When you have read this article, you will appreciate the main difference between accounting and bookkeeping software. You will also understand why most small businesses would be better off using bookkeeping software and then asking their accountant to complete the finishing touches.

Accounting software is more complicated and allows you to prepare monthly or quarterly accounts including a balance sheet. To get the most out of accounting software you really need to know how to post journals and have some accounting training.

When using accounting software you should calculate accruals, prepayments and depreciation and post these adjustments monthly or quarterly depending on the period of trading you are monitoring. If you don’t do this, then you are not using the software properly.

This is what I call a 'Bookkeeping Stinker' and this and many other 'stinkers' are discussed in my free e-book entitled 'Your Bookkeeping Stinks!' - click the link to get your free copy.

Also, some accounting software has stock management capability which can be complicated to set up and manage.

On the other hand, bookkeeping software is less demanding. You just need to record your sales and purchase invoices and track money in and out of the business. Whilst this won’t give you complete management accounts, you will know who owes you money, who you owe money to, what your cash position is and you can complete your VAT return.

You will have completed most of the work necessary to prepare the management accounts as your bookkeeping will be reconciled to your bank account and petty cash, as appropriate. It is then a relatively simple job to calculate stock movements, accruals and prepayments and depreciation to complete the profit and loss statement.

Also, many of the entries required to prepare the balance sheet will also be readily available i.e. debtors, creditors, VAT, bank balances etc together with a record of the sale and purchase of fixed assets.

Many businesses use their accounting software like bookkeeping software or give up altogether because their accounting software is just too complicated. I don’t believe in making life more complicated than necessary and therefore recommend that most small businesses would be better off using bookkeeping software in the first place.

If the software is complicated it makes data entry more time consuming, leads to more errors and makes your business more dependant on expensive, skilled staff. Compare that to simple bookkeeping software, where basic training can be completed in around one to two hours.

Take care that your accountant is not simply recommending accounting software to you so that you become more dependant on his/her services. I believe that you should be empowered by your software, not confused and dependant.

This article has given you a brief understanding of why most small businesses would be better off using bookkeeping software when considering their accounting and bookkeeping options. Also, the main differences between accounting and bookkeeping software have been simply explained so that you can decide what type of software you really need for your small business.

If you would like some advice on which bookkeeping system would be best for your business, please contact me at mark.salmon@welovebookkeeping.co.uk

Alternatively, I have more information on finance and bookkeeping at my blog/website at www.businessrenegade.co.uk