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Accounting, budgeting, and financial technology for businesses

3 Accounting Software Features Your Small Business Can Skip—and 3 You Need

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I drive a 2012 Honda Civic. When I bought the car, I knew I needed a few things: decent gas mileage, room for a carseat, a solid safety rating.

I also knew the list of things I did not care about, even a little: zero to 60 mph time, reverse camera, a sunroof. Having the list of “don’t needs” was as important as having the list of “do needs.”

Today, we’ll take a look a three accounting software features you can skip over along with three you’ve got to have.

3 accounting software features you don’t need

These are the things your business can (probably) skip. There are always exceptions that prove the rule, and I’ve called the biggest exceptions out at the end of each section.

1. Multicurrency Support

Multicurrency support is a feature many software systems offer these days, but you shouldn’t go out of your way to get it. In short, multicurrency is a way to keep all of your accounts and amounts pegged to an accurate and up-to-date exchange rate.

It’s a constant translation, in effect, where you put in one rate or value in U.S. dollars, and the software spits it out in British pounds or Canadian dollars or whatever. In action, this means you can generate invoices in other currencies, quickly value overseas or foreign currency accounts, and keep your prices steady in one currency while they fluctuate in another.

Why you can skip it

In reality, your one Canadian client isn’t going to require multicurrency support. One-off, or even recurring monthly bills can be generated on the fly using a site such as xe.com or your favorite foreign exchange listing.

I’m all for maximizing margins, but the $8 extra you might lose or make with a manual system isn’t worth choosing an accounting system that doesn’t otherwise fit your workflow.

Of course, you might need it if…

There are some folks who genuinely need multicurrency features. For example, this might save you a ton of time if:

  • You bill in a lot of different currencies on a regular basis
  • You hold money in other currencies
  • You have retail business in a country with a wildly fluctuating currency

2. Fixed asset management

Fixed assets are things that are valuable to the business, but that aren’t readily converted to cash. Your inventory of creepy clown lamps is designed to be sold for cash as quickly as possible, so it’s a current or liquid asset. On the other hand, your delivery truck that never leaves the front drive (because who’s going to buy those things) is designed to support the business—it’s a fixed asset.

Fixed assets depreciate, which means you can write their value off over time, decreasing your tax burden. This is designed to represent the decline of things’ usefulness. My 2012 Civic isn’t going to be worth anything in 2050, when it’s no longer operational.

Why you can skip it

The tax benefit of depreciation might make you think, “Well then I need to track all this stuff I’ve got and write it down.” You’re not wrong, but one, there are better ways to do it, and two, you probably don’t own enough stuff that’s valuable enough to write off.

Section 179 of the tax code allows you take immediate deductions on purchases that you would normally depreciate. Small businesses that spend less than $2 million per year on equipment purchases can immediately write off up to $500,000 worth of those purchases.

It makes tracking fixed assets for tax purposes unnecessary for many businesses.

Of course, you might need it if…

Talk to your accountant. Writing things off over a longer period can have advantages if it affects your tax bracket or cash flow. You might also want fixed asset management in your accounting software if you have a huge amount of machinery or other assets that require detailed tracking.

3. Inventory management

I don’t want to paint with too broad a brush, but the inventory capabilities of accounting systems are all horrible. That’s not 100% true, but there are better options almost 100% of the time.

The problem is, accounting software is designed to tell you how much money you have, where it’s been spent, how much you’ll have in the future, and how much tax you owe.

Meanwhile, good inventory management is all about what physical items you have on hand, where they are, how much they’re worth, how much they cost, and when you need to get more of them. It’s not entirely incompatible with accounting, but it doesn’t have a ton of overlap.

Why you can skip it

What you really want is a dedicated inventory management system. Ideally, it integrates with your accounting software to make financial management easier, but the power of the inventory system should stand alone from the power of the accounting system.

Demanding some mediocre inventory system in your accounting software is a recipe for disaster.

Of course, you might need it if…

You fall into the group of folks that uses inventory for basic, but important, work. If you only sell one thing, which is only kept in one place, inventory basics might be valuable and enough to satisfy your needs. It can also be useful if you keep some small inventory of parts or supplies that you bill for on a regular basis as part of your project work.

3 accounting software features you absolutely need

Now that you know what to avoid, here are three features to keep in mind. These are features only in the most general terms. Think of them like the brakes on your car. Sure, it still counts as a car without brakes, but I’m not sure I’d drive it off the lot.

1. Invoicing capabilities

Getting paid is the most important thing. I’ll say it again: Getting paid is the most important thing.

Cash will save or kill your small business, and the businesses that do the best are the ones that convert work to cash the quickest. A robust invoicing feature set is going to make this process easier and keep you in the black longer.

Look for systems that support the following functions:

  • Recurring billing
  • Emailed invoices
  • Automatic reminders
  • Tracking or reporting tools for unpaid invoices

The ability to quickly see who owes you money and to spend less time chasing that payment down is solid gold.

Of course, you might skip it if…

You hate being in business.

2. Reporting tools

In a similar vein, knowing more about your business will help you make smarter decisions. The difference between you and your competitors often isn’t your price or capability; it’s how well you each allocate your limited resources.

Depending on the accounting software you use, the business intelligence tools you already have in place, and the add-ons you’ve got, you can dig into everything from projecting income and expenses to profitability by customer.

Taking a poorly performing service out of the rotation and replacing it with a slightly tweaked offering can make all the difference when thin margins stand between you and the competition.

Of course, you might skip it if…

You’re just not going to use it. Even the best tools and best intentions don’t turn potential into practice. Paying for a tool you’ll never use is like setting money on fire, except it won’t keep your family warm. Learn how to use the reporting tools to your benefit, or skip them.

3. Data export capabilities

As we send more and more of our data into the cloud, it’s becoming difficult to figure out who owns what. Did the picture you just put on Facebook become the social network’s property? Can you cancel your New York Times digital account? Will they keep your name in the system forever?

What happens to your historical data when you switch accounting software providers?

In business, being flexible has value. Before you sign on the dotted line, make sure you have a super clear understanding of what data you can wrench out of the system later on down the line.

Of course, you might skip it if…

You signed up with that one provider that’s never going to raise its prices, get hacked, get rid of the feature you love, or go out of business. If you can see the accounting software future, maybe you won’t need your data. Also, give me a shout—I feel like there’s an article in that power.

Finding the right software for your business

Once you figure out your list, you can head over to the used car dealership and get taken for a ride. Ha ha! That’s a callback to my earlier car anecdote and, therefore, a joke. Seriously, once you know what it is you’re looking for, then you can go find it.

Capterra has a directory of over 325 accounting software options with reviews, features, and overviews. If you need something, we’re bound to have at least one program that fits your needs.

Looking for Accounting software? Check out Capterra's list of the best Accounting software solutions.

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About the Author

Andrew Marder

Andrew Marder is a writer for Capterra. His background is in retail management, banking, and financial writing. When he’s not working, Andrew enjoys spending time with his son and playing board games of all stripes.

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