The popularity of business accounting software has gone manifold.
Business accounting software refers to all the systems and applications that are used to record, manage, and process financial data. It is widely used by accountants, bookkeepers, and finance professionals to record transactions, monitor financial activity, and report relevant financial information to stakeholders.
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Accounting software generally comprises various commonly used modules such as accounts payable and receivable, trial balance, general ledger, and payroll. It can be developed in-house or purchased from a third party. It may be web-based, desktop-based, or even app-based. The market for business accounting software is huge, given its applicability in nearly all types of organizations, and different accounting software varies in their scope and functionality.
The business accounting software market is estimated to grow by USD 1.64 billion during 2020-2024, at a CAGR of over 6% during the forecast period. Some of the key players in the global accounting software market are Microsoft, Freshbooks, Oracle, Acclivity, and Zoho.
Market Size and Growth Rate of Business Accounting Software
The market for business accounting software was estimated at $3.2 billion in 2016. It is expected to grow at a steady CAGR of 6.03% to $4.10 billion by 2024.
In 2010, the revenue from cloud software for the finance/accounting segment amounted to $1.9 billion USD. It was expected to grow to $2.16 billion USD by 2016 but with its increasing popularity, it has surpassed that number.
The robust growth rate is due to the increasing necessity to automate the routine tasks of book-keeping and recording of financial information. Not only that, but it also streamlines every aspect of accounting-related activities, including keeping track of bank transactions, online and in-store sales, stock and inventory, and more. The surge of cloud accounting software is also responsible for more companies opting for business accounting software.
Key Factors Driving the Global Accounting Software Market
- Cloud-based accounting has enabled ease of access on-the-go, leading to its steady growth.
- An increase in the number of mobile accounting applications is also contributing to its growth.
- There is a growing need for effective management of accounts by small businesses, which accounts for a significant contribution to the market.
Segmentation by Deployment and Analysis of Accounting Software
The business accounting software market can be segmented on the basis of multiple parameters.
North America (U.S. and Canada)
Europe (U.K., Germany, France, Italy, Spain, Hungary, Belgium, Netherlands & Luxembourg, Rest of Europe)
Asia-Pacific (China, India, Japan, Singapore, Australia, New Zealand, Rest of Asia)
Latin America (Brazil, Mexico, Rest of Latin America)
Middle-East and Africa (GCC, North Africa, South Africa and Rest of Middle East)
On-premises software: The accounting software and related hardware are installed on-site. Adequate IT staff is needed to implement, maintain, and support this traditional accounting software system.
Cloud-based software: SaaS or cloud-based accounting software are accessible via the internet through any supported device. It is remotely handled by the vendor.
Manufacturing: Companies involved in the manufacture of finished goods from raw materials need accounting and billing software with specific features like inventory and warehouse management and keeping track of financial transactions related to the purchase of raw materials.
Service: Service providers have different requirements for accounting software. There is a greater focus on invoicing, sales management, employee tracking, and management, etc.
Commercial Accounting Software: It deals with the key accounting and bookkeeping needs of most organizations. It often includes graphs, reports, and forms.
Professional Accounting Software: It is specifically designed for professionals, such as doctors, independent contractors, freelancers, etc., keeping their needs in mind.
Enterprise Accounting Software: Best suited for large enterprises, it offers an integrated accounting system that tasks care of a wide range of functionalities. Some of which include workflow management, project planning, business intelligence, and more.
Custom Accounting Software: Many vendors offer bespoke accounting solutions that allow businesses to create a customized accounting software. Moreover, many businesses create their own custom accounting software in-house.
Top Vendors of Accounting Software in the Global Market
Here are the most popular vendors in the global business accounting software business:
Market Trends Impacting the Growth of Accounting Software
Certain trends and disruptors have been affecting nearly every aspect of modern business. They have managed to penetrate the global accounting software market as well.
Most companies are seeing a perpetual rise in their cloud-based accounting software subscribers. The ease of accessibility and low cost as compared to on-premise (as it doesn’t require high investment in infrastructure) has many companies adopting cloud-based by small businesses.
By 2024, a company using non-cloud-based accounting software would substantially go down.
The app-based mobile software is quickly becoming a necessity owing to the increase in remote employees and telecommuting. It’s the same with accounting software. Mobile accounting software is the solution that enhances the productivity of the accounts department in the companies, no matter where the team members are.
Data security is going to take center stage. Bookkeepers and accountants have access to sensitive information; more companies will attempt to protect the same and invest in security software.
Artificial Intelligence (AI) and Machine Learning (ML)
AI and ML will both find increased application in accounting, especially in conjunction with business accounting software. By 2022, accounting tasks, banking, payroll, and audits are most likely to be fully automated with AI-based technologies. It would cause a significant reduction in the number of errors and the time consumed.
The blockchain is going to be a gamechanger for accounting. Using blockchain technology for accounting would make data once recorded impossible to tamper with or manipulate. By 2025, 10% of the global GDP will be stored on blockchain-related technology. It would bolster the entire accounting system, making fraud virtually impossible and errors negligible.
Opportunities and Threats for Vendors in the Accounting Software Market
In the burgeoning accounting software market, these are the functionalities that present considerable opportunities for improving existing software by incorporation of the same:
OCR (Optical Character Reading)
The use of Optical Character Reading (OCR) in conjunction with business accounting software presents an opportunity to save hours of manual labor. OCR technology converts images into readable and editable text. It can be a boon for the accounting function, which has to deal with tons of receipts every day. Receipts can directly be uploaded to the cloud, thus enabling paperwork to be transferred to the accounting platform. OCR will pull all the relevant data and text. It will be posted and analyzed accordingly by cloud computing to the relevant platform.
Data analytics will provide that much-needed push that the main users of accounting software need. The first advantage is that there will be an improved ability to detect fraud anomalies in data, making auditing more effective. Analytics will use accounting data to empower accountants, auditors, and finance professionals to provide data-driven insights. It will engender better financial forecasting and risk management.
Following are the threats to a vendor in the global accounting software market in this period:
Security threats are the biggest challenge for the accounting software market. In 2017, the average size of data breaches in the US alone was 24000 records valued at $3 million in the annual average data value. Firms want to be vigilant from the get-go. Accounting software will have to step up to meet the genuine need for robust security against data breaches, fraud, and manipulation. The onus will be on business accounting software developers and providers to incorporate better threat identification and security systems such as blockchain technology and data analytics.
Cost inefficiency is still a problem in the accounting world. Before automation, costs were high because of the labor-intensive work that accountants would have to perform on a daily basis. Now, training existing accountants and bookkeepers to become familiar with and stay updated with the accounting software will be expensive. Especially with how fast accounting software is undergoing changes, it is going to be quite a while before the training costs actually yield any returns.
Cloud vs. On-Premise Software
This can be quite the dilemma for companies looking for a change in accounting software or installing accounting software for the first time. Although the cloud is gaining popularity, some firms still prefer on-premise software for security reasons. But cloud accounting software is cheaper, offers more features and the vendors themselves provide automatic upgradation and maintenance.
Wrapping it Up
The global business accounting software is set to undergo massive transformations in the coming period. Increased automation and the use of AI, such as chatbots, and machine learning, are posed to be the disruptors for this industry. These disruptors will play a significant role in changing the very function of accountants and/or bookkeepers. They will assume more of an advisory/consulting role, as opposed to their present roles which involve more routine tasks related to recording and analysis of transactions.
The migration to the cloud and app-based accounting software will be instrumental in facilitating remote workplaces with employees scattered worldwide, also in turn giving a boost to the gig economy. Greater integration of other workflows (such as budgeting, costing, and benchmarking) with accounting software will be seen. Thus, there will be a move towards integrated cloud accounting software solutions.