Our Guide to Small Business Accounting Software
Every dollar counts in business, especially for smaller companies. Cutting costs helps small
businesses stay ahead of the competition, and lowering expenses increases profits, so your business can rely on financial stability.
Essentially, playing it smart with money minimizes risks and sets the stage for long-term growth — and small business accounting software can help you accomplish that.
Does small business accounting software help to reduce costs?
Small business accounting software can help reduce costs in several ways.
Accounting software typically involves some degree of automation, especially for repetitive tasks like data entry, invoicing, and bill payments. This reduces the need for manual human labor, saving time and labor costs.
Automating calculations and reducing human input also minimizes human error, which improves accuracy and helps avoid costly mistakes. This also saves time through streamlining, giving everyone working within a small business something valuable: more time to focus on other aspects of the company. In addition, accounting software gives you financial insights and reports, helping identify inefficiency or excessive spending areas.
You will also spend less on physical storage space and supplies for paperwork with digitized records and documents. When it comes to tax time, your software can keep track of tax obligations and deadlines, reducing the risk of penalties and fines due to missed payments or incorrect tax filings.
What is the current landscape for small business accounting software?
Today’s small business accounting software uses cloud-based solutions, automation, and AI
integration. Software providers offer seamless integrations with other business tools, user-friendly interfaces, and scalable options. Mobile apps are also necessary since more and more companies want to access their accounting data when on the go.
What are the benefits of small businesses using accounting software?
Some small businesses may believe they don’t need accounting software — after all, they are small. But even the smallest companies can benefit from accounting software.
Time-saving automation features, real-time financial insights, and tax compliance are just some of the advantages to be enjoyed. In addition, many cloud-based accounting solutions have robust security measures, usually surpassing the security of manual bookkeeping or local spreadsheets and ensuring the safety of sensitive financial data.
What are the benefits of cloud-based software?
Cloud-based accounting software offers easy accessibility from anywhere with an internet connection, allowing business owners, partner accountants, and anyone else who needs access to financial data.
Cloud-based solutions also typically offer cost-effective subscription models, eliminating the need for costly hardware and maintenance. Data security is prioritized, so sensitive financial information is protected.
For example, at EvolveCFO, we see the value of cloud-based software being accessible from anywhere on your device. We manage all our bookkeeping in Xero and QBO so you can get the information you need whenever and wherever you may be.
How can this software help reduce costs for small businesses?
Can software automate mundane tasks to free up resources?
Yes, accounting software can automate mundane tasks to free up resources for small businesses!
It can automate repetitive tasks like data entry, invoicing, bill payments, and bank reconciliations. This saves time and increases overall productivity and efficiency, ultimately leading to cost savings and improved business performance.
What is the cost/benefit of investing in accounting software?
The main cost of accounting software is the initial investment: an upfront fee for purchasing the software or subscribing to a cloud-based service. That cost can vary based on the software and plan that is purchased, features, scalability, and licensing model. Depending on the software, ongoing technical support and upgrade costs may also exist.
Training employees to use the software effectively and integrating it into existing workflows may require additional cost and time. The benefits are many, especially cost and labor savings. Accounting software automates tasks, minimizes human errors, streamlines financial processes, and centralizes data leading to improved efficiency and productivity, enhancing overall business performance.
Real-time financial data and reporting provide valuable insights for better decision-making and cost control, and using software and its insights can optimize financial processes and reduce errors. Accounting software can help with tax compliance, reducing the risk of penalties and late fees and ensuring accurate financial records.
In most cases, the benefits far outweigh the costs, especially when you combine online bookkeeping with management by real accountants.
Can software create detailed reports with accurate data for tax/audits?
Accounting software is designed to create detailed reports with accurate data that can be used for tax preparation and audits. The software automates organizing and calculating financial data, reducing the risk of errors. It can typically generate various reports, including income statements, balance sheets, cash flow statements, and transaction summaries.
With accurate and up-to-date financial data in accounting software, your business can easily access the necessary information required for tax filing, ensuring compliance with tax regulations and minimizing the chances of errors or omissions in tax returns.
You can, of course, work with an accountant for an extra layer of oversight. The detailed reports generated by the accounting software provide a comprehensive overview of your business’s financial transactions, making it easier to review and verify the record’s accuracy.
Regularly reviewing and reconciling financial data can further enhance the accuracy and reliability of the reports generated by the software.
What are some examples of popular accounting software solutions?
QuickBooks and QuickBooksOnline (QBO) are the most well-known accounting software
Solutions:
- Quickbooks provides features like invoicing, expense tracking, tax preparation, and financial reporting.
- Xero is a cloud-based accounting software designed for small businesses. It offers features like bank reconciliation, invoicing, expense tracking, payroll, and integration with many third-party apps.
- Wave is free accounting software popular among small businesses and freelancers, with simple, basic accounting features like invoicing, expense tracking, and financial reporting.
- Other popular accounting software solutions include FreshBooks, Zoho Books, Sage Business Cloud Accounting, and Kashoo.
How to identify which ones are best for your business needs
Each accounting software solution has different features, usability, and other advantages and disadvantages based on your business and its needs.
List the specific accounting tasks you need the software to handle, like invoicing, expense tracking, tax management, payroll, reporting, or any industry-specific needs.
Even for a small business, ensure the software can scale as your business grows. It should accommodate increased transactions and additional users without compromising performance.
Look for user-friendly software that is easy to navigate and requires minimal training for you and your team to start using it effectively — remember, training adds cost, so Look for software providers that offer reliable customer support and training resources to help you get the most out of the software.
If you use other business tools like CRM or payment gateways, consider software that integrates seamlessly with these systems to streamline workflows.
Decide whether you prefer cloud-based software, which offers accessibility and automatic updates, or on-premises software if you need more control over your data. For most small businesses, cloud-based software is ideal and suits mobile accessibility perfectly.
Compare pricing plans to see if the software fits within your budget. Consider both the upfront costs and ongoing subscription or support fees.
Read user reviews and look for recommendations from other businesses in your industry to gain insights into the pros and cons of different software options based on real user experience.
You can also take advantage of free trials or demos offered by software providers to test the software’s features and user experience before committing to a purchase.
Tips to make the most out of small business accounting software
First and foremost, take the time to familiarize yourself and your team with all the features and functionalities of your accounting software. Understand how each feature can benefit your business and how to use them effectively.
Accurate data is also critical, so consistently enter financial data into the software to maintain up-to-date records. Regularly reconcile bank accounts and ensure all transactions are recorded promptly. An accountant can help with this!
Take advantage of all automation features, and if applicable, integrate the accounting software with your other business tools like CRM, payment gateways, and e-commerce platforms. This will ensure seamless data flow and improve overall efficiency.
If the software is cloud-based, use cloud storage to store financial documents and records securely. Implement a regular data backup schedule to safeguard against data loss, whether using cloud-based or on-premises software.
Keep up-to-date with tax regulations and ensure the software is configured to comply with the latest tax laws and analyze financial data and reports generated by the software regularly — again, an area where an accountant can help!
Finally, contact customer support or attend training sessions provided by the software provider to ensure you can fully leverage the software’s capabilities and address any challenges.
What is the importance of data security?
Data security is critically important for small businesses using accounting software.
Strong data security practices reduce the risk of financial fraud, ensuring that only authorized personnel can access and manipulate financial data. Accounting software contains sensitive financial information, including transactions, bank details, and payroll data, that must be safeguarded from unauthorized access or data breaches.
Small businesses must comply with data protection laws and industry regulations like their larger counterparts or face potential legal penalties and reputational damage. Cyberattacks and data breaches can also have severe consequences and disrupt business operations, leading to downtime and lost productivity.
Ultimately, data security measures help mitigate the financial impact of data breaches, including expenses related to data recovery, legal fees, and potential fines.
Future developments in small business accounting software
Emerging trends in accounting technology
Technology is rapidly evolving in all industries, including accounting.
Artificial intelligence (AI) powered accounting solutions are becoming more common, and machine learning algorithms are being utilized in auditing processes to identify patterns, anomalies, and potential risks. Predictive capabilities assist in better financial forecasting, which makes businesses of all sizes more profitable.
As the adoption of cryptocurrencies grows, accounting technology is adapting to handle digital assets accounting and tax implications.
And, with data security at the forefront of everyone’s minds, accounting technologies are implementing increasingly advanced encryption methods, multi-factor authentication, and secure cloud storage to protect sensitive information.
Benefits and risks of embracing new technologies
These new technologies can increase efficiency and productivity, enhance customer experience, save money, and give your business a competitive advantage — essentially, everything accounting software can already do, but better.
That comes at the risk of potential security or privacy concerns if using untested, brand new tech, implementation challenges as you integrate new technology into existing infrastructure and staff knowledge, and, as always, the need to ensure regulatory and legal compliance with any technology tour company embraces.
What are the security measures for protecting your data?
Protecting your data, whether using new technology or something tried and true, comes down to a multilayered approach. You need strong passwords, employee training, monitoring, and logging systems, access control, and security audits of your systems and physical spaces at the workplace level.
Encryption, firewalls, regular updates, software patch management, and vendor security assurances are also crucial.
While preventative steps are vital, you also need a risk assessment and incident response plan to be prepared for a data breach or security incident so your company can respond promptly and effectively.
While this all sounds like a lot of effort, it needn’t be if you outsource your accounting needs to a trusted partner such as EvolveCFO. Our virtual accountants and bookkeepers only use the most up-to-date, robust, and secure systems to keep your data safe and your accounting tasks performing perfectly.
We’re highly cost-effective too. Why not get in touch with a member of our team and have a chat about how our accounting services and cloud-based software can benefit your business?