But while doing everything yourself can be a huge amount of work, employing a full-time accountant can get expensive. This is where accounting software can really help.
In this article, we’ll explore why accounting software could make a real difference to your small business.
What does accounting software do?
The exact features may differ from package to package, but, in general, accounting software will help you with the following functions:
Bookkeeping: You need to keep a record of the money that flows in and out of your business. Accounting software can do this for you so you, saving you from doing it manually. You can then automatically generate summaries and reports which can be checked against your bank account and shared with other stakeholders.
Invoicing and billing: many accounting software programs allow you to create and send invoices. This is much quicker than doing it by hand, as the necessary information can be easily duplicated.
You can also keep track of due dates. Some platforms may let you set up automated recurring billing, too, such as a subscription. A good invoicing feature is one of the top things to look out for if your business needs this function.
Payroll: some platforms include payroll functions, so you can manage paying your employees through the software, including generating pay stubs and calculating taxes.
Inventory management: if your business deals with physical products, you may be able to track your inventory using your accounting software. On a basic level, you’ll be able to see what you’re buying and selling, but more sophisticated platforms may also allow you to track when you need to reorder.
Reporting: accounting software will quickly generate reports for you, including profit and loss, balance sheets, finances over time, and cashflow statements.
Taxes: accounting software will help you understand what taxes you need to pay and when, and may even support with filling in the requisite tax forms.
It’s also worth noting that the best accounting software will allow third-party integrations that can unlock a whole host of additional features. For example, you may be able to integrate with your customer relationship management (CRM) tool to link invoices to customer profiles. Or, as you grow, you could integrate your payroll with your HR software to automatically take into account leave payments.
In case you’re still wondering how this could be of benefit to your business, we’ve listed the seven top advantages below:
How accounting software can help small businesses
Saves you time
In a small business, time is money. The more time you need to spend on admin, the less you can apply to creating new products, marketing, or just sorting things out. You can do your accounting manually, but it takes time to create spreadsheets, enter data, and make calculations.
Accounting software can automate lots of processes, like tracking expenditure and creating reports, and can also cut time spent on things like invoicing and billing.
Accurate accounting is so important for your business. Even small errors can snowball into big ones that could have a massive impact. For example, miscalculating the amount of inventory you need to leads to unnecessary costs, while missing your tax deadlines could result in hefty fines.
Using accounting software to do calculations for you reduces the chance of error. You can then easily check against other sources of information, like your bank account, to make sure everything is reconciled. Some accounting software even integrates with your bank accounts so such reconciliation can be done automatically.
Saves you money and manpower
Employing a full-time bookkeeper or accountant can be costly, especially for a small business or startup. With accounting software, you should be able to do most things yourself, saving you the cost of hiring someone—although you may still wish to get an occasional consultation from a human to check you’re on the right track.
Additionally, with software that includes payroll tools, you can reduce the time needed to do basic HR functions. This may mean you can delay hiring a HR manager until you need someone to focus on recruiting and retaining the best staff rather than just administering pay.
One of the trickiest things for a new business owner is navigating the different taxes owed and the forms you need to fill in, not to mention the deadlines. The right accounting software can make all of this much easier.
For example, top cloud-based accounting software like QuickBooks and FreshBooks makes taxes much easier by helping you calculate exactly how much tax you need to pay. It also helps you prepare for tax submissions with all the information you’ll need.
Some software providers, like KPMG Spark, also offer supporting accountants who can doublecheck your compliance, too. This may come with an extra cost, but for peace of mind, could be worth the price.
Enhances customer service
Nothing screams startup like poorly designed invoices coming from the boss’s email address. With software that gives you invoicing functionality, you can send professional-looking invoices, track payments (and in some cases facilitate them electronically), and even chase late payments.
This will give the impression of a smooth-running, well-managed company, even in the early phases. And, you should be able to collect payments more effectively, too—leaving you better off.
With a more organized, efficient company, you will also have more time and attention to give your customers. Every little helps.
Enables secure collaboration
If other team members need to check the finances, using cloud-based software lets them access your data without you needing to email it or store it on insecure drives. This can be especially important if your team works remotely.
Cloud-based accounting software like QuickBooks, KPMG Spark, or FreshBooks, uses encryption to keep your data safe. Most software will also use multi-factor authentication (MFA), which means you need to use at least two login methods for security. Their internal servers are usually protected by firewalls, too. It can also be more cost-effective to use the security features provided by the software company than buy your own.
The other advantage of a cloud-based system is that your team can upload data wherever they are. For example, rather than saving receipts to claim expenses when back in the office, they can do it on the go.
The collaborative nature of cloud-based software makes it easy for everyone to contribute. You can usually adjust permissions for each user if you don’t want your employees to see everything.
Gives real-time insights
The decisions you make as a small business owner can determine the future of your business. Accounting software can quickly generate the reports and charts you need to make those decisions informed and educated.
For example, you can get a detailed view of your inventory usage over time; understand where you could be saving money with a profit and loss chart for each department; and even forecast what might happen in the future.
And, if you need buy-in from your board, team members, or advisors, reports can provide them with the essential knowledge to support you. There’s nothing more powerful than the numbers in black and white.
Although accounting can seem like a daunting part of running a business, with the right accounting software, it doesn’t have to be. Accounting software can save your small business significant time and money, and make sure you are fully compliant with taxes owed and business regulations. Additionally, a cloud-based solution can make your business more collaborative and streamline your interactions with customers.
With so many advantages, it’s definitely worth exploring the different accounting software options to find one that’s right for your business. Although there will be some expense in terms of setup and subscription, in the long run, using accounting software will more than likely pay for itself.