Accounting software questions: what really matters

The questions people ask about accounting software are rarely about software. They are about whether the business has outgrown what it is doing, what the accountant actually needs, and how much of the work a package will genuinely take away.

Answered below with the reasoning rather than a recommendation, and with an honest note where the answer depends on something no page can know.

What to take away

Do we actually need a package?

Not automatically. A spreadsheet can hold a perfectly adequate record for a small, simple business, and pretending otherwise sells software.

What a spreadsheet cannot do is enforce double entry, which means nothing tells you when the two sides of an entry disagree, and it has no audit trail, so a changed figure leaves no evidence. Those two absences are tolerable until they are not.

The signal to move is a specific event. A balance you cannot explain. A report you needed and could not produce. A second person who has to be in the file at the same time. A customer statement that turned out to be wrong.

Growth on its own is a poor trigger. Complexity is the real one, and it arrives with stock, jobs, staff or money collected on behalf of others rather than with turnover.

What does the software actually remove?

Keying, arithmetic, and a category of error. What remains is everything that requires knowing something the system does not.

The right hand column is the bookkeeping. It is the same work in any package, and it is the routine described in the bookkeeping foundations guide.

Will it produce accounts we can rely on?

It will produce a balanced set of reports from whatever it has been given. That is not the same thing.

Reports become reliable when each balance is agreed to something outside the ledger: the bank to a statement, the supplier ledger to statements, stock to a count, the loan to the lender. No package does that agreeing for you.

A package that shows a tidy balance sheet built on unreconciled accounts is more dangerous than a spreadsheet, because it looks finished.

What does our accountant need from it?

Ask them, because the answer varies and it is cheap to find out. Three things come up almost always: access in the way they normally work; a complete export at the year end, which in practice means a trial balance and general ledger detail in a file they can open, such as a spreadsheet or CSV; and the ability to post adjusting journals and see them separated from the business's own entries.

A fourth worth raising: what they expect to do outside the system, since asset registers and reconciliations of amounts held on behalf of an authority are the usual answers.

Knowing that in advance means those jobs are assigned, not assumed. Which amounts those are for your business follows from how it is set up, and the federal side of it is set out in Publication 334, Tax Guide for Small Business, and Publication 15, the Employer's Tax Guide.

How much history should we bring across?

Enough for comparatives, usually the current year plus opening balances. Bringing more is expensive and rarely used.

The constraint is not what you want to see, it is what has to remain retrievable. The IRS sets out the periods in Publication 583, Starting a Business and Keeping Records: generally three years for records that support a return, and four years for employment tax records. Keeping the old system readable is usually cheaper than migrating history into the new one.

Can it stop us making mistakes?

Some, and it is worth knowing which.

What it cannot do is know that goods arrived, that a job is finished, or that an invoice should have been raised. Nor can it tell a customer deposit from a sale. Those are the errors the revenue recording guide covers, and they are made before anything reaches the system.

What should we not decide on?

Price this month, appearance, and the length of the integration list. All three feel decisive during a demonstration and none of them predicts whether the books will be defensible in three years. The things that do are the export, the period lock, the control account restrictions, and whether it holds the schedules you would otherwise keep by hand.

Those answers are the ones to compare, and they are comparable across every package a small business normally shortlists: Intuit QuickBooks, Xero, Wave, Sage, FreshBooks and Zoho Books among them. Send the same four questions to each provider in writing, because a demonstration shows a best case and never an export.

The account structure you put into it matters more than the package, and it is a chart of accounts decision made by a person before anything is entered.

Common questions