It’s pretty common for entrepreneurs to put themselves in charge of everything for their small business, including the books. That scenario can present problems because small business owners may be unfamiliar with basic accounting principles.
They may think that keeping books is as simple as “cash in, cash out,” and to some degree they are correct. That’s known as cash basis accounting, and it’s a recording practice. You keep track of what you spend, when you spend it, and you keep track of what comes in, when it comes in.
Unfortunately, this “simple” task often gets relegated to the bottom of that large pile of everything to do. Revenue and expenses aren’t recorded regularly, but instead are done when the owner can get around to them. Then comes the domino effect: bounced checks; late payments; cash flow problems.
More Effective Bookkeeping
This simple task also may be less than a business requires.
Effective bookkeeping is the process of maintaining your financial records, including revenue, expenses, profit and loss. It can give a snapshot in time of how your business is doing or long-range picture that will help you plan for your future. Effective bookkeeping may go a few steps beyond cash basis accounting by including monthly expenses and outstanding bills along with day-to-day items, and separating out things such as sales tax. It’s not a task to be left solely to an Excel spreadsheet.
So, what does a small business need?
Accounting software may be the answer, and there are many choices out there. If you are like most small business owners, you want to keep costs down, so you want a product that is reasonably priced. You also should consider what your business needs the software to do.
- Do you need it to track income?
- Do you need it to generate invoices?
- Is it something you will rely on at tax time?
Software that Meets Your Needs
You should consider software that offers many bookkeeping benefits, including:
- Double-entry accounting. With double entry accounting, every debit has an equal and opposite credit. There’s no guesswork to tracking your business’s income. The result is an accurate picture of your profits and loss. You will also be better able to manage your inventory and control your cash flow.
- Instant invoices. When you can create instant invoices, your billing no longer is slow or delayed. Make sure the software also records payments.
- Cloud-based accounting. Everywhere you go nowadays, the Cloud is part of the conversation. Cloud-based software gives you access to your books on your smartphone, your tablet, at your home computer. If you can get onto the internet, you can work your books.
- Ease of use. You have a business to run, you need software that is easy to use and doesn’t come with a steep learning curve. Choose a product that is intuitive and is backed up with adequate support, such as training videos or a support staff you can reach by phone or email.
- Free trial. This an investment in your business, so you want to make the right choice. Give the software a trial run before you buy, and make sure you find a product that gives you total access to its tools.