The importance of accounting software for any business

Key points

• Accounting software is a smart investment for small businesses
• The benefits of accounting software for small business owners
• How it can help you to manage your finances better
• Choosing accounting software that’s right for you

Managing your finances is an important part of running a business. By investing in accounting software that does all the financial heavy lifting, you can save valuable time and sharpen your financial reporting.

Business owners can reap many benefits by using accounting software to manage their finances – and we’re going to explore these benefits and more in this article.

Accounting software has many great benefits for small business owners

There are different types of accounting software packages that business owners can use. But no matter what type of accounting software you decide to use, you’ll likely experience most, if not all of, these great benefits.

• Invoice and quote management is all in the one spot.
• You can track your sales for more accurate sales data.
• Business budgeting is based on more accurate financial data.
• You have access to more accurate data that can give you more confidence in your business.
• Financial reporting is automated and can easily be shared with accountants, banks and other stakeholders.
• Integrated phone or tablet apps, which gives you immediate access to your financial information.
• Saves you time so you can focus on other areas of the business.
• You’ll be ready for tax-time, as you’ll have all the information you need on your accounting software.

There are different reasons why you might invest in accounting software

While it’s ideal if you have business software at the start of your venture as this will lead to more accurate data from day dot, there are other factors that might lead to you investing in accounting software later on.

• Your business is growing and you need to keep better track of and manage your finances.
• You need fast and immediate access to your financial information.
• You want to eliminate repetitive administrative tasks, such as quoting and invoicing.
• You notice more manual errors in your financial data.

Investing in accounting software  in the early stages of your business can be a game changer

Using your accounting program of choice from the start has several advantages for both you and your business, including:

1. Improved view of cash flow

Managing cashflow can often be the most challenging aspect of running a small business. Accounting software can:

• help you manage your cash flow and improve your financial projections
• slow down cash outflow, such as staying on top of recurring late fees and avoiding any late fees
• list all the fixed and variable costs that you anticipate will occur throughout the financial year.

These features can help you identify any potential cash flow reductions during certain periods and enable you to plan accordingly, such as reducing your expenditures where necessary.

2. Provide the financial records lenders may ask for when applying for a loan

Having accounting programs in place can be a business-saver if you need to apply for a loan. A detailed report that outlines your current cash flow and future predictions can show your bank that you’re more than capable of paying back a loan – and in some cases this may be a requirement for the bank (which is another reason to get it set up before you need it).

3. Focus on other areas of your business

If you’re not an accountant by trade then tracking, reviewing and managing your financials can be a real time sponge, especially if you’re manually entering the data into various spreadsheets and trackers. This can eat into the time you could be spending on other areas of your business.

One of the best things that accounting software does is that it can automate and streamline the management of your finances. For example, your accounting software might automatically send out invoice reminders to your clients a week before they’re expected to pay you.

4. Fewer manual errors

Manually entering data can often lead to many mistakes. Whether you accidentally press a 2 instead of a 1, or if you forget to add an extra 0 to a figure, all these honest errors can add up.

Mistakes can affect your business' cash flow reporting and the quality of your data, having a ripple effect in other areas of your business, such as reducing the likelihood of securing a loan or losing partnerships with suppliers.

Some of the great features that most accounting software will have that increase accuracy of financial recording include:

• being able to upload receipts for business purchases to document the amount spent
• linking your bank account to the software, which allows the accounting software to identify discrepancies between your bank account and the receipts.

Things to consider when choosing accounting software that’s right for you

If you’re starting a business, the right accounting software can help you to build a steady financial base and know exactly where your money is going – helping you to manage the day-to-day better. But there are plenty of options to pick from. While it may feel overwhelming to choose, we’ve compiled a quick list of things you may want to consider when choosing accounting software for your business.

• The cost of accounting software can put a lot of small business owners off from investing in it. Take advantage of any free trial period to test different software to find one that’s right for you. As at the date of publication, programs such as Xero, Intuit QuickBooks and MYOB all offer free trials.
• Learn if the software is easy to use, because an experienced bookkeeper might know the product like the back of their hand, but you might not. Play with different features and watch tutorials online to get a feel for the product’s features.
• What features do you need? If you work with clients, then you might need to create, track, and manage your invoices. Or maybe you need to process card payments only. Think about how different accounting features can complement your business and bring everything together.
• Everyone needs access to customer support, even small business owners. Check if support is free or paid and how you can contact them (phone, email, chat) to see if it aligns with how you like to work.

Next steps

If you want to discover how accounting software can help you get a faster business loan, then check out our article so you can get the ball rolling on your business’ finances.