Accountant vs. Accounting Software: How to Find the Right Balance

Should we hire an accountant or use accounting software to handle our business’s financial accounting and tax-filing responsibilities? This is a surprisingly common question — surprising because it implies an either/or dilemma. But the truth is, once a company begins to grow and its leader’s time is better spent running the business than handling daily accounting tasks, a hybrid approach that blends the human touch of an accountant with the functionalities of modern accounting software will likely make the most sense. This article explores the benefits of both options, as well as the power derived from combining the two.

What Is an Accountant?

An accountant is a trained professional who specialises in analysing, auditing and communicating the financial status of businesses (and individuals) in compliance with established accounting standards. Accountants are responsible for preparing financial reports, maintaining accurate accounting records, complying with tax laws and Generally Accepted Accounting Principles (GAAP), and — perhaps most important — advising their employers or clients on financial strategies, tax planning, risk management and investment opportunities. At smaller businesses, they may also perform bookkeeping activities, such as recording financial transactions, reconciling banking statements, and handling accounts payable (AP) and receivable (AR).

Accountants typically hold bachelor’s and, often, master’s degrees in accounting(opens in a new tab) or business. They may also specialise in different types of accounting(opens in a new tab), such as financial accounting, managerial accounting or internal auditing. Additional credentials in the United States include:

• Certified public accountant (CPA): A licenced accountant who has passed the Uniform CPA Exam and met the educational and experience requirements set by the state board of accountancy in the state they practise in.
• Certified management accountant (CMA): A professional who has been recognised by the Institute of Management Accountants (IMA) for passing a rigorous exam and meeting specific educational and experience requirements.
• Enrolled agent (EA): A federally authorised tax practitioner who has passed a three-part exam on federal tax laws and regulations. EAs may represent taxpayers before the Internal Revenue Service (IRS).
• Accredited business accountant (ABA): A professional recognised by the Accreditation Council for Accountancy and Taxation (ACAT) for meeting certain educational and experience requirements and passing a comprehensive exam. ABAs specialise in accounting and taxation for small businesses.

What Is Accounting Software?

Accounting software is a computer program that helps businesses record, manage and report on their day-to-day financial transactions. Specific functionality will depend on the software product itself, with spreadsheets included as a bare minimum. The range of capabilities may include basic record-keeping, production of quarterly and annual financial statements and tax returns, fixed asset management, expense and revenue management, AR, AP, subledger accounting, reporting and analytics.

Leading accounting software can track an organisation’s assets, liabilities, revenues and expenses, while automatically populating the general ledger with these transactions in real time, providing business leaders with immediate access to accurate financial data that helps them make better decisions for their companies.

Accounting software can come in the form of a standalone system or as part of a greater enterprise resource planning (ERP) solution that integrates with other business-critical applications, such as inventory management and human resources management.

What’s the Difference Between an Accountant and Accounting Software?

Buddhist monk Dalai Lama certainly wasn’t thinking about accounting when he said, “Humans are not machines — we are something more,” yet his words sum up the inherent difference between accountants and accounting software. Accountants offer the highest degree of human judgement, plus personal, customised services tailored to the specific and ever-changing needs of their companies and clients. That said, modern-day accounting software (read: automated, embedded with machine learning and artificial intelligence) lifts the time-consuming, error-prone burden of financial management from business leaders’ and accounting departments’ shoulders so they can focus on more strategic endeavours.

But if we may offer up another applicable quotation, this one from automaker Henry Ford, “For most purposes, a [person] with a machine is better than a [person] without a machine.” And that is certainly true of accountants and accounting software.

Key Takeaways

• Accountants are degreed professionals who apply established accounting principles to help businesses operate at optimal financial performance and stay in compliance with tax and other regulations.
• Accounting software is a computer program that supports businesses in recording, managing and reporting on financial transactions.
• It is not a question of choosing between an accountant and accounting software but of achieving the right balance between the two to keep a business functioning at top performance and in compliance with tax laws and regulations.

Accountant vs. Accounting Software: Find the Right Balance

Accountants and accounting software both bring to the table many individual advantages that complement each other and become all the more formidable in combination. The right balance will depend on a variety of factors, including the business’s number of transactions, growth projections and budget.

Advantages of Choosing an Accountant

As of May 2022, more than 1.4 million accountants and auditors (opens in a new tab) were employed in the United States, according to the U.S. Bureau of Labor Statistics. Their services, whether as part of an in-house accounting team or as a third-party provider, are in demand for many reasons, including:

• Expertise: Accountants are educated professionals who have the up-to-date knowledge and expertise to manage a business’s finances — not to mention that they are likely quite experienced in using accounting software to do their jobs. They’re steeped in the latest tax laws, financial reporting requirements, industry-specific regulations and accounting best practises, and know how to correctly apply them in their daily practise.
• Time savings: Managing a business’s financial affairs is a time-consuming and complex responsibility. Accountants save time and resources by taking the lion’s share of accounting tasks out of the hands of business owners and staff, who are then free to focus on their core business.
• Financial planning: Accountants can help develop a financial plan that aligns with the business’s goals and objectives. They also provide valuable insights into financial trends and opportunities, optimise tax strategies and provide guidance on business investments and other financial concerns.
• Risk management: Accountants can identify and manage financial risks, such as fraud and noncompliance with accounting and industry-specific regulations, both of which can become a financial drain. Accountants can also develop internal controls and processes to mitigate risks.
• Business growth: Accountants foster business growth by providing valuable financial insights and advice. They can pinpoint areas for cost savings, optimise pricing strategies and customise a budget that aligns with the business’s growth objectives.

Disadvantages of Choosing an Accountant

Despite the advantages of engaging with an accountant, businesses should take note of some potential downsides:

• Cost: The average salary for a staff accountant is just shy of $55,000 per year(opens in a new tab), according to Payscale.com. That doesn’t take into account the significant expenses associated with acquiring, hiring, training and retaining one — which can total as much as three to four times the salary(opens in a new tab) for recruitment alone. Meanwhile, third-party accountants typically charge by the hour, with rates determined by the accountant’s level of experience and expertise, types and complexity of services required, and time it will take to complete the job at hand. These costs can add up quickly — into the hundreds, thousands or tens of thousands of dollars — and may be compounded by how frequently these accounting services will be needed.
• Overdependency: A danger exists in becoming too dependent on an accountant’s expertise and advice, especially if it comes at the expense of the business’s own understanding and its ability to make any financial decision without outside input.
• Errors and risks: As good as accountants may be in ensuring that the business’s numbers add up, taxes are properly paid and financial statements are accurate, they are still human beings. Ultimately, responsibility for all accounting rests with the business, which will have to shoulder any penalties and fines levied as the result of inaccuracies and/or noncompliance.
• Limited availability: Depending on their workloads, accountants may not be able to respond to a business’s needs at the very moment action is required. Some may even be too busy to acknowledge the request. This can hamper the business’s ability to obtain timely advice or assistance, and it can also damage business relationships.
• Limited scope: Although accountants can provide valuable financial advice and expertise, they may have less knowledge in areas that affect, but are outside of, finance, such as marketing or operations. This will limit their usefulness and require additional insight from other sources.

Advantages of Using Software

The multibillion-dollar accounting software market shows no signs of slowing down: Gartner(opens in a new tab), for example, predicts that the global market will be worth $24.4 billion by 2026, representing a 9% compound annual growth rate from 2021’s $16.3 billion. Bolstered by the increasing adoption of cloud-based accounting software(opens in a new tab), accounting software offers many advantages worthy of consideration. They include:

• Automation: Automation empowers businesses to perform their accounting more efficiently and effectively, which is especially important in today’s challenging economic climate. Competition is fierce, too, so the more accounting software can do on its own, the more time business leaders can devote to standing out among consumers. Accounting automation can take care of many critical tasks and processes, such as handling all aspects of the financial close(opens in a new tab), calculating and issuing payroll, generating invoices, and processing payments and routing them for approvals as part of AP and AR procedures.
• Accuracy: From net profit margin to current AP and AR ratios to days sales outstanding and beyond, the world of accounting has no shortage of metrics and key performance indicators(opens in a new tab) for measuring progress toward financial goals. Accounting software is designed to perform complex, multistep calculations that would be prone to error if handled manually, as might be the case with duplicate data entry, for instance.
• Real-time data: Cloud accounting software that works in real time takes accuracy to an even higher level, instantaneously updating transactional data, dashboards and reports with the latest information. This allows a business to proactively stay on top of their financials and inform decision-making.
• Cost savings: For growing businesses, accounting software is the more cost-effective solution(opens in a new tab) for managing finances. Accountants typically charge for their time and expertise — which includes software know-how. Costs can add up quickly and unpredictably. As a result, accounting software is often the more economical choice, particularly when it’s in the cloud and
• Time savings: From the creation of journal entries to the preparation of financial statements — and all the steps between that compose the accounting cycle(opens in a new tab) — accounting software handles a multitude of bookkeeping(opens in a new tab) and accounting tasks, saving valuable time and effort that can then be devoted to more strategic business pursuits. Cloud-based accounting software, in particular, saves additional time because the cloud software’s vendor handles many of the tasks that would otherwise be assigned to an IT department, such as managing infrastructure, pushing out software and security updates, integrating with other applications and backing up data. And as the old saying goes, time is money.
• Accessibility: The ability to access accounting software online, whether through a secured virtual private network or in the cloud, is an undoubted business advantage, especially these days when so many people work remotely.
• Scalability: Leading accounting software can be scaled up (or down) as the business and its accounting needs expand (or contract). The ease with which that can occur will depend on the deployment model — another check mark in the cloud accounting column, because it’s handled by the vendor and without the need to purchase more equipment, such as servers.

Disadvantages of Using Software

No software is 100% bulletproof. Any accounting software decision should include a thorough vetting of vendors and their solutions. It’s wise for businesses to keep the following points in mind when deciding whether to use software:

• Learning curve: Depending on the solution, it could take some significant time and ongoing training to learn how to use it effectively. This can be particularly challenging for solopreneurs and small-business owners who understand their core businesses inside and out but don’t possess a background in accounting or technology.
• Technical issues: Like any software, accounting software can experience minor and major technical issues from time to time. The consequences range in severity, from delays in invoice generation and reporting to the possible loss of data and inability to release financial statements on time. A service-level agreement should spell out clear expectations in the event of a problem, including the expected level of service and what actions the vendor will take to rectify a problem.
• Limited functionality and customisation: While accounting software can be customised to some extent, it may be able to go only so far in meeting a growing business’s needs.
• Security risks: Storing financial data on a computer or in the cloud can present security risks, such as data breaches or hacking. It is important to take appropriate measures to protect your financial data.
• Dependence on technology: Using accounting software requires a computer or mobile device, an internet connection and a power source. If any of these components fail or are unavailable, you may be unable to access your financial data.
• Lack of personalisation: No matter how leading edge the accounting software may be, sometimes a person wants personalised advice or expertise that only a real, live accountant can offer. The back and forth nature of an actual conversation is something technology hasn’t yet mastered (though given the rapid advances in AI and machine learning, never say never).

Choosing the Right Option for Your Business

No matter the industry, accounting is core to every business. How you decide to handle it for your business often comes down to a variety of factors, including the volume and complexity of your company’s financial transactions; whether you have the time, resources and expertise to devote to accounting; knowledge of accounting and tax regulations; budget; business requirements; and plans for growth. Modern advancements in accounting software — automation, chief among them — eliminate the need for many manual, laborious tasks, but software can’t dispense real-world advice or understand your situation the same way a human can. In other words, each option brings value that can’t entirely replace the other.

Choosing the Right Accounting Software With NetSuite

As your company grows and its accounting needs become more complex, spreadsheets and entry-level accounting software will quickly reveal their limits. NetSuite Cloud Accounting Software provides all the functionality you need, in one place — much of which is automated, relieving you and your accounting staff of mundane accounting tasks that can easily throw off your books if an error is made. NetSuite’s solution streamlines AR and AP processes, manages taxes across geographies, monitors cash flow, manages fixed assets, ensures regulatory compliance and more, all to the highest degree of accuracy. Data is stored safely in the cloud and updated in real time, so you can be sure that your decisions are based on the most current information possible.

No matter a company’s size, technology has become an integral part of modern business operations. But it can’t replace the human touch — at least not yet. When it comes to a business’s accounting needs, whether to rely on accounting software or use the services of an accountant is not a choice that has to be made. Each option has advantages and can compensate for the other’s disadvantages, working together to provide the best of both worlds.

Accountant vs. Accounting Software FAQs

Can software replace accountants?

While it can’t replace the personalised “human touch,” accounting software can automate a multitude of services typically provided by a professional accountant, such as basic bookkeeping and financial statements. Accounting software can also be integrated with other core business systems and based in the cloud to provide the highest level of accessibility. Many times, however, the best solution is to use a combination of both.

What software do most accountants use?

The role of the accountant has changed in recent years, from number-cruncher to software user. Among the most popular accounting software solutions used by small businesses are QuickBooks, Xero and NetSuite, according to Forbes(opens in a new tab).

How does accounting software help accountants?

Accounting software automates many of the routine tasks accountants must perform, increasing accuracy and efficiency and enabling accountants to channel their expertise into more strategic work.

Is accountant a software?

No, an accountant is a professional who specialises in measuring, analysing and communicating the financial status of businesses and individuals, in compliance with established accounting standards.

Is QuickBooks as good as an accountant?

QuickBooks may cover the bookkeeping basics, but growing companies that require higher-level functionality will be better served by more sophisticated (read: automated) software and an accountant’s expertise.