to Choose Accounting Software for Your Business

When my grandfather opened his grocery store in Wollaston, Massachusetts in the early part of the last century, he did his accounting in a double entry ledger and soon developed the ability to rapidly and flawless add long columns of figures in his head. Luckily, those of us without a mathematical brain can still balance our books thanks to accounting software. Here are the steps to choose the best for your needs.

Instructions

Difficulty: Easy

1. Learn which software you bank supports.
   Ideally you want a seamless interface between your bank and computer. You’d like to be able to download transactions, a real time saver when it comes to accounting. Different banks support different software. My bank supports QuickBooks, Quicken, Microsoft Money, Managing Your Money and Microsoft Excel.
2. Draw up a list of the features you need.
   We all need to be able to budget, anticipating bills and payments. We also have to have the ability to print invoices and checks, an important part of creating a good business image. What functions are important to you in the software? Do you anticipate a large payroll? Do you have to track an inventory? Once you've determined the family of software supported by your bank the next step is to determine which model you need.
3. How well does the software handle taxes?
   Ideally you want software that forces you to account for every expenditure. At the end of the tax year it should export each category to an IRS tax form for your accountant to review before filing. Remember, there are other taxes you'll have to worry about. If you're selling retail, how does your software handle sales tax? Can you readily figure local taxes for city and state? The more work your software does, the less your accountant will have to do.
4. Compare prices and support options.
   You'll probably be using this software for a long time to come. Is the user interface intuitive? As your business expands, you want an upgrade path. Look at your business plan. What features do you anticipate needing as your venture continues to grow? Will you be able to get credit for buying into a product line and sticking with it?
5. Back up everything, frequently.
   In the days of DOS, my very first accounting software was Andrew Tobias' "Managing Your Money." One tax season, just before I was due to meet with my accountant, I opened the program to see that all of my data had evaporated. I had to get an IRS extension to start again from scratch for that year. Now I back up to a Zip drive every session and to a Firewire drive every couple of weeks.