A recent survey revealed that 51% of small businesses with less than 20 employees don’t use accounting or financial management software. Of them, 30% use spreadsheets to manage their books, and 21% don’t use any software at all.
It seems that many small businesses prefer manual methods and spreadsheets as they have worked well for them in the past. Other reasons for not using an accounting software include using an accountant or bookkeeper, not having the budget, or not having the time to learn about a new software solution.
But an accounting software can definitely benefit your business in more ways than one, let’s see how.
Spreadsheets are not enough
Although many businesses are more comfortable with simple spreadsheets, managing your finances with them isn’t the most strategic choice. Budgeting and planning can be done that way, however, manual solutions can be nearly impossible to navigate and hard to organize. And, often, it’s harder for more than one person to keep track of changes at a time. For money, time, and organizational purposes, investing in a cloud-based accounting software is the right choice.
What is cloud-based accounting software?
Cloud-based accounting software allows detailed tracking and instant analysis of financial transactions. Online accounting software stores all of your information securely in the cloud and syncs with your bank, credit card service, and other online financial tools. And because it’s all online, you can easily access your information from anywhere.
Different kinds of accounting software do different things, but most of them–like QuickBooks and Xero–automatically enter, store and analyze financial data. This means closing the books is a much easier process. Accounting software also offers tools like invoicing, payroll, and financial reporting.
Why use accounting software
1. Reduce manual errors
Constantly seeing a book with hundreds of pages and piles of invoices on your desk–that’s what owning a business is all about. Right? Well, you know better than anyone what a nightmare it is to keep everything in order when doing a million things at once. Using accounting software reduces manual errors since it captures information directly from the source (for example your bank account or bill pay tool). It also prevents data loss due to missing documents.
2. Sync data with your bank and other financial tools
When financial data from different sources is captured and displayed in one place, you save time and don’t need to do double the work. Once your bank and credit card accounts have been connected to software like QuickBooks, accounting tasks become much more seamless. Plus, this allows you to detect discrepancies much faster.
Some accounting software, like QuickBooks Online and Xero, sync with online bill pay tools like Melio. This means that all your invoices and bills are synced between the systems, and every payment you make via Melio is automatically updated in your accounting software.
3. Make it easy come tax season
Every business owner’s favorite time of year… tax season. Said no business owner. Ever. Businesses are expected to keep track of all financial transactions that occur throughout the year including all money coming in and out. If it's tracked incorrectly, you can be penalized and at the mercy of the IRS.
Using accounting software ensures that all of your business’ data is captured accurately. So when tax season comes rolling in, you can be sure that all your paperwork is in order. And you’ll also be ready in case of an IRS audit.
4. It’ll save you money in the long run
Accounting software may cost you money, with prices varying depending on your company size and the capabilities you need. But in the long run, avoiding mistakes results in money saved. Having all your financial tools working together will also save you money (as we all know time = money).
5. Involve more people in the task (and free up time for yourself)
When your finances are messy, involving more people to help organize them can complicate things and create more problems. But when you use online accounting software, multiple people can collaborate and do tasks simultaneously. Most accounting software allow you to give specific permissions to users so that you remain in control and the final say stays in your hands.
6. It’s not as complicated as you think
Business owners want to focus on the day-to-day operations of the business itself. No one loves to deal with the finances. However, any successful business owner knows the importance of tracking business transactions, keeping current and accurate customer and vendor info up to date, and staying on top of bills and invoices.
And yes, you’ll need to learn how to use accounting software. But most of them are quite intuitive and you can learn to use them on the go. You can even consult a professional accountant or bookkeeper who will help you choose the right software for you (and help onboard your company).
What to look for in business accounting software
Easy to use dashboard
Using new software is always intimidating but some are more intuitive and user-friendly than others. Many of them offer a demo or free trial period. Try some out to find the best one for you.
Ability to sync with your bill pay solution
To make sure your accounting software is fulfilling its most important task and the data is as accurate as can be, choose one that syncs with the other tools you use. Melio syncs with QuickBooks, Xero, and other top accounting softwares, so be sure to check them out.
Accounting software comes with a price that can start as low as $9 a month and up to a few hundred a month. Before you commit to one software, make sure you do proper research. Hiring an accountant to manage the transition for you is a good idea. Accountants and bookkeepers can usually reduce the subscription fees for you (and do the heavy lifting as well).
With business growth in mind, an accounting system that scales with your business is crucial. Choose accounting solutions that provide automation and enable efficient and reliable processes.
When running a business, oftentimes we tend to rely on our good ol’ ways and if something works, we don’t see any reason to change it. However, when diving deep into the state of your finances, you’ll see that old methods of data tracking are more prone to mistakes. New forms of technology can do wonders for your business and help its financial health and growth. Plus, work together with your other financial tools, like Melio, to make your entire process smoother.
*This blog post is intended for informational purposes only and is not intended as financial advice.
**Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.