"Creativity is great – but not in accounting." (Charles Scott, Former governor of Kentucky)
When it comes to managing a small business, no tool will be as important as your accounting software. Accounting software allows entrepreneurs to track accounts receivable and accounts payable, have a clear understanding of their profitability, and be prepared for tax season, all of which are essential for keeping cash flows intact and fulfilling obligations.
There are, however, a myriad of accounting software solutions available on the market, most of which have features or services a small company may never use. Investing in the wrong accounting software can be like going to the dealership for a small runabout and coming home with a Ferrari. So where does a small business owner begin and just what should they be looking for when it comes time to buy this vital piece of software?
Being able to track money as it is coming in and going out is essential for small business owners. Not having proper cash flow management and a full understanding of where your money is going makes it hard to analyse where your business can improve and whether it is succeeding. Come tax season compiling your tax returns accurately becomes extremely difficult if you haven't been keeping track of every receipt and invoice.
Fortunately, small business owners can now use out-of-the-box software that is capable of helping them to track these important aspects and ultimately to compile their various tax returns. This software can also help when it comes to invoicing clients, reconciling transactions and generating the reports. But how do you know which software programs are right for your business and which are simply more powerful than you need? And how do you balance the features you want with the budget you have?
Ask yourself these six questions –
- Is it simple to use? – Perhaps this goes without saying, but any software you choose needs to be simple to use. As a new business owner you are likely not an accountant and perhaps you lack basic IT skills (which is not unusual). The more complex the system the more time it will therefore take for you to get used to it, and further, to actually complete the day's necessary tasks. When you are already overloaded with work, the addition of an extra thirty minutes of bookkeeping a day can really add up and put strain on your other deadlines. While reviews can be helpful to narrow down your selection, it is advisable that you try out a few accounting systems before you settle on the one you want to use. Most accounting software is offered on either a free trial or comes with a guided demo to explore the interface that is easily visible before any purchase. If the software you are looking at has neither, it is wise to stay clear. If there is more than one person who will be using the system involve everyone in the decision-making process. Draw up a list of essential, common uses and take the opportunity of the trial to run through generating monthly reports, sending invoices, and running payroll. Simply by testing the software you will quickly discover which is the better fit for you and your team. It's very important that the software is easy enough to use straight from the get-go. Don't make excuses for the program by blaming yourself or promising it will be easier to use once you have "played around a bit."
- How good is the technical support? – In this light, it's also extremely important that whatever software you do go with has helpful and responsive support. If you do ever run into a problem, it can cost a fortune to get an independent expert to help out, so rather go with a program that comes with the support you need from the beginning. Generally, the best way for you to gauge whether their technical support is good is by looking at the reviews. Make sure you read these carefully and look for any issues around a lack of responsiveness from their side. Believe us, if there are problems, they will all be spelt out in the review. The worst time to find out that a company you are about to work with is not helpful is just after the system has collapsed and invoices are waiting to be sent out.
- What features do you need? – Before you
commit to buying any software it is extremely important that you
work out just which features you need, which you don't and
which may be nice to have. What do you need the accounting software
to do? Must it be able to track accounts receivable and payable?
What kind of reports do you need to generate? Do you need it to
track inventory? Do you need it to include ancillary services, such
as time tracking, project management and payroll? Determining these
aspects is important as every feature you add will likely also add
to the cost and you don't want to be paying for features you
really don't need. There are other features to consider too
that have little to do with the actual accounting functionality of
the system. There are:
- Integration: How easily does this software integrate with your other systems. It's no good buying an accounting program that only runs on Apple when you are a Windows Office user. Beyond the obvious you should ask, "Does this software integrate with your shipping system, and sales platform?" Choosing software that integrates across the board could save hundreds of hours of troubleshooting in the future.
- User access: Just how many people can be authorised to use this piece of accounting software? Can you set different levels of visibility and authority for different people? Perhaps you want your sales team to be able to invoice clients, but not see all the same things your accountant can see? Is this possible? Make sure the system you buy has the user access capabilities you need.
- Accessibility: How accessible is your data? Most accounting solutions these days offer cloud-based access, allowing you to check your accounts from anywhere in the world and on any device. Which services are available on the app and which are available on the core program? Which services are essential for you to be able to operate remotely?
- What is your budget? – Every cent can make a difference to the small business and your accounting software is no different. When making your choice, it's important to formulate a budget and stick to it. Apart from your starting costs watch out for any additional charges, which may add up. When purchasing make sure you fully understand things like setup and customisation fees, to make sure you're not missing anything.
- Will you need to upgrade down the line? – When choosing an accounting system, you need to be aware, not only of your needs now, but also of your potential needs in the future. You may only need essential recording and reporting at this stage, but in the future might foresee the need to scale the system to do payroll and other valuable tasks. Carefully balance your current budget and your needs with your potential growth – how long will it take before you need to upgrade? What features will you need when you do? You may decide that you need to choose a system now that can be easily scaled at a later date, requiring you to spend a bit more money. Alternatively, it may make sense to use a simple system now with no scalable benefits and then overhaul it to a more complete system later. All of this is going to depend, not only on budget but on how much appetite you have for training and learning new systems in the future.
- What do your accountants suggest? – Discuss your financial recording and reporting needs with your accountants. It is likely they have assisted and advised other clients on the selection and set-up of systems appropriate to various businesses' needs. They may well have 'war stories' to tell of issues and systems you need to be wary of.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
