Bookkeeping or books of original entry records all the financial transactions of a business. The bookkeeping process is essential for every business. It involves classifying, recording and summarising the financial transactions of a company. The bookkeepers record and maintain the books of account.
The bookkeepers used to record all business transactions manually on the journals and ledgers. However, with the advancement of technology, bookkeeping can be done through bookkeeping software. Most of the accounting software includes bookkeeping software also.
There is a thin line that differentiates bookkeeping and accounting. Thus, the accounting software includes bookkeeping software which allows the users to record debit and credit transactions.
Elements of Bookkeeping Software
Bookkeeping helps to keep track of payments and receipts. It records and summarises the income and expenditure of a business periodically. The bookkeeping records are used to prepare the financial statements that include the profit and loss account and balance sheet.
Thus, the three primary elements of bookkeeping software are:
- Ledgers, and
- Financial statements.
Features of Bookkeeping Software
The bookkeeping software usually contains the following features:
- Customise invoicing: This allows the company to send invoices to get the payment as soon as the company does the job.
- Instant reporting: This allows the company to get customised reports whenever they are required.
- Inventory tracking: This allows managing the flow of goods and products in and out of a company and getting real-time stock valuations.
- Automate banking: The company can monitor financial transactions and get real-time updates on the cash flow by connecting it with the bank accounts.
- Remote access: This allows bookkeepers/company owners to access crucial business reports anywhere, anytime, through an online web browser.
- Payment reminder: This allows to set up automatic reminders to the customers whose invoices are overdue.
- Paying bills: This helps to schedule bill payments, receive and store bills electronically. It also helps to know where the business is spending money.
- Payroll: This allows for tracking employees working hours, automatic payroll filing and tax calculation.
- Tax rates: This automatically calculates the sales and other tax rates applicable to the business.
- Contacts list: This helps obtain an extracted list of contacts based on the needs, thus reducing the data entry.
- Purchase order: This simplifies the purchase order process and maintains control.
Functions of Bookkeeping Software
- Billing for services provided or goods sold to the clients.
- Recording and verifying invoices from the suppliers.
- Recording receipts from the customers.
- Processing ESI, employees pay, PF, etc.
- Recording payment made to the suppliers.
- Recording depreciation and other adjusting entries.
- Providing financial reports.
- Monitoring individual accounts receivable.
Uses of Bookkeeping Software
Bookkeeping software greatly helps small businesses that have a daily routine of keeping their books of accounts up-to-date. A bookkeeping software simplifies data entry, organises vital information, provides reports and grants more access for accountants to crucial financial information about different aspects of the business.
It helps the bookkeepers, accountants for preparing financial reports and statements. It also helps the business owners by providing easy access and information on the financial transactions relating to the business.