Most accountants would be surprised to know the age of the advent of ledgers. More than 5000 years ago, the Mesopotamians used general ledgers on clay tablets. It was merely used to record quantities. The concept of a double-entry ledger system dates back to 1340 AD. Over the years, ledgers have passed through several civilizations and timelines. The introduction of computers to the world has aided in simplifying the way we use ledgers. Over the past few decades, even accountants have steered away from the traditional method of maintaining general ledger books. The introduction of cloud-based software and world-class technology has eased it all, keeping the essence of the general ledger intact.
If we think about it, the simplicity and comprehensive nature of accounting ledgers have compelled generations to stick to the same formula. Today, accounting firms use a general ledger to keep track of and analyze the finances of businesses. The reports and the analysis are also key in helping firms with business forecasts.
In this blog, Finsmart Accounting – trusted in India and abroad for outsource bookkeeping services – will share everything about general ledger software for CPA firms. Let’s start with the components of a general ledger.
Components of a general ledger
The task of the general ledger is to simplify the accounting associated with businesses. It is divided into the following categories that are responsible for drawing a picture of the financial transactions over time, which is known as the chart of accounts:
– Expense accounts: This includes rent, depreciation, team wages and salaries, and utilities.
– Revenue accounts: This includes the service feeds
– Equity accounts: This includes stocks, dividends, and retained earnings
– Asset accounts: Accounts receivable, cash, inventory, and fixed assets are a part of this category
– Liability accounts: This includes the accrued expenses and accounts payable
Why do accounting firms need general ledger software?
Accounting firms are all about handling finances the right way. And the role of general ledger software in that can not be underestimated. Some of the top reasons why firms need it are:
– They help track all financial transactions and cash flow accurately
– They help the firm leaders stay on top of spending with a report on revenue and expenses
– They help the firms evaluate profitability, liquidity, and overall financial health
– They make tax return filing easy as all expenses and incomes are available in the same place
– They help maintain information needed to compile financial reports
– They help prevent, spot, and rectify unusual or fraudulent activities
– They help balance the books before tax season arrives
The best part is that all of these can happen without the risk of human error. A general ledger software helps avoid overlooking errors like omission of a ledger entry, mistyping of a number, etc. These software are responsible for mitigating loss of time in repetitive and redundant actions. For accounting firms, it is important to stay up-to-date with internal and external standards. Most software has it up-to-date with those standards and that helps the accountants overcome the complexity with ease.
Things to keep in mind when choosing a ledger software
Before picking a general ledger accounting software, there are several factors that you need to keep in mind. Here are some of the top things that help you pick the one that suits your needs:
1. Types of software: Today, accounting is no longer synonymous with a heaving pile of files. Accountants, just like any other profession, want more freedom – especially about when to work. It might be wise to choose a cloud-based software that gives the team the freedom and flexibility to work anytime, anywhere.
2. Ease of learning: It is important to choose software that does not need a lot of training. Small firms lack time and resources and it is wise to choose software that makes them self-sufficient. Choosing software with unnecessary complications will only make things worse for your firm.
3. Essential features: Each accounting firm is unique and that is why, it is important to choose ledger software that caters to your own unique needs. Make a list of features that your organization needs, talk to the accountants who do the grunt work every day, and pick the ones that meet all these needs.
4. The cost: Ultimately, it is the cost that everything boils down. As a leader of a small CPA firm, it is essential to analyze the cost of the software you are considering before picking the one you need.
5. Customer support: Buying the software might be a one-time thing. However, it is essential to partner with a platform that is ready to provide customer support promptly. This is an important criterion. Make sure you talk to people who have used the platform and know about their experiences.
Top general ledger software for accounting firms:
One size does not fit all – especially when it comes to the varying needs of the clients. In a small accounting firm, tasks can get easy when you have the right software needed for general ledger or other tasks. But it is just the opposite that can happen when you are not careful.
Here are some of the top general ledger software picks that can help you in easing your process:
1. Quickbooks Online Advanced: It is a complete organization management and assessment software that enables users to analyze their financial portfolios. Accountants can not only access ledgers but also view inbound and outbound sales, track inventory, manage payroll, process payments from tax returns, coordinate distribution, and more. Video tutorials and online support are also available to help users access the software seamlessly.
2. Xero: It is a cloud-based accounting software meant for small businesses with tools for managing invoicing, bank reconciliation, inventory, purchasing, expenses, bookkeeping, general ledger, and more. It is a modern software that is accessible on both computers and mobile phones. It is a smarter and easier option for accountants. The price of Xero starts at $7.50 per month.
3. Netsuite: Providing support to over 37,000 organizations, NetSuite is an all-in-one cloud management solution. It helps enterprises operate more effectively by automating the core processes. It provides real-time visibility into operational and financial performance. A single integrated software, NetSuite helps in managing accounting, order processing, inventory management, production, and general ledger. This software is designed to give companies visibility on their information and control of their business.
4. Zoho Books: It is a smart online accounting software that is designed to help businesses streamline their operations, automate workflows, and help accountants collaborate. It can be used by businesses of all sizes and from all fields. Zoho is known not only to make the operation of the general ledger easier but also to help in cash flow management, inventory management, purchase order management, expense tracking, balance sheet management, and much more. The price of Zoho is $20 per month.
Choosing the right general ledger software: Summing up
The right software for general ledger will not only help you with general ledger tasks, but it is responsible for all your accounting needs. From assessing your business needs to determining the budget and creating a holistic approach to your day-to-day accounting. When choosing a solution, do not forget to consider scalability and flexibility, analyze features and functionalities, and make sure that they are user-friendly. It is essential to note that the right kind of software will not only streamline your financial processes but also drive your business decisions.
Want to ease your accounting processes? Outsource some of your tasks to Finsmart Accounting!
Have questions? Write to us at connect@finsmartaccounting.com.
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Director Growth Strategy & Alliance
Maanoj Shah is a finance and outsourcing expert with strong Business Strategy and Scaling-up experience. Over the last 20 years, he has incubated multiple businesses and helped build global enterprises in verticals as diversified as hospitality, technology, and healthcare.
