After being in business for a year or two, you should be on top of your company’s finances. Profits may have already replaced projections. Income and expense numbers are real, and you have enough supporting data to map your next moves.
So how is your accounting system performing? Is it robust enough to manage your day-to-day bookkeeping tasks, or does it need more horsepower? Manual entry and Excel spreadsheets may have suited your startup phase, and provided the essentials to create balance sheets and cash flow statements. But the reasons it’s probably time to upgrade to an automated accounting system are as varied as each owner’s business needs. Here are a few things to consider.
Why Change Your Accounting System?
Two words: time and manpower. How much time are you spending on bookkeeping when you could be taking care of the rest of your business? Software that streamlines accounting tasks can add more productive hours to your day.
Let’s say you want to access real-time account information anytime from any device, automatically bill clients by email, keep track of inventory, or generate reports that help you make better business decisions. If your current system hasn’t kept pace with your needs, it’s time to shop for software with more advanced features.
What Can Accounting Software Do That Spreadsheets Can’t?
Automate, automate, automate. Accounting software can quickly and accurately reconcile bank statements, prepare invoices, send invoices online directly to your clients, and monitor accounts receivable and past due accounts receivable. It can track inventory and depreciate fixed assets. Plus, it prepares basic accounting reports (balance sheets, income statements, cash flow statements) on demand, and can save significant time preparing your year-end taxes.
How Much Will It Cost?
Basic accounting software is available for as little as $10 a month. Prices can increase (up to $70 per month) with the number of advanced features, customized services, and additional modules or apps you require. The average accounting program on disc is around $175, and generally lasts three years before an upgrade is necessary, though it may not be as flexible as an online edition that provides automatic upgrades.
When Is It Best To Make The Change?
Generally it’s best to upgrade your accounting in January, presuming that’s the start of your fiscal year. To simplify the process and skip the stress of juggling two systems within the same accounting period, it’s smart to transition to a new program at the end of your fiscal year. Most sole proprietors use the calendar year, since they are required to use the same tax year that they use to file their individual return. (Note: If you’ve already filed a tax return for your business, you have selected a tax year.) A partnership or LLC must generally use the same tax year as the majority of its owners.
What Do You Want Your Accounting System to Do?
As you shop for accounting software that covers the basics, take time to evaluate added features that will support your business as it grows. Do you want it to handle all aspects of payroll (including taxes) and deliver online and mobile credit card processing, for example?
You may want to compare revenue by customer or by project from one period to another and use information from prior-year transactions to generate trend reports that can help you plan for the future. Integrated accounting systems may offer financial forecasting, tax management, and add-ons to customize your system, online access anytime from any device, and extra data security, as needed.
Making the Final Decision
Most important is selecting an automated system that serves your unique needs. Ask for a 30-day trial to take the software for a test run. Is it intuitive and easy to use? Will it improve the way you manage your cash? Does it provide backups so you never lose your data? Can you use your mobile devices to access your financial information? Would you be paying for high-end features that you do not need, or will you grow into them? If possible, it’s also a good idea to test the providers’ customer service before you decide.
The accounting system you choose will not just provide the critical backbone to support your business, it will also create the environment you need to manage and build your company with confidence.