How to Build an Accounting & Tax Management Software
The ancient art of accounting and taxation has been a sore spot for many companies. Plus, in multiple countries requirements in this field aren’t standardized. That’s why accounting and tax management might seem complicated and confusing without a highly experienced specialist.
Luckily, with the whole world being rapidly digitized, accounting and taxation can be almost fully automated with the help of relative software or functionality.
Surely, developing accounting software takes effort as well. Besides, a lot of questions might pop up:
- Should you opt for a custom solution or buy an out-of-the-box one?
- Is it possible to build accounting functionality into an existing solution like an internal ERP system?
- Where to store and how to protect digital financial data?
In this article, we’ll answer this and many other questions on accounting & tax management software development. Additionally, we’ll talk about what features you might need for your custom accounting software, what are the 3rd-party integration options, and give you tips on how to calculate your potential development expenses as precisely as possible.
So, if you want to develop an accounting & taxation software, need to find an answer to some of the issues we listed, or simply want to learn more about it — welcome!
We have 2 different articles on accouting software development. One is for accounting companies to manage their clients' bookkeeping as well as their own finance. And this one is dedicated to custom accounting software for companies that want to digitize their financial management. In case you want to read the first article, you can follow this link.
💼 Custom Development vs Accounting Software Providers
Ready-to-use accounting software is quite a popular option on the market. It’s normally based on the subscription model. For the fixed price, users get a set of features and a server. The design can be both fixed and customizable.
Even though there are multiple software providers, many companies still opt for a custom solution — it’s 100% customizable, unique, and beneficial in the long term.
In this section, we’ll talk about use cases when custom software might be a better option, compared to using accounting software from a certain provider.
Yet, if you’re quite a small company, it’s not likely that custom accounting software would be a necessity for you. In such case, we’d recommend taking a look at Quickbooks, Xero, and FreeAgent as ready-to-use alternatives. But surely, everything is highly individual and even the smallest companies might need a custom solution.
Case # 1: Functionality Choice
Tax management software providers are targeted at expanding their audience, which is why their functionality often includes a mixed set of features. For example, apart from tax calculation and revenue tracking they might offer the chatting feature.
The problem here is that, in most cases, paying for certain features only isn’t an option. Thus, you have to purchase a whole set of them — regardless whether you’ll use it or not.
Plus, having excessive features might make the software bulky, which can cause convenience damage.
Custom accounting software development implies the maximum customization. So, if you’d like to have a solution that’s fully tailored to your use case, you should consider developing a custom one.
On the other hand, software providers may not have some specific features. It can be some industry-specific taxes, animated notifications, or 3rd-party integrations.
So, if you think you might need uncommon features, custom accounting software might be more suitable.
Case # 2: 3rd-Party Integrations
It often happens that companies use third-party integration for emailing, IP telephony, as a CRM system, etc. But ready-to-use software options rarely offer integrating them into their service — they either have a predetermined set of APIs/SDKs or don’t offer anything at all.
The thing is that integrating something into a software isn’t just about installing it. To use an API/SDK, you need to modify the code of your product.
That is why 3rd-party providers don’t have such options:
- It takes extra time, but software providers are about giving you a product as quickly as possible.
- It increases costs of the package while their №1 advantage is comparable affordability.
- It takes up additional space in the storage.
With custom accounting software, it’s possible to add any new 3rd-party service, build your current ones into the software, change the service provider, or give up using it at any time.
So, if you’d like to keep using your integrations or add new ones, custom development is a more sustainable option to go for.
Case # 3: Security
When storing accounting information digitally, it’s ideal that you have a great security system. It can have multiple security features as well as be compliant with several regulations.
Yet, when using an out-of-the-box accounting software, you’ll have security features that a provider offers — and it might not be enough. Additionally, they’ll most likely be compliant with necessary certifications only. So, if you need something extra, the chances you’ll get it aren’t high.
What is more, 3rd-party providers normally use shared servers, which means higher data leaks and breaches exposure, more potential bugs, and possible decrease of performance.
We don’t mean that using third-party providers is unsafe at all. Our point here is that the security system and its structure isn’t up to you — you just have to take what is offered if you decide to use it, unless your subscription model implies an opportunity to modify the software. But surely, it’s possible that you’ll find it sufficient.
Yet, with a custom accounting software, you can add any security feature or comply with any regulation. In the next section, we’ll talk about how to ensure high-level security.
Case # 4: Corporate Expense Approval
In most big companies, it’s quite difficult to spend money using a corporate bank account since such expenses should be approved by several employees or departments. This way, approval becomes multi-layered and requires a custom approach.
With out-of-the-box accounting software, it’s quite difficult to find a provider who’ll allow building such a system. On the other hand, custom software doesn’t restrict you in any way when it comes to structuring this process.
So, if you need a corporate expense approval system, consider custom development as a more suitable option.
Case # 5: Diverse Expense Tracking
It can happen that your business requires a complex expense tracking system. For example, you have several branches in different countries and work in the retail industry.
It most likely implies that you work with numerous suppliers and have a multi-layered structure of accounting departments. For this purpose, custom accounting software might be more suitable.
❓ FAQ on Custom Accounting Software Development
When developing an accounting software, a lot of aspects might be confusing, which is why we’ll answer top questions on the development and digital accounting and taxation generally.
How to Integrate Accounting & Tax Management Software with a Current Solution?
Each digital product is a code after all, so, to integrate such functionality into your current software, you need to build it into the code. Yes, it is possible in many cases, but the question here would be rather if it’s worth it. Let us explain.
Firstly, to be able to unify new and old functionality, they should be written using the same framework, or at least in the same programming language. Otherwise, they won’t be compatible in most cases.
Plus, it really depends on what type of product you currently have. For example, if you have an app but want to build a web dashboard, your development team’s not likely to reuse the app’s code.
Moreover, the current product might not be developed in a way that you find fuctional enough. If you want to have a well-developed accounting software but you’re not sure that your CRM is such, then you could either develop the software separately. Or consider rebuilding the current product to meet your needs.
In case everything is perfectly fine with compatibility and you’re satisfied with the current product’s quality, it won’t be a problem for an experienced development team to integrate the software with it.
To sum up, there are 3 ways of performing the integration:
- Rewriting the code from scratch.
- Modifying the current product’s code for it to be more suitable for your use case and adding accounting functionality.
- Taking a part of the existing code and integrating it into the new software. It’s similar to the second one but will change your development team’s approach.
For more information on your use case specifically, talk about it to your development team or simply contact us!
Where and How to Store Digital Accounting Data?
To begin with, the data has to be stored on a certain server. Most companies with software use different types of cloud servers, which we also recommend.
Cloud storages are normally based on a subscription model where you pay a fixed price once in a month/6months/year. Or storage providers can also use the pay-as-you-use model, which implies that you pay for an amount of storage that you used during a certain period of time — no more, no less.
It’s a convenient option since:
- You can access the data storage from anywhere and any device with an internet connection.
- The subscription price often includes additional costs like maintenance.
- It’s easy to store as much data as you need, so there are practically no limits.
Unfortunately, cloud storages have higher exposure to breaches and leaks because of its accessibility over the internet. But good news is that it’s highly secure with the right approach to storing the data.
First of all, a limited number of people should have access to it. And those with the access should have it to an extent that’s enough for them to perform their duties. Additionally, you can set up different access levels instead of defining them for each employee separately.
You should also enable data encryption. Currently, many companies use Advanced Encryption Protocol (AES). It has 3 layers, the data is encrypted and decrypted 1 time on each of them.
How to Enable High-Level Accounting Software Security?
One of the key benefits of custom accounting software development is an ability to enable an excellent security system. There are three main options you can combine: multi-factor authentication, monitoring, and security testing. Let’s review them.
# 1: Multi-Factor Authentication
Multi-factor authentication is intended to protect access to the software itself. You can add:
- A password system that can include complex login passwords, one-time passcode generation that’s connected to a certain email/phone number.
- Biometric authentication like fingerprinting, face ID, voice recognition, etc. For web products, it’s harder to enable such features, so, you should simply talk to your development team — they’ll offer you a solution or an alternative.
- Personal security questions.
- Verification over the phone/email.
- Security tokens — small hardware (physical) devices with each owner’s personal information. Access is given through scanning.
- Digital signatures & many others.
Surely, you can combine features to create a multi-layered security system.
# 2: Monitoring & Compliance Auditing
It’s essential to enable regular monitoring — register log-ins and spot the new ones. Sensitive data might require extra attention so you can keep track of actions performed on such information.
So, just in case there’s a data leak or breach in the system, you’ll be able to easily track where it comes from. Additionally, you’ll be able to find out what the primary cause is and eliminate it or strengthen the weak point.
Auditing is another great way to prevent data leaks and breaches. You can check if there are any updates in regulations that you comply with or technologies that your security system consists of.
Plus, you can create a set of criteria to evaluate your company’s security system from time to time.
# 3: Security Testing
So, when writing or updating the code, it’s important to perform testing so there are no bugs or breaches. To automate some parts of this process, you can enable Continuous Integration and Continuous Delivery (CI/CD).
Continuous Integration can enable regular bugs and breaches scanning of each new code version. All testing is performed not on the actual code but in the library where the code is replicated.
Once an issue is spotted, you’ll get informed so your development team could fix the problem. Once you’re done with this stage, Continuous Delivery takes up. With the help of CD, you can automatically apply fixes to the code.
✅ Accounting Software Features
In this section, we’re going to review top features that you might need in your software.
# 1: Income and Expenses Tracking 🔄
The software can register each operation and activity related to money turnover so you can access this information later. For higher convenience, you can create a filtering system. As for expenses, it can include filters by:
- Category (inventory, business trips, employee social packages, etc.).
- Bank account (if there are several).
- Amount of money spent ($0-$500, $500-$1000, etc.).
- Destination. If you buy food for the office from the same supplier, for example, you can create a dedicated filter.
As for income filtering, it’s pretty similar. You can have filters by categories (deposit, investment, income from project, etc.), date, amount of money, bank account, destination, etc.
Apart from these features, you can also enable multi-currency transactions. With the help of banking services integration, you can add automatic categorization of your money turnover. Plus, transactions from and to your banking account can also be tracked automatically.
# 2: Reporting 📈
This feature allows you to build and access any data by using report templates. What’s great about it is that you don’t have to wait for a certain date for a report to be ready since it’s formed automatically. This way, you can have an overview of a general situation or a specific KPI at any time.
For a quick access to previous reports, you can also add a filtering system or enable marking files as important, for example.
Plus, it’s essential to make reporting forms customizable. So, it can be adding or removing tabs and columns, adding and changing formulas, leaving comments next to reporting files, comparing actual and budgeted numbers, etc.
You can also add budgetary planning and analysis so that the software can forecast it and advise you on where to make improvements. Additionally, you should enable sharing and exporting features so as to easily share the data.
Another great idea might be to add the block/unblock feature. For instance, there’s a report that you want to archive and make editing impossible unless you unblock the report.
Moreover, you can allow your employees to send screenshots and receipts of their expenses that you cover. You can dedicate a separate screen to each employee so that all information is well-structured and easily accessible.
# 3: Payments & Invoicing 💲
Firstly, you can create an invoice template and simply fill out the blanks like amount of money, name, etc. For a more convenient payment process for both parties, you should add several payment options like debit and credit card, Apple & Google Pay, PayPal, and others.
You can also automate invoicing through emailing, for instance. Once the invoice is formed, you can set the date and time when it’ll be sent. It might be a good idea to add a “Pay now” button so clients could pay once they receive an invoice.
If your business model includes requesting a certain % of the fee as a deposit before you actually start working on the project, you can enable such a feature within your software as well.
So that all financial information could be centralized in your software, you can connect it with your bank accounts. This way, you can be a sender of payments as well. You could set up automatic payments for utilities, food supplies, payroll, etc.
You can additionally build in a calendar so that it’s easy for you to overview all important payment dates and deadlines.
Such features can be integrated with the help of BaaS (Banking-as-a-Service) providers like Solarisbank, Treezor, Railsbank, etc. Basically, banks and fintech companies provide other companies with their financial infrastructure.
If you’d like to learn about available options more, what exactly BaaS can offer, and how to choose the most suitable provider, you can check out our article on this topic:
# 4: Inventory & Items Tracking 📚
With inventories like current assets, capital assets, etc., being a huge part of accounting, your dedicated software should have a separate feature for keeping track of it.
First, it can include tracking of stock items like the quantity of each one, its location (if you have several warehouses), etc.
Plus, you can also keep a record of sales within the inventory tracking, It doesn't necessarily have to be physical items — whatever it is you offer to your customers can be recorded. You can also keep track of your office supplies, short-term equipment, and other capital assets.
# 5: Analytics & Infographics 📊
To deeply understand your company’s performance, determine strong and weak points, analyze customer behaviour, and generally improve your business strategies, you can enable the analytical and infographic features.
Firstly, this feature should be able to collect and analyze data on a specific metric like “item A sales”, “Food Expenses-June”, etc. So that analytical reports would be more efficient, it’s reasonable to make them customizable — different departments and employees need different data.
One of the most useful things of the feature is visualizing the data with the help of infographics. It can include various types of graphs, charts, and tables. Such visual content allows you to track dynamics and detect repetitive patterns to enable forecasting and improve the accuracy of risk management.
⚙️ Top Features for a Tax Management Flow
Even though taxation is a part of accounting, we decided to dedicate a separate section to this flow since it has quite a lot of details to discuss.
Tax Calculation & Payment 💳
One of the most important features here is calculation of taxes. Custom development is great in this case since it provides a fully personalized solution. Each country or even region within the country has different taxes, their types, requirements for tax reports, etc. Plus, there can be industry-specific taxes.
So, it can include:
- Tax report templates.
- Tax calculator.
- “Calculate New” and “Withdraw” buttons.
- Opportunity to fill in numbers both automatically and manually.
- Payment date set-up & others.
If you decide that you want to connect your bank account to the software, you can enable automatic tax payments right in the software. You can also allow choosing the bank account from which the payment will be performed.
If you need to send a payment confirmation to your accountant, financial department, or authorities, you can set up automatic forwarding.
Documentation Management & Compliance 📑
Accounting software is really helpful when it comes to managing tax digital documentation. The functionality can include:
- Tax report templates.
- Tax returns forms.
- File uploading to scan the documents and store them digitally.
- Filtering system to look for archived tax reports by date, type of tax.
- Creating new documents and deleting old ones & others.
You can also allow creating new tabs and multi-layered folders for customizable document system’s structure.
It’s also important to make sure that all documents and forms are according to standards. For example, your software should be able to generate VAT report forms according to requirements. So, whatever it is you need to be compliant with, take that into account in advance and make the forms customizable as well.
🤖 Tech Stack for Accounting Software
To add certain features in your accounting software, you can use APIs and SDKs:
- For calendar integration, you can use Google Calendar, Zoho, or Nylas.
- Payment systems or BaaS services can be integrated by using Braintree, Stripe, Solarisbank. If you’d like to learn more about integration payment systems, feel free to read our article on this topic.
- As for desktop notifications, you can use iZooto or Sendpulse.
- If you need to get feedback from your customers, consider using Twilio or Lumoa.
💰 What Affects Accounting Software Development Costs
Even though it’s quite hard to predict the costs since each case is unique, there’s a set of aspects that you need to take into account when planning your budget:
- Number and complexity of features.
- 3rd-party integrations.
- An hourly rate of your development team.
As you can see, developing an accounting software for your company might be a game-changer in many aspects. It includes reducing time needed for keeping a track of money turnover, digitizing document management, automating tax forms fillup and payment, etc.
Let’s summarize what steps you should take to build an accounting software:
- Deciding whether you need a custom development or out-of-the-box solution would be enough.
- Think about what current products you don’t want to give up using.
- Choose features that you want to have in your software.
- Think about how you’ll enable high-level security.
- Find a Tech Partner and start the development!
If you need any help with the development or have some questions, feel free to contact us. We’d be happy to help you!