Small and medium-sized businesses use bookkeeping software to record and process their business transactions - an electronic ledger that automates double-entry bookkeeping. It can manage tasks such as managing customer invoicing and accounts receivable, vendors billing and accounts payable, and financial reporting.
Bookkeeping software is either installed on your computer or accessed online. Popular bookkeeping software includes Freshbooks, QuickBooks Online (or QuickBooks Desktop for the desktop version), Zoho Books, and Xero.
The name bookkeeping software derives from the primary users being a bookkeeping business owner, or a bookkeeper specialist. They may be a direct employee but more likely a third-party service providing this function to the business. The National Association of Certified Public Bookkeepers (NACPB) identifies their primary member types as (members) Employee Bookkeepers (pro members) Bookkeeping Business Owners.
No. Bookkeeping is the vital task of recording transactions, and building the transactional data of sales and expenses for the business.
Accounting expands into analyzing what that data means.
In 1966, the American Accounting Association (AAA) defined accounting as 'the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of information'.
Ultimately, an accountant may perform bookkeeping tasks, but a bookkeeper can’t be an accountant without proper certification.
Bookkeeping software is an excellent foundation for small and relatively simple medium-sized businesses. It provides the fundamental features to support processing business transactions. Excel and other spreadsheet or reporting software provide analysis. However, in many use cases, Excel is used to overcome emerging areas of complexity as the business needs change and grow, where bookkeeping software features are too simple or limiting.
A relatively simple medium-sized business is typically where it is a single operating entity. They utilize a single currency and the business operations are generally straightforward. For example, selling and marketing products or services to a specific market.
Enterprise accounting software includes all of the bookkeeping features needed. It expands capabilities and power to manage complexity, scale and provide superior analysis. Excel and other reporting and analysis tools continue to be used and add value - but not as a manual, time-consuming, or risky substitute for accounting features.
More complex small and medium businesses typically are multi-entity. They may operate with one or more currencies and have numerous operating dimensions - selling and marketing a wide range of products and services to customers in a variety of vertical or geographic region markets.
Let’s compare bookkeeping software to enterprise accounting software.
Bookkeeping software targets small and simple medium-sized businesses. A sizable group of users are business owners (who run the business and are bookkeepers by necessity). This means the primary focus is providing a user-friendly interface, with a basic layout to navigate and access straightforward accounting features.
Enterprise accounting software can handle larger and more complex businesses. While the interface must be as easy as possible to use, the need for more complex features such as managing multiple entities in one platform, results in a deeper interface with a more advanced layout, containing more options and settings.
Bookkeeping software provides the essential bookkeeping features for core accounting. These features include invoicing customers and accounts receivable, processing vendor bills and accounts payable bills, and general accounting functions such as bank reconciliation and reporting financial statements.
Where enterprise accounting software expands beyond bookkeeping is by delivering more robust features. For example, multi-entity management (e.g. accounting for wholly owned subsidiaries, partly owned subsidiaries, and joint venture subsidiaries) and automating required intercompany accounting and consolidation for advanced financial reporting and analysis. Enterprise accounting software supports managing multi-currency accounting and ideally includes digital currency transactions and accounting as digital currency is an increasingly popular, and perhaps inevitable long-term (almost 2,500 US businesses accept bitcoin as of late 2022 according to Deloitte), means of conducting business.
Enterprise accounting software will typically provide richer, advanced reporting and analysis. This allows for insights into data, via user-driven tabular reports and dashboard visualization.
Both bookkeeping and enterprise accounting software will integrate with Excel. Enterprise accounting software should be more accessible for third-party reporting and analysis tools to access the accounting data.
Scalability is measured by business complexity and volume of activity.
As businesses grow in size (or simply build up an operating history) the number of transactions able to be processed, consolidated, reported, and analyzed may outgrow bookkeeping software limitations. Transactions include invoices, bills, cash movements, and journals. As complexity increases, scalability becomes even more critical. A business must have sufficient scale in its accounting software to easily and flexibly manage new growth, increasing complexity, and the rising volume of transactions.
Enterprise accounting software's purpose is to scale. Users will configure to update and accommodate change, increasing complexity and transaction volumes.
Both bookkeeping and enterprise accounting software should offer integration with third-party applications. This can be done directly or via an integration specialist vendor. As businesses grow, they may need to upgrade other critical software (such as their CRM, HR, or MRP), and potentially bookkeeping software integrations may be more limited to other small business systems, rather than supporting integration with other new enterprise-level systems used.
Where enterprise accounting software also differs from bookkeeping software is by offering higher levels of customization. This can be in the form of configuring the accounting software’s interfaces, process workflows, and settings. For example, a chart of accounts, dimensions, etc.
Ideally, the enterprise accounting software will be completely open, providing an application programming interface (API) for complete control over the platform (especially valuable for customers with complex technical environments, unique business workflows, or needing integrations with their systems outside of those provided as standard) including providing data openness for other third-party reporting and analysis tools to directly leverage the accounting data.
The cost of accounting software can range dramatically. Capterra has an excellent starting pricing guide (as well as directly linking to the various vendor’s profiles and reviews). Final costs will depend on your requirements. It is typically driven by a combination of factors such as features needed, premium modules (if required), advanced capabilities, the volume of transactions, and the number of users. You should always plan for training, implementation, and ongoing support costs as well.
Reflecting the features and capabilities provided, bookkeeping software will be more affordable, and should be simple to implement (potentially including near-to self-service, where training and onboarding support is provided rather than extensive professional services),
Enterprise accounting software will be more expensive. However, the cost of software and services ranges widely. There are specialist vendors focused on specific business verticals or those focused on providing the most needed enterprise accounting features for customers forced to step up from bookkeeping software at a reasonable cost. Finally, there are the high-cost enterprise software vendors. These vendors support the largest customers, with the applicable enterprise software, services, and ongoing support price tag.
Bookkeeping software is the right choice for small and simple medium-sized businesses to manage their business transactions and have basic accounting needs.
Ultimately bookkeeping software can’t be enterprise accounting software.
Enterprise accounting software is for businesses preparing for or who already have a more complex financial and operational profile. They also may be scaling to higher volumes of transactions, with the need to process, report and analyze this larger and more complicated accounting data.
A CPA with more than 10 years of varied public and private accounting experience, Ben has led many complex financial projects to successful outcomes.
Ben holds a B.S. in Accounting from the University of Maryland.