So, you’re looking for an accounting system.

This reference guide provides insight into the accounting features and functions currently available on today’s market for small to medium businesses (SMBs). It will help you determine which features your organization needs—or doesn’t need.

But first, here’s a brief overview:

What Are Accounting Systems?

Accounting systems manage procedures for accurately entering, tracking, and maintaining information related to an organization's financial operations. These accounting applications typically support general ledger, accounts payable and accounts receivable, payroll, job and project costing, and multinational accounting.

Many SMBs require that other functions (such as inventory control, manufacturing management, and financial reporting) also integrate with their accounting system.

About This Guide

Although a full accounting system RFP can contain upwards of 4,000 features and functions, we’ll focus on the “big picture” features for now, for (obvious!) considerations of space.

You’ll notice that we’ve grouped accounting features by broad category. These categories correspond to a high-level functional breakdown of software features. In this reference guide, we provide a brief explanation of how each category impacts your accounting processes.

Reference Guide to SMB Accounting Software Features

1. General Ledger

Chart of Accounts

The chart of accounts is, for all practical purposes, the business management system. If revenues and costs are not captured and segregated into the best suited categories, the financial statements you produce will be useless.

Transaction Processing

This category describes features that address typical journal entry processes, including general transaction processing, workflow period closing, batch layout configuration, and job cost adjustments.

Month- and Year-end Closing

While you can bill revenue and collect cost information, if this information is not published in the form of financial statements in a timely manner, the statements themselves are essentially useless.

Control Reports

All business management systems must have some form of controls to make sure information is input correctly. Software features covered in this category are designed to accomplish this task.

Financial Statements

Financial statements drive the company. However, for smaller companies this may not be true to the same extent, since the owner or manager should have a "feel" for operations rather than relying on printed reports. Larger companies cannot do this, simply because they are too big.

2. Accounts Payable

Vendor Master File

Master files are the starting point in any application. For accounts payable, the vendor master file must be set up first, as that drives the rest of the accounts payable functions.

Purchasing Controls

While anyone can issue a purchase order, the process should be controlled. This category covers the purchasing process as well as control systems you can use.

Data Input

Once a purchase order has been sent and goods received, the obligation for that purchase needs to be recognized. This category reviews the various steps required to actually get information into accounts payable.

Payables Analysis

Once an invoice has been input, it needs to approved and scheduled for payment. This category covers those steps.

Check Writing

Once an invoice has been processed and approved, it needs to be paid. This category addresses various check-writing features, including bank account assignment and check formats.

Control Reports

While you may choose to assume that information has been input correctly, that is not always the case. The features in this category address reports that give users the ability to check information to make sure it has been input correctly.

Financial Reports

Once data has been input into accounts payable, users will probably need to review slices of that data to determine if costs are in line, where costs are being incurred, and how those costs compare against other benchmarks.

3. Accounts Receivable

Customer Master File

Accounts receivable starts with customers. This category addresses the processes whereby you can set up customers, and define all the controls relating to that customer.

Customer Relationship Management (CRM)

CRM and its relatively lightweight cousin, contact management (CM), are the keys to managing your relationship with customers.

Invoicing

This category covers the invoicing processes you should adopt to send invoices quickly and accurately.

Cash Receipts

Customer payments must be received in a timely fashion, recorded properly, and deposited into the bank as quickly as possible. This category includes features for variable payment terms, less-than-full payment, and so on.

Debt Collection

Recording profitable business counts for nothing if you are not receiving payment in a timely fashion (or at all). This category covers some of the procedures you can adopt to make your customers pay you in a timely fashion.

Control Reports

While you may choose to assume that information has been input correctly, that is not always the case. The features in this category address reports that give users the ability to check information to make sure it has been input correctly.

Financial Reports

Once data has been input into accounts receivable, users will probably need to review slices of that data to determine if revenues are in line, where revenue is being generated, and how that revenue compares against other benchmarks.

4. Payroll

Employee Files

The payroll application will not operate efficiently unless all parameters have been defined or set up. Features in this category cover typical setups, such as pay periods, deduction calculations, sick leave accrual basis, and so forth.

Human Resource (HR) Management

HR applications track detailed information for each employee. If users need to track educational qualifications, training, and other activities for employees, they probably require some form of HR application.

Canadian Payroll Processing

If your organization has Canadian employees, you will require a payroll system that meets various Canadian regulations. This category covers some of the more common requirements.

Data Input and Cost Distribution

Payroll information drives not just the production of payroll checks, but also the distribution of those costs to various departments and activities.

Payroll Check Writing

This category covers such features as flagging abnormal checks, voiding or reprinting selected checks, direct deposit, facsimile checks, and so on.

Control Reports

While you may choose to assume that information has been input correctly, that is not always the case. The features in this category address reports that give users the ability to check information to make sure it has been input correctly.

Financial Reports

Once data has been input into payroll, users will probably need to review slices of that data to determine if costs are in line, where costs are being incurred, and how those costs compare against other benchmarks.

5. Inventory

Inventory Master File

As with all other applications discussed up to this point, the inventory application will not operate efficiently unless all parameters have been defined or set up. This category covers such parameters as customer price matrix options, bar code tracking, and inventory costing methods.

Inventory Control and Assembly Systems

There are any number of activities that control how goods are received, stored, assembled, and ultimately shipped. This category addresses a variety of features, including bill of material types, computer-aided design (CAD) integration, tool management, work orders, and so on.

Data Input and Cost Distribution

Inventory information drives not just the shipping and receiving process, but also the distribution of those costs to various departments and activities.

Receiving Activities

This series of features highlights the receiving process and its many component activities.

Shipping and Withdrawal Activities

Once an order has been received, the objective of the exercise is to ship the goods to the customer as quickly and efficiently as possible. In some instances, the shipping is internal only, with goods being sent to a production line. This category of features traces each of the steps necessary to get material where it needs to go.

Financial Reports

Once data has been input into inventory, users will probably need to review slices of that data to determine if costs are in line, where costs are being incurred, and how those costs compare against other benchmarks.

6. Job and Project Costing

Job Initiation

The process of setting up a job is similar to setting up any other master file. First you have to define system defaults. Then you define how the system is going to work. Finally, you define the jobs themselves.

Data Input and Cost Distribution

Once a job has been launched, cost information will flow into it either directly or from other applications, such as payroll, accounts payable, and inventory. The key to the success of any job-related organization is allocating costs to jobs accurately and in a timely manner. Once the actual costs have been posted to a job, managers can control that job and bill for the work done.

Job Control

Small jobs are relatively easy to control. Larger jobs may be so complex that several people may act as managers. In cases like this, it is very easy to lose track of costs and labor. This category covers some of the support a business management system can provide.

Cost Analysis and Reports

While it is important to post all costs to jobs, it requires some degree of study to make sense of this information. This category covers some of the activities and information managers may need to help them control each job.

Job Invoicing

Collecting cost information is the first and most important step, but if those costs are not billed properly, then all control efforts go to waste.

7. Fixed Assets

Equipment Files

Equipment files perform the same function as master files for customers, employees, etc.

Cost Calculation and Distribution

Once an asset has been acquired, its acquisition cost must be amortized over a period of years. This category covers functions that control that process.

Reports

Users need to access reports that analyze depreciation. This category covers such features as cost distribution reports, maintenance cost analysis, and detailed fleet maintenance analysis.

8. Order Entry

Order Entry (Set Up)

Order entry is not just about taking orders and subsequently shipping goods. There are many other activities you need to consider when you set up an order entry system. This category covers some of those functions and activities.

Order Receipt

The process of receiving an order can be simple or it can be complex, depending on the nature of the order, how it is recorded, and the industry in which you’re operating. This category covers various aspects of the order receipt process.

Order Tracking

To assume that once an order has been received is a mistake. Anything can happen to prevent an order from being shipped or delivered on time. This category covers functionality that help users track orders from the moment they’re placed to the moment they’re delivered.

Shipping

The process of actually getting a shipment out of the door can be complex as well as costly. This category covers some of the activities that can be enhanced by a well designed business management system.

Invoicing

Once a shipment has been dispatched, invoices should be printed as soon as possible. This category addresses the procedures supported by a business management system.

Reports

Reports coming from the order entry system should help you get shipments out the door efficiently and on time—and also learn where improvements can be made.

9. Budgeting

Budgeting (General)

This category covers features relating to the budgeting process.

Review Process

Before a new budget can be created, users should review the results from the previous year (and earlier). This may give them trend information that will be useful when establishing a new budget.

Construction of New Budget

The actual process of constructing a new budget can be fairly simple or very complex, depending on the nature of your business, as well as your inclination to split the budget into smaller pieces.

10. Manufacturing

This category includes features for

·          product costing

·          master production scheduling (MPS)

·          material requirements planning (MRP)

·          capacity requirements planning (CRP)

·          shop floor control

·          quality control

11. Multinational Accounting

This category includes features for:

·          installation and support

·          basic information

·          currency rate tables

·          transaction entry

·          gain/loss reporting

·          financial/management reporting

A comprehensive RFP will also include general considerations, including reseller and value-added reseller (VAR) channels and industry-specific modules. It should also address technology-related information, such as technical requirements, control and audit features, and operational functionality.

We hope you find this reference guide useful. For more information on accounting software features and functions, please visit our Accounting Software Comparison page.

Republished with permission from Technology Evaluation Centers