A look at accounts payable and accounts receivable software

Every company needs to have an accounting system in order to manage revenues and expenses. Choosing an accounting software package or system that meets the needs of your company will make a huge contribution in making your company successful.

Two of the most basic accounting functions that an accounting software package should have are the accounts payable and accounts receivable functions. Accounts payable keeps track of the money not yet paid to suppliers, and accounts receivable is the money not yet received from customers. For example, in a dentist's office, the accounts receivable account would represent the monies due from insurance or patients for services rendered. The accounts payable account would track the amounts from invoices on dental supplies, the lease on the office, and the magazine subscriptions for the waiting room. The dentist could buy an off the shelf basic accounting software for these accounting functions, but a dentist would probably purchase a package that is integrated with the accounting functions unique to the dental industry.

What kinds of things should an accounting software package have?

1. A good database is essential to a good software system. Most larger accounting systems use professional database management systems. These databases take care of handling large amounts of data. Sometimes the software takes care of many of the administration tasks, but it is still a good idea to have a database administrator or someone on your staff handy with databases to take care of some of these functions.
2. Forms, reports, checks and invoices are an essential part of the accounting system. The software should have boilerplate and customizable reports, invoices, checks and so forth. These should be customizable so that you can put your company's logo and information on these documents. These documents should be available in popular formats so that they can be emailed electronically if desired.
3. Internal controls are essential, especially in a large organization. It is good practice to have safeguards against "cooking the books". One way to do this is for the software to provide detective controls. Every time a transaction occurs in the software, information such as the date, time, who, and sometimes on what computer the transaction occurred should be logged. These transactions should be safeguarded so that they cannot be changed. If anybody tries to tamper or hack the system, a log of such activity should be kept by the software and database system.
4. An effective prior period adjustment system is critical to good accounting software. Most accounting systems have an accounting period. At the end of the accounting period, a closing occurs. The software will then prevent changes to the accounting period. Once in a while, an error will be found in that month's data or transactions. There must be an effective way to handle the transaction clearly and effectively.
5. There must be an effective balancing system in the AP/AR software.
6. The number one way to find errors is to compare the receivables to the payables. Duplicate payment entries can occur. Common errors, such as data entry errors can be difficult to find. By detecting these errors with effective software tools, you can make the accounting process much easier.
7. The software should be intuitive, user friendly and easy to use.
8. There must be an easy way to interface the software with other systems. Almost no company or small business can use accounting software to accomplish all its tasks. It needs to interface with other software by transferring data. Sometimes, it needs to exchange data with other companies' software systems as well.

There is no perfect accounting software, but every package should contain at least a few of these basics.