What is Accounting Software?
While there are countless variations in features and functionality between different accounting software solutions, all of them have the same basic goal: to record and report a company’s financial transactions. Back in the day, a company’s “books” were literal books. However, with the advent of computers and the creation of accounting software like QuickBooks Online, not only is keeping your books more efficient and accurate, it is easier and more accessible than ever before.
But why even bother with accounting software? You can look at your bank account and tell that more money is coming in than going out, so you’re fine. Or maybe you have more money going out than coming in, so you don’t want to add another expense however minor it might be. I contend that in both situations, using accounting software is not only recommended, it is absolutely vital for the future success of your business or nonprofit. Here are 3 reasons why you should be using accounting software:
Reason 1 – Efficiency
Consider all the time consuming, manual tasks you currently have to do for your business: paying bills, invoicing clients, receiving payments, paying your taxes, etc. All of these tasks can be simplified and improved by using accounting software.
Maybe you had a stack of bills that you would have to constantly flip through, looking at due dates, determining which ones to pay when. With accounting software, you can see at a glance what is due when, plan out your cash flow days and weeks in advance and in some cases pay the bill with the click of a button.
How about invoicing your client and receiving payment from them? Are you writing the services provided or products sold on a piece of paper and mailing to them then waiting to receive a check in the mail? With accounting software, you can not only generate an invoice quickly, you can also immediately email it to them with a payment option where they can pay electronically as soon as they receive it. An entire process that could take up to a month can now be done in a matter of minutes.
Does your process of filing and paying taxes involve giving a box full of receipts to your CPA, waiting for them to work their way through it, dreading what kind of bill you’re going to get? With accounting software, you can provide clean and complete data to your CPA, allowing for much quicker and cheaper filing of your taxes.
This just scratches the surface of the efficiency that accounting software can provide. Just consider any task that is incredibly manual and takes up your time. Odds are there is a software solution for it.
Reason 2 – Compliance
Does the thought of being audited keep you awake at night? You want to do what’s right, but there are so many taxes and regulations out there. Without accounting software, you don’t have a good way to know or prove that you’re compliant.
If you’re selling products, you are most likely having to collect sales tax and then passing it on to your state. With accounting software, you will have a clear record of what was sold, the tax that was collected and the payments that were made to the state. This even goes back to the previously point on efficiency. You could manually track sales tax, but with the right accounting software, it can all be done for you.
You want to pay your fair share of income tax but absolutely no more than is necessary. Accounting software provides the records and backup documentation to support your income tax filings and payments. If the IRS ever comes knocking, you’ll have all the data right there ready to go!
Reason 3 – Clarity
You have a goal of where you want your business to go. However, you’ll never get there if you don’t know where you are currently. Using accounting software is a vital step to determine how your business is doing and what/where to improve. You’ve got to know your numbers!
An accounting software can take all the transactions you’ve recorded and provide countless reports on your income, expenses, assets and liabilities. You can see how your company is doing overall and even dig down into specific products or services. This helps inform you on what areas may be thriving and what areas need to be improved or cut entirely.
The clarity this financial information provides goes beyond guiding you and providing direction, it also has an impact on your stakeholders and financing opportunities. If you’re wanting to grow and need a loan, a bank is most definitely going to want to know how your company is doing and whether it has the ability to repay. What if you’re running a nonprofit? Your focus isn’t going to be on making a profit, but you want your nonprofit to remain viable and continue fulfilling its mission. Potential donors will also want to know how the nonprofit is doing and that it’s managing its finances wisely.
If you’re managing your finances in a notebook or simply piling your receipts in a shoebox, I hope this article helped show you that there is a better way. With the right software, you will save time, improve compliance, get greater clarity on your business and earn countless other benefits.
Don’t wait another day to implement this vital piece of your business. Contact me today to discuss how I can help you implement an accounting software and you’ll be on your way to improving your business and reaping the benefits.