Choosing accounting software — what to look for

Accounting software is now the backbone of most small business finance. It holds your transactions, prepares your GST reports, runs payroll, sends invoices and produces the figures you make decisions with. Choosing the wrong product, or the wrong plan within a product, can mean years of workarounds, manual spreadsheets and data you cannot trust. Choosing well takes a little time upfront. This guide sets out what to look for and how to make the switch smoothly.

Start with your business, not the software

Before comparing products, write down what your business actually needs. Consider:

how many transactions you process each month
whether you sell products, services or both
whether you hold stock
how many employees you pay, and how often
how many bank accounts, cards and payment platforms you use
whether you operate more than one entity or location
who needs access: you, staff, a bookkeeper, your accountant
the other systems you use, such as point of sale, e-commerce, job management or customer relationship tools

A sole trader issuing a dozen invoices a month has very different needs from a retailer with three stores, stock and twenty casual staff.

The main options

In Australia, the widely used cloud products for small and medium businesses include Xero, MYOB and QuickBooks Online, among others. Each offers several plan levels, and features differ between plans as well as between products. All of them can serve a typical small business well. The right choice depends on the fit with your needs, your existing systems and the people who will use it. Compare current plans and pricing directly with each provider, as they change from time to time.

What to look for

Australian GST and BAS

The software must handle Australian GST properly: tax codes for taxable, GST-free and input-taxed items, GST on the cash or accruals basis, and reports that prepare your BAS. Check whether it supports lodging the BAS directly to the ATO, or lets your registered tax agent access the figures easily. Our GST guide and BAS preparation checklist explain what the reports need to support.

Bank feeds and reconciliation

Automatic bank feeds from your bank, credit cards and payment platforms save hours and reduce errors. Check that all your financial institutions are supported, and look at how easy the reconciliation screen is to use, since you or your bookkeeper will spend more time there than anywhere else. Rules that suggest coding for recurring transactions are a real time-saver.

Payroll and Single Touch Payroll

If you employ staff, the payroll module must be STP-enabled, handle super, leave and award-based pay items, and keep up with changes to tax tables and super rules. Some businesses use a separate payroll or rostering system that integrates with the accounting software. Either approach can work, provided the data flows reliably. See our article on payroll, STP and super for what payroll needs to handle.

Invoicing and getting paid

Look at how invoices, quotes and reminders are created and sent, whether customers can pay online from the invoice, and how payments are matched back. Faster invoicing and easier payment usually mean faster cash collection.

Bills and expense capture

Good software lets you capture supplier bills and receipts by email or a phone app, extract the details automatically and attach the document to the transaction. Keeping the source document with the entry makes your records far stronger, and the ATO generally requires business records to be kept for five years.

Reporting

You should be able to produce a profit and loss, balance sheet, aged receivables and payables, and GST reports easily, with comparisons against prior periods and budgets. Check whether the software supports tracking categories, classes or departments, so you can report by location, division or project without bloating your chart of accounts. If you want regular management accounts, see whether the built-in reports are enough or whether you would need an add-on reporting tool.

Inventory

If you hold stock, look carefully. Basic inventory features in general accounting software may be fine for a modest number of items, but businesses with many products, multiple locations, batches or assembled goods often need a dedicated inventory system that integrates with the accounting software.

Integrations

Check whether the software connects with the other tools you rely on, such as your point-of-sale, e-commerce platform, job management or practice software. A good integration removes double entry. A poor one creates reconciliation problems. Ask how the integration posts transactions, not just whether one exists.

Users, access and security

Check how many users each plan allows, what access levels are available, and whether your accountant or bookkeeper can be given their own login at no cost. Insist on multi-factor authentication for every user, and give each person their own login rather than sharing one.

Multiple entities

If you run several businesses or a group with a company and a trust, check how the software handles separate entities and whether consolidated reporting is possible. Each entity usually needs its own file and subscription.

Data ownership and exit

Find out how you can export your data if you ever leave, and what access you keep to historical records after cancelling a subscription. You need to be able to produce old records if asked.

Making the switch

If you are moving from another system, plan the change rather than doing it in a rush.

Pick a sensible start date. The start of a financial year or a BAS quarter keeps reporting clean.
Decide what history to bring across. Many businesses bring opening balances and open invoices and bills, and keep the old system available for older detail.
Set up the chart of accounts and tax codes first. It is easier to get the structure right before transactions arrive.
Connect bank feeds and integrations, and test them.
Enter conversion balances and check that the opening balance sheet agrees with the closing position of the old system.
Run parallel for a short period if payroll is moving, and check the first few pay runs carefully.
Train everyone who will use it, and write down your coding rules.

Involve your accountant early. They can help set up the file correctly and confirm the conversion balances, which avoids problems at year end.

Common mistakes

choosing on price alone and outgrowing the plan within a year
picking a product nobody in the business knows how to use
leaving the default chart of accounts unchanged
migrating mid-quarter without reconciling the conversion
connecting integrations without checking what they post

The best accounting software is the one that fits how your business works, is set up properly from day one, and is actually used every week.

How we can help

We can help you work out what your business needs, set up your accounting file properly, and manage a move from your old system without losing track of the numbers. Learn more about our accounting services or contact us to discuss your setup.

This article is general information only and does not take into account your circumstances. Speak to a qualified adviser before acting on it.