Choosing the right accounting system for your business

If your business is growing strong, it’s probably time to move on from your familiar spreadsheet to an accounting system. It’s a big change that requires a big decision. So which accounting system should you choose? Everyone has a preference, but that may not be the right choice for you or your business. You need to consider which features you need and which ones you’ll never use. For example, Xero is the first choice for many, but it’s expensive and you should make your decision based on your needs, not popularity. In this article, we’ll guide you through the common features of an accounting system and some real-life scenarios, so you can determine if a system is right for you.

Talk to your team

Before you go any further, your first decision should be who will actually do your bookkeeping. If you already have a bookkeeper, BAS agent or tax accountant, discuss this with them to decide what system will work for both of you. Many professionals specialise in one particular system or choose to work only with the major players to offer more insight. However, if you’re someone who likes to be involved in their bookkeeping (with or without professional help), read this article and choose carefully – it could save you hundreds of dollars a year!

Accounting systems for different businesses

If you don’t want a big, all-in-one accounting solution, you need to find the right fit for your particular business. Accounting systems are often specialised for different types of businesses, such as e-commerce, retail, wholesale, manufacturing, service or a combination of these. Here are some of the common features needed by different businesses.


If you have an e-commerce business, some inventory management and invoicing is already integrated into your online platform. You just need the basic functions of an accounting system, such as expense tracking and bank feeds. However, if you’re growing and would like more complex inventory management – with purchases and sales linked to your items to give you individual profit margin details – you should look for a solution that gives you that.

Brick-and-mortar retail

If you’re a brick-and-mortar retail shop, you have a POS (point of sale) solution – basically, your till. Unless you still enter transactions into a physical cash register, your POS system has some functionality that you should explore fully before looking for an accounts system. For example, a POS system records all your sales per item, per group and per time slot. This can give you information about your performance. If you don’t send out invoices, you may just need expense tracking and bank feeds.


As a wholesale business, you send invoices and may have an ordering system as well. You also have some sort of inventory management to link the two together. Our advice is the same as for retail: fully explore what you have first, and then find the missing functionality in an appropriate accounting system.


If you’re a manufacturer, your software focus is on ‘item packages’ or ‘recipes’ (i.e. the cost of producing certain items and combining them into a sales item). Assuming you’re a very small manufacturing business – like a hobby turning into business – you first need to decide where you want to take your business, as manufacturing reporting can be very complex. You want to make sure you have all the features you’ll need.


As a service provider, you rely heavily on invoicing and time tracking for the service you provide. You probably don’t need inventory management, but you do need a good accounts payable system to track billable expenses.


The last group is a combination of the above and is the most common scenario. The best example is a hospitality venue that has manufacturing (cooking), retail (wine), service (table service) and, these days, e-commerce (online ordering). Businesses like these need to consider all the features above to determine the best accounting system for their combined needs.

Not-for-profits and fund accounting

If you’re a not-for-profit business, you need a specialised accounting system. The bookkeeping and auditing process for not-for-profits is very different than for regular businesses.

Finding a payroll solution

Payroll is the largest and most important component of your new accounting system. If you’re growing and need employees for the first time or you’ve been doing payroll manually, you should spend the most time considering your payroll solution.

Benefits of a good payroll solution

A good payroll solution has several benefits:

  • Since the introduction of Single Touch Payroll, you need to report each pay run directly to the ATO. A good payroll solution can do that.
  • Awards are getting more complex and harder to interpret. Not even professionals do it manually anymore for liability purposes. A good payroll solution has awards integrated and can determine how much you should pay.
  • Time rostering and time tracking can be time consuming to do manually. A good payroll solution can do it in no time.

Some accounting packages offer payroll included, but you’re usually better off with a separate solution that gives you all these benefits.

Components of payroll and HR

Many payroll systems easily integrate into your chosen accounting package or are already attached. But to make the right choice, you need to understand the individual components of payroll and HR:

  • Hiring, onboarding and termination – Together, these areas are often called human resources (HR), and larger companies have a whole department for this function. For smaller businesses, modern payroll systems can help with onboarding, award interpretation and even staff recognition.
  • Rostering and timesheets – Many payroll systems provide a solution for rostering and/or timesheets, but not all have the features you need. Can staff clock in and out? Can you record break times? Will timesheets integrate seamlessly into payroll? If you need these features, make sure your chosen payroll system has them.
  • Payroll – This is the actual process of recording wages and on-cost for your employees.
  • ATO reporting – Every pay run must now be reported to the ATO directly. Super contributions can also be reported and paid through the ATO clearing house. Your payroll systems need to do all these things.

Basic payroll solutions provide only payroll, so make sure you know what features you need when choosing your system.

Other components of accounting systems

Below are some more great features that you’ll find in modern accounting systems. However, you may not need them all. Based on what type of business you operate, consider each of these and purchase what you need. Additionally, we strongly recommend getting professional help to set up these components. While you can do a lot yourself with easy-to-use software, it won’t work properly if it doesn’t have a solid foundation.

Expense tracking and accounts payable

Expense tracking enables you to photograph your receipts and uses some automation to match the receipt to your bank transactions. This is fairly common now. However, if you want to go a step further and track all the bills you need to pay, you need accounts payable. Be aware that, while receipt tracking has some automation, it’s not infallible and needs continual maintenance. AI won’t match invoices that aren’t paid exactly to the cent or are paid in bulk. Also, it can’t match a payment to the right invoice if the amounts are the same. If you want to use AI to reduce data entry, you must engage a professional to set it up for you and give the system time to learn. If your system has accounts payable functionality, you can pay all your suppliers at one time once a week or fortnight. However, it only works if you follow a process that’s been set up for you. If you prefer to pay your bills manually as they fall due, don’t use accounts payable, as it won’t work very well.

Invoice management – accounts receivable

Invoice management is the most used area of an accounting system unless you have a POS solution. You can easily issue invoices, often from your smartphone, and track receivables (i.e. unpaid invoices). You can connect payment portals, so customers can make payments conveniently, and program automatic invoice reminders. The functionality is wide-ranging and will make your business life easier.

Bank reconciliation or clearing bank feeds

Most modern online accounting systems can import your bank feeds automatically to match bank transactions with actual transactions and let you track your expenses and income. If you use receipt capture and invoice management, many bank transactions will have automatic matches, but others will need to be allocated manually. Note: Automation is not perfect, so please get help with the setup to save your tax accountant a major clean-up job at the end of the year.

Inventory management

Inventory management enables you to track the purchase and sale of all your items. Once set up, it’s very easy to use, but it can be complex if problems arise. Our best advice for this feature is to keep it simple.

Purchase order management

Purchase orders (POs) help you track what you order and receive. Usually, you order from your supplier’s item list through the system and create a purchase order. The system checks the PO against the invoice for any inconsistencies (price changes), replacements or out-of-stock items. A good system then transforms your PO into a bill that enters the accounts payable process.

Financial reporting

This should be the result of all your expense and invoice tracking – a financial report that tells you whether you’re profitable. Larger accounting systems have commonly used reports set up as templates, so you just pull up the report you need. However, all your invoices, expenses and bank feeds must be up to date to ensure that reports show the correct figures!

General ledger

This functionality is more for your bookkeeper, BAS agent or business accountant. If you have professional help – which we always recommend – they’ll be happy to be able to extract a general ledger to audit your transactions.

Budgeting and forecasting

This feature is only as good as the data behind it. It also needs to be set up correctly to make sense. Please don’t expect the budget and forecasting module to work correctly if you don’t have help from a professional.

Tax management

This functionality has been popping up more lately, as it enables you to extract your BAS figures and report without help from a tax/BAS agent. Additionally, it usually connects straight to the ATO – so you don’t need to lodge through MyGov or the business portal. However, we must give a warning here – all transactions must be processed before your system can extract the correct figures. A common mistake people make is believing the system automatically recognises bank feeds as expense or income. This is not true! Only matched transactions or allocated transactions are recognised for tax purposes.

Choose the right accounting system

You can see that there are many features to consider when choosing an accounting system. If you compare accounting systems online, you may find even more features – and not all of them are necessary for your business. The best place to start is an accounting professional who can help you make the best choice. Once you’ve put in the hard work to set it up, you’ll be reluctant to change it – even if it turns out to be wrong for you. So get the right advice upfront.

Need more advice?

You can do a lot yourself with the help of a great accounting system, but it all starts with a professional setup. Makes sure you hire a professional to set up everything for your purpose and audit your transactions to avoid messy clean-up jobs. Your business and your accountant will thank you! Do you have more questions or need assistance choosing the accounting system for you? Feel free to get in touch with us using the form below. We’re happy to chat with you!