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Many small business owners grapple with the question of whether or not they need accounting software. Is the cost of purchasing and time spent learning software worth it? The short answer is yes. Whether you are an individual, partnership, or company, there are numerous benefits to using accounting software. We lay out the many benefits in this blog.
The first great benefit to a busy business owner is that accounting software saves you an enormous amount of time and energy. You can spend countless hours manually entering information into spreadsheets, keeping track of invoices and bills, and calculating payroll. This time could be better spent on focusing on the day-to-day running of your business.
With accounting software, you can easily perform all sorts of tasks, including:
Popular accounting software are Xero, MYOB, Reckon, QuickBooks, and Netsuite, but there are also numerous others.
Manual data entry is very susceptible to errors. It is very easy to input a wrong number or date, or to forget an entry altogether. Even minor errors will mean your books won’t balance and you can spend a lot of valuable time trying to figure out where the problem is. It is also very easy to forget when the payment of suppliers is due, or for unpaid invoices to slip by unnoticed. Accounting software stores everything electronically and data is far easier to locate and cross-check.
You can view a quick overview of accounts payable and receivable, or examine finer details of which bills have been paid and which are outstanding. You can group them by date, customer, or other criteria you choose.
Software such as Xero can even automatically chase outstanding payments with automated reminders. You can set how often reminders are sent out, and with a few clicks, you can check if your customer has seen the invoice and if it has been paid. Accounting software can also sync with your bank accounts so you can easily check any transactions owing.
With the click of a button, you can also analyse the state of your business’s finances with real time data. You can generate reports, check balance sheet summaries, and view accounts receivable and payable at any given time to monitor how your business is doing. With MYOB you can create reports that span years, quarters or weeks or specific date ranges so you can spot trends. This information will help you to make informed decisions about any changes you may need to make in the running of your business. Noticing trends early is a great asset.
You can also monitor payroll and tax calculations. Because accounting software is set up to do many of the necessary calculations for you, you can be confident that your financial data will also be much more accurate than if you were using spreadsheets or paper.
Most accounting software is cloud-based, so all of your data is stored in the cloud. Even if you lose a paper invoice, you still have a record of it. Because all the data is stored electronically, you can easily locate invoices and bills with a search function. So, any disputes with suppliers or customers can be settled very quickly and easily.
Businesses with more staff or people in business partnerships can access and share information on the cloud as needed.
Cloud storage is a particularly handy feature for tradies, caterers, landscapers, and others who are mobile and work in multiple locations. You can access client details, expenses, or invoice information from your phone or tablet at any time from any location. You can even send invoices directly from your mobile device. The sooner you can send your invoices, the earlier you will receive payment and the healthier your cash flow will be.
You can grant your accountant or bookkeeper access to your software. This will save you time and costs by reducing the number of appointments you need to make. Your bookkeeper can get what they need quickly and can generate reports directly from the software. High-quality accounting software such as Xero, MYOB, Netsuite etc. also has high levels of security such as two-step authentication. This protects your financial information and is far more secure than sending email attachments.
Having cloud-based accounting software will also save you a lot of time and stress if the ATO decides to audit your business. Accounting software automatically provides an audit trail, leaving everything you need at your fingertips. The software tracks all changes to a client’s books, what the changes were when they were made, and even who made them.
As your business grows, accounting software will easily handle the growing complexity of your business. For example, as you take on more employees, you can utilise more of the payroll features which will keep track of various awards and rates, PAYG and other obligations. You can also handle the increase in bills and invoices easily.
Good accounting software such as Xero and MYOB will even handle multiple currencies. If you have overseas suppliers or customers, your software will save you time by working out exchange rates for you.
Every business must report to the Australian Tax Office (ATO). If you are registered for GST, you will need to submit numerous financial reports and make sure to balance your books correctly.
Not sure if you need to register for GST? We break down who needs to register in our blog post.
Single Touch Payroll (STP) is mandatory for most employers to report tax and super information (for details see the ATO website's STP reporting page). This means, each time you pay an employee, you are required to send the employees' payroll information (such as salaries and wages, PAYG and super) to the ATO. Good accounting software has an STP feature so you will be in compliance.
The ATO also requires businesses to submit a business activity statement (BAS) monthly, quarterly or annually, as well as an annual PAYG withholding report. You must also submit an annual GST return if you are eligible and pay Superannuation Guarantee charges (SGC) if necessary.
Australian taxation is complex and there is no doubt that fulfilling your taxation requirements is far easier with accounting software. Software such as Xero and MYOB link electronically to the ATO. They will automatically update your tax tables. You can create PAYG, GST and BAS statements directly from your software and send them directly to the ATO.
Accounting software will free up your time and also the time your bookkeeper or accountant needs to spend on your books. The software will handle invoicing, billing, accounts, payroll, and much more. You can monitor the health of your business accurately and whenever you want. You will have peace of mind knowing that your books are accurate and you are compliant and up to date with your reporting and taxation obligations.
While you could easily manage a small-scale businesses with spreadsheets, you will eventually have to upgrade your systems if your business does well enough. If the above benefits of cloud accounting software for small businesses haven't convinced you, here are are some prominent signs that indicate that now you need to switch to accounting software.
Growth is an important objective for any organisation, particularly for a small or new business. When a business outpaces its size and scale, it loses focus on essential functions. Spreadsheets are good when starting out. However, as business operations continue, things can easily get out of hand. The best accounting software streamlines your company’s operations. Not only can you keep on top of the cash flow, but you can also prepare for the next tax year in advance. Simple tasks, like cash flow projections, become tedious and time-consuming when you have too much on your plate. Accounting software frees up time that you can use to make sure your company remains successful.
Increasingly large amounts of data are generated in the business. The ability to manage torrents of data is paramount for today’s companies. When you have lots of data, it shouldn’t be in a spreadsheet. Accounting software is better suited to handle and process bulk data. Decision-making becomes easier as you’re able to evaluate the financial position of your organisation quite quickly and access the information right away. Having easy access to reports and dashboards means you can easily create strategies for future growth.
If you use spreadsheets instead of accounting software, you can end up paying a fortune in fines. Because we're all human, you'll probably make mistakes from time to time. Then, you'll have to waste time fixing unnecessary errors. It’s best to avoid such issues, as they can become serious concerns. Automation has reduced the error count to almost zero. Accounting software gives you your time back, so you can focus on creative endeavours and come up with new ideas for your business.
Having real-time access to your data supports smart business decisions and better ensures a healthy cash flow. A few go-to features to be aware of include:
How many people will be using the accounting software? Some apps can be set up for multiple users, while others cannot. Get a quote/estimate for unlimited users. It’s worth asking. Also, if you don’t want to commit to a long-term software solution, you can opt for a monthly subscription plan. However, if you choose an annual subscription plan, you’ll get a significant discount.
Some of the most desired features of accounting software are financial report management, invoice and transaction management, foreign exchange gain and loss calculations, cash flow forecasting, and asset depreciation management. Decide what you want your accounting software to do.
Establishing a business and promoting its growth is a challenging task that needs helping tools in the form of different software and applications. The finance department especially needs efficient accounting softwares to expand the business. You can handle your financial records with spreadsheets for small-scale businesses but cannot always rely on them and this is why it so important to go for accounting software.
There are several accounting software options out there, you just have to pick the right one. Take into account your needs and accounting skills when searching for software that can serve your business's needs. You might want to consider a specialised tool that is designed to help businesses in your niche. For example, there are applications for retailers and restaurants. With cloud computing becoming more prominent in the business landscape, it’s a good idea to look at cloud applications.
Still wrapping your head around accounting software? Here’s a beginners’ guide:
