10 Reasons Your Small Business Needs Online Accounting Software
Bookkeeping is an essential task for any business. But some business owners believe that the cost of accounting software outweighs the benefit. Consequently, they keep their books on Excel worksheets or merely hand the relevant paperwork to a bookkeeper at the end of the month or year.
Most accounting solutions are now supplied on a SaaS (software as a service) basis. The software is available online as a cloud-based solution. And instead of a one-off or annual license fee, you pay a monthly fee that includes licensing and support. Prices for online small business accounting solutions start from as little as $20 per month.
So, cloud-based accounting software is inexpensive and convenient, but what does the owner of an SME (small to medium-sized enterprise) gain from using accounting software? Here are ten reasons to use an online accounting solution to maintain your accounting records.
Keeping manual records usually involves a lot of duplication. For example, you might raise a sales invoice in MS Word and then record the invoice in an Excel worksheet. And, if you later need to send the customer a statement, it’s back to Word again, and more typing. Modern accounting packages are fully integrated. So, producing sales invoices also updates the accounts receivable and the general ledger. Furthermore, preformatted invoices and statements can be sent electronically to the customer.
An accounting solution’s accounts payable (AP) functions will enable you to manage payments to suppliers and keep track of who you owe. Run an aged payable’s report, and you will be able to immediately see which vendors need to be paid and which ones can be left for a while. The software will also likely have automated payments enabling either the printing of checks or electronic payments.
The accounts receivable (AR) feature will be an invaluable tool for managing customer accounts. You will be able to raise sales invoices and have customer accounts immediately updated. The Aged AR report will tell which customer accounts are overdue and need chasing. Customer statements can be produced from the system. Some systems also allow the keeping of notes against customers for recording promised payment dates and other credit control information. Furthermore, you will be able to check the status of a customer’s account before agreeing to supply any more products or services.
The AP and AR systems will help you keep on top of what you owe and what you are owed. An accounting package will also have a cashbook function to manage your cash. The cash book feature will likely link to your bank, enabling automatic bank reconciliations and electronic payments. Solutions such as QuickBooks and Xero also have a short-term cash flow forecasting app to help you to manage your cash.
When you need to make business decisions, you need the latest financial figures in front of you. An online accounting software package allows you to update your accounts daily, even when out of the office. Consequently, the latest figures are always on hand. Online systems also allow you to answer queries from customers and vendors fast. But, if you keep manual books, first, you will need to get all the paperwork together and update your various worksheets.
You may employ a bookkeeper to keep your accounts updated as your business grows. But you will still want to know what the state of your finances is and be able to answer queries. Cloud-based accounting software allows you to log in anytime, anywhere, to review your accounts. You can also give your accountant access to the accounts whenever needed.
Accounting packages come with standard reports, such as profit and loss accounts and balance sheets. These reports allow you to get a summarized view of your business finances without the need for any further work or input from a bookkeeper or accountant, saving time and money.
It’s going to be tricky to control costs if you are unaware of how you have already spent. An online accounting system will track expenses by category, general ledger code, cumulatively for the month, and year-to-date. You will also be able to compare actual expenditure to your budget to keep spending on target. Consequently, there will be no nasty surprises when you finally prepare the accounts. Instead, keep the accounting system updated, and you will be able to control costs day-to-day.
Modern small business accounting software is easy to use and requires little or no accounting knowledge. The double entry on transactions such as vendor and customer invoices is completed automatically. The books can’t get out of balance. So, you or an employee can keep your accounts updated, giving you access to the real-time financial information needed to run a successful business.
An accounting package will also help you prepare and file taxes. There are usually features for preparing and filing 1099s, for example. And the software will take care of sales tax, too. When the time comes to file annual taxes, your accounts will be ready-classified, saving your accountant or tax preparer time and saving you money. Should you have an IRS audit, there will also be an audit trail of transactions, with attached documents and scanned images.
Accounting software used to be little more than rudimentary bookkeeping systems. However, modern cloud-based accounting solutions are straightforward for non-accountants to use. They provide many features and benefits for small and medium-sized businesses. And, as they are available as SaaS, they are not overly expensive, and you get support, storage, and software upgrades included in the monthly fee. Most crucially, accounting software will save the owner of a small enterprise time and money and provide all the financial information needed to manage their business.