What is the cost of developing a custom accounting software?

­­­­In today’s environment and fast-paced business dynamics, generic and age-old accounting solutions aren’t built to meet the unique needs of organizations. This is where custom accounting software comes into play. These custom software solutions offer more advanced features and solutions that cater to the specific needs of individual businesses. Furthermore, features like scalability and integration options are also included in these bespoke accounting software solutions, which aren’t easily found in older off-the-shelf software. But as with any decision taken by a business, the question arises: What is the cost of developing custom accounting software?

This comprehensive guide will offer information on accounting software development. It will also cover everything you need to know, from elements that influence the cost of custom accounting software to practical tips for managing expenses. It’s necessary to be aware of the costs associated with custom accounting software, as this will help in making informed decisions. 

Cost of custom accounting software

The cost of custom and bespoke accounting software varies depending on different technical and business factors. This cost can range from $20,000 for basic software to over $250,000 for software with a variety of features catered to the needs of enterprises. Different factors, needs, and organizational sizes influence the size, duration, and complexity of software development. Some of the primary factors that determine cost include:

Complexity and scope of features

Basic accounting software that only offers simple functions, such as invoicing and ledgers, doesn’t cost a lot and is generally affordable. They are significantly cheaper than systems that offer more complex features, such as advanced financial reporting and automated tax calculations.

Number of Users

The number of users supported by a system and the traffic it can manage also affect its cost. This is because the backend architecture must be more complex to support a larger number of users and differentiate between various access levels (for example, admins, accountants, auditors, etc.). The development of such a complex system takes more of both development and testing.

Integration Requirements

It can take extra time for accounting software to integrate with platforms like CRMs, ERPs, and payroll systems. This can take weeks and elongate the development timeline, consequently impacting the total cost.

Geographical Location

There are varying differences in labor costs worldwide due to different socioeconomic and political factors. Development teams based in North America or Western Europe will typically charge more than, if not more capable, development teams based in South Asia or Eastern Europe.

For instance, small businesses may only require necessities, such as invoicing, simple ledger entries, and payment tracking. This would keep their costs between the $20,000-$50,000 range. Contrastingly, multinational organizations, due to their multifaceted nature, require features such as multi-currency support, real-time analytics, and integration with legacy systems, among others. All of these features and solutions could easily see the costs exceeding $250,000.

Key features that impact development cost

Development cost is affected by both the number of features and the complexity of those features. Some of the common key features that influence custom accounting software costs are as follows:

User Management

A robust user management system in place enables the creation and assignment of multiple roles and permissions. Furthermore, this allows for proper audit trails. For instance, a manager of an organization may have full permission to view all reports, while a junior accountant may only be allowed to input data into certain reports. Creating these access hierarchies and then ensuring security adds to the complexity of the whole process.

Invoicing and Billing

Most organizations utilize complex invoicing systems that extend beyond basic templates. Such systems support automated tax calculations, discount rules, payment terms, and overdue tracking, among other features. This process can become more complex and tedious if integration with digital wallets or banking APIs is required.

Payroll Processing

The payroll system of any organization must be set up to comply with regional labor laws, tax codes, and benefits management. Payroll systems are usually integrated with timesheet systems and HR tools, making their development a multi-faceted effort.

Tax Management

Tax is a very sophisticated subject, and so is its management. Real-time tax calculation, support with filing, and updates to the regulatory system often require regular maintenance. This process becomes even more complicated for organizations operating in multiple regions. Such organizations require localization, including the implementation of GST, VAT, sales tax, and withholding tax calculations. Such factors significantly impact the scope of development.

Financial Reporting

When you think of financial statements, balance sheets, and P&L statements come to mind, but these are just the beginning. Reports such as comparative analytics, year-by-year performance tracking, and custom dashboards require a robust backend logic system and data visualization tools.

Cloud Integration

Most organizations nowadays store their data in cloud systems, which enable accessibility from any device and ensure that data is properly and safely backed up. Building a seamless mobile experience that mirrors web functions introduces another layer of development.

Third-Party Integrations

Accounting software must be integrated with various databases, such as CRMs (e.g., Salesforce) or ERP systems (like SAP). There are certain activities associated with each integration, like API constraints, security checks, and data synchronization logic. Each of these can heavily influence the timeline and the cost of building the software. 

Factors affecting the cost of custom accounting software

Several variables, beyond just features, can potentially affect the cost of custom accounting software. Understanding these can help you budget more accurately and consequently avoid any unexpected expenditures during development.

Development Team Location

There is a difference between labor rates based on geographical location. Hiring a development team from different regions will incur different costs. Hiring from North America (US, Canada) can cost between $100 and $250 per hour. In Western Europe, the development team’s labor costs can range from $80 to $150 per hour. The same work in Eastern Europe will cost between $40 and $100 per hour. Labor rates are the lowest in South Asia, and so will cost around $20-$60/hour. It’s worth noting that while lower hourly rates can help save money, it’s also necessary to consider other factors, such as quality, communication skills, and time zone compatibility. Generally, development teams from overseas offer an ideal balance between cost and quality.

Technology Stack

A project’s cost is also affected by the tools and framework used in its development. For example, tools and frameworks such as Node.js, React, Python, .NET, or microservices can impact both the speed of the project and hiring costs. Similarly, employing newer, cutting-edge, or niche technologies requires their specialized developers, which increases hourly rates and development time.

Project Duration

It is known that longer projects naturally incur more costs. A simple MVP (Minimum Viable Product) may take 3-4 months to build, whereas a complete and robust platform with analytics and integrations could take 8-12 months to develop. The duration of a project also depends on other factors, such as the size of the team working on it, the scope of its features, its testing phases, and feedback cycles.

Design Complexity

A well-designed system is necessary, as a polished interface is easy on the eyes and boosts user satisfaction. Although this does mean it also requires a lot of design effort. Custom dashboards, dynamic features, and layouts increase the cost and time required to complete the project. Additionally, A/B testing and usage testing further add to the time.

Compliance and Security

Since accounting firms mostly handle sensitive financial and non-financial data, security and compliance are non-negotiable. This involves implementing encryption protocols (e.g., SSL, AES) alongside data control regulations, access controls, and audit logs. Implementing and then maintaining these features requires careful planning, legal reviews, and additional work, which raises development costs.

Customization

The more customized the software is, the more development and testing it requires. This can include various features, such as business-specific workflows, multi-entity accounting, and custom reporting tools. Furthermore, any plans for scalability in the future would increase the initial investment as more advanced architecture would need to be developed.

Cost breakdown of developing custom accounting software

Let’s break down where money typically goes in the software development process. The initial stage, which is generally requirements analysis, typically costs between $2,000 and $10,000. This stage typically involves detailed planning and discussion. UI/UX design cost ranges from $5,000 to $20,000, and it’s an essential stage in developing an intuitive and user-friendly interface. Backend development is one of the core processes as it powers the application’s core logic, APIs, and Third-Party integrations. This stage incurs the most substantial cost, ranging from $10,000 to $100,000.
On the other hand, frontend development, which is responsible for the user interface, costs between $8,000 to $50,000. The software also features APIs and third-party integrations, which enable seamless connections with external tools such as CRM systems. The costs associated with this generally fall in the $5,000 to $30,000 range.
Quality Assurance is a necessary stage, as it involves rigorous testing to ensure the software is bug-free and secure. The costs associated with this stage range from $3,000 to $15,000. Deployment costs, which cover server setup and initial launch, are relatively low and range from $1,000 to $5,000. It is also necessary to ensure that the team responsible for using the software knows how to do so efficiently. This process of documentation and training can range from $1,000 to $3,000. Overall, the total costs associated with the process range from $38,000 to $243,000, depending on the software’s complexity and scale.

Ongoing maintenance and support costs

The development of any software is just the beginning of the process. Regular maintenance is necessary to ensure operations run smoothly. The costs associated with this can be analyzed as follows.

The most recurring costs are associated with bug fixes and regular updates, which range from $5,000 to $15,000 per year, depending on the complexity of the software. Another recurring expense is the cost associated with server hosting, which varies depending on the server’s traffic and requirements. Technical support is crucial for troubleshooting issues that arise and for providing assistance to users. Additionally, annual or biannual audits of the system are necessary to ensure data protection and compliance with relevant regulations. The cost of a single audit can range from $1,000 to $5,000. As a general rule of thumb, maintenance costs are typically 15-25% of the initial development cost, and should therefore be allocated accordingly.

Tips to reduce custom accounting software development cost

There are several ways to cut costs while developing software without compromising quality.

• Requirements should be defined clearly and early in the process so that only essential functions are added, and the scope of the development isn’t ambiguous.
• Technology stacks should be chosen so that they are widely supported and also cost-effective.
• A minimum viable product (MVP) should be developed first, with only the core features, and then advanced capabilities can be added afterward.
• Development time and cost of the project can be reduced by incorporating open-source tools into the project.
• Labor costs can be reduced by utilizing experienced rates in regions like South Asia, where rates are lower without compromising quality.

Collaborating with Coding Crafts for your custom accounting software

Coding Crafts is a trusted name in software development and has extensive experience in building secure, scalable, and compliant platforms tailored to businesses’ needs. We ensure transparency, timely delivery, and cost-effective solutions. Contact us today and let us transform your accounting operations with software tailored to your exact needs.