29 Feb, 2024

Why Should You Use Accounting Software For Your Business?

Learn why accounting software is essential for small business owners. Simplify transactions, manage inventory, and improve operations with the right platform.

Running a successful business requires efficient financial management and organization. Investing in quality accounting software tailored for small businesses can help entrepreneurs and startup owners simplify accounting tasks, automate reporting, keep compliant records, and gain valuable financial insights. Here's a closer look at why embracing business accounting software can be a game-changer for managing your company's finances.

What is the Importance of Accounting Software for Small Businesses?

For small business owners and solopreneurs, staying on top of finances using spreadsheets and manual processes can quickly become frustrating. As transactions mount, keeping error-free records and creating insightful reports every month demands significant time and effort. Worse, critical insights into profitability can arrive too late for any course correction.

This is where the right accounting software becomes invaluable. Automating routine finance functions provides stability, allowing you to focus on business growth. The software also minimizes costly human errors that overspend budgets. Creating those mission-critical reports for spotting problems becomes more accessible. Most importantly, deeper visibility over finances aids smarter decisions.

Benefits of Using Accounting Software for Small Business

Here are some major upsides to business accounting tools from the perspective of a lean startup or small business owner:

  1. Saves Time with Task Automation

Accounting software automates critical finance functions like transaction categorization, invoicing reminders for clients, making supplier payments, bank reconciliations, etc. These routine but demanding tasks would otherwise eat into the most productive hours of senior management. The automation edge saves small business owners at least 10-15 hours weekly, even during early-stage growth. This translates into better opportunity costs for business strategy and scaling decisions.

  1. Eliminates Errors in Calculations

Using spreadsheets to compute columns of figures manually, apply formulas, consolidate reports from staff, etc., is prone to oversight errors and gaps. A minor cell mix-up can cause profitability reports to show alarming dips, whereas a software audit trail readily identifies discrepancies. Automated bank feeds and reconciliation in accounting systems provide reliable oversight.

  1. Centralized Finance Data and Documentation

Accounting platforms create a centralized, easily accessible hub for all documentation, like purchase agreements with suppliers, sales invoices to clients, inventory records, payroll sheets, tax papers, and associated financial records. Losing crucial purchase orders that confirm pricing agreements becomes impossible. So does misfiling paperwork, which causes needless delays.

  1. Secure Platform Protecting Critical Data

Robust accounting software is built from the ground with bank-level encryption, role-based access control for employees, and automated periodic backups to secure databases. This matches or even exceeds the information security levels central banks use to prevent data breaches. Loss of income due to compromised client details or business data is undoubtedly every startup owner's nightmare. Trusted accounting software helps entrepreneurs sleep easy on this count, even while scaling up fast.

How Accounting Software Can Help Manage Finances Efficiently

The most significant benefit for leaned-out small business teams is how well-designed accounting systems take over number-crunching responsibilities. Consequently, owners gain the bandwidth to interpret what the figures represent for business growth. Key aspects where accounting automation drives financial efficiency across size-constrained startups and enterprises are:

Cash Flow Forecasting: Monitoring past and present income-expense patterns daily rather than monthly forecasts net cash positions more accurately. Business owners avoid potential shortfalls better.

Proactive Payment Reminders: Automated alerts ensure clients clear dues on time or even pre-pay, helping cash reserves stay healthy.

Process Rule Creation: Systems can be customized with specific conditions that trigger actions like preventing stock overruns based on inventory levels.

Real-Time Reporting: Key metrics get updated round the clock across modules, indicating problems sooner rather than later during month-end reports.

Scalability Despite Lean Teams: The accounting structure flexes seamlessly even with 100x growth in transactions or personnel, although finance managers were previously overwhelmed.

Top Reasons to Invest in Accounting Software

Here are compelling reasons for small business owners to bite the bullet and subscribe to accounting software, whether during launch or early growth phases:

  1. Significant Cost Savings

Automation leads to significant savings from reduced need for outsourced accountants, maximizing owner time for priorities, and identifying opportunities like lowering recurring overheads or minimizing inventory pile-ups – things that quickly impact profit margins for small businesses with tight cash flows.

  1. Better Informed Business Decisions

Reports and financial insights can be customized in accounting systems to focus on key performance indicators for senior executives while ensuring real-time accuracy of metrics. Management has higher confidence in planning based on trends.

  1. Maintains High Accounting Compliance

Built-in sales tax calculations, automated bank payments, periodic balance sheet creation, income statements for year-end filings, etc., make staying legally compliant more accessible across different accounting regulations. No more penalties for reporting delays!

  1. Complete Ownership of Processes

As finance teams become familiar with accounting software capabilities, reliance on external accountants substantially reduces, leading to significant cost savings. Activities like payroll and tax deductions are managed internally. Owners gain complete control over decisions impacting financial operations.

How Can Accounting Software Benefit Business Owners?

Here are some specific ways that affordable accounting tools help entrepreneurs focus their limited time and energy toward what matters most – delighting clients and boosting revenue streams for the business.

Streamlining Accounting Tasks with Software Solutions

Accounting systems drive considerable productivity gains within small businesses by removing bottlenecks across critical finance functions:

Invoice creation needs just line item and quantity details to auto-generate periodic billing. Expense claims require receipt submission and approval routing to manager workflows for fast processing. Bank deposits, whether online or cash/check, get categorized and updated system-wide, cutting down reconciliations. Payroll transforms from a tedious spreadsheet to a largely automated one, including taxation computed hourly.

Managing Finances with Ease Using Accounting Software

User-friendly accounting software helps owners regain visibility and control over end-to-end finances rather than rely on monthly reports from an accountant:

Real-time reporting dashboards across devices help monitor all transactions 24/7. Rules and reminders ensure taxation deadlines, payments due, etc., are noticed, avoiding penalties. Everything from budgets to cash flows and projected profits becomes transparent company-wide, spurring collaboration. Multiple user access with access controls enables remote teams to coordinate better and close books faster.

Why Small Business Owners Should Consider Using Accounting Software

For a relatively modest investment, monthly subscriptions to full-featured accounting systems like Jaz offer long-term benefits in exchange, such as:

Continuous Auditing: Detailed audit trailing of every accounting entry improves organizational compliance practices over time.

Uncovering Hidden Cost Savings: Granular tracking of operational expenses by segment or product line often reveals savings from unseen waste. Platform

For Future Growth: The structured format imposed by accounting software ensures the financial rigor needed for small firms with IPO or external funding ambitions.

What Are the Key Functionalities of Accounting Software for Small Businesses?

Now that the foremost benefits stand clear, what are the typical functions business accounting platforms enable for entrepreneurs and finance teams?

Managing Invoices and Bookkeeping Efficiently

Core modules found across leading accounting systems help completely transform invoice and bookkeeping aspects:

Accounts payable and accounts receivable workflows accelerate turnaround cycles for outbound customer invoices and inward supplier payments. Recurring invoicing eliminates administrative hassles, allowing teams to focus on scaling up new client acquisitions. Purchase order generations from approved expense requests speed up procuring items for the business. Catalog-driven invoicing saves time for regular clients ordering standard products/services from predefined templates.

Automating Payroll and Expense Processing

Payroll was among the most challenging responsibilities for founders during the early startup stages. Integrated payroll software and newer platforms like Gusto make this deceptively simple, including:

Creating employees and adding credentials Configuring payments and deductions Calculating hourly, contract, or salaried pay runs based on custom rules Generating W-2/1099 tax forms annually Likewise, streamlined expense systems rid the awkwardness around personal outlays incurred for business needs:

Creating and enforcing structured expense policy Matching receipts against claims Manager approval workflows with automated verification checks before reimbursement Reporting by category or department

Importance of Tracking Cash Flow and Financial Data Using Software

Beyond balancing monthly bank statements, accounting tools provide deep visibility using essential features like:

Intelligent bank imports via Plaid/Yodlee that auto-sweeps transactions. Custom report builder helps visualize profitability exactly how owners need it. Scheduled insights on AR aging, AP cycles, etc., help preserve working capital Budget vs. actual variance analysis, operating Cash flows bring reality checks Projections modeling for scenario planning – seasonal peaks/troughs, growth spurts, etc.

How To Choose the Right Accounting Software

With so many accounting system options promising similar core capabilities and a dizzying array of bells and whistles, how can cash-crunched startups determine what works best for their needs?

Factors to Consider When Selecting an Accounting Software Platform

Prioritizing business requirements in terms of current functionality vs. future scalability and specialized needs is the starting point before software comparisons.

What essential features are needed for a business model – invoicing, multilocation inventory? User experience and interface design so owners can access reports efficiently bandwidth for learning curves based on in-house skill sets Scalability needs amid unpredictable growth in orders, investments, etc. Third-party integration essentials like shipping, e-commerce platforms, Budget availability – one-time license fee or yearly cloud subscription?

Best Practices for Evaluating Software Programs for Small Businesses

Stacking up spreadsheet checklists of software programs is less productive than hands-on smell testing of platforms using free trials.

Document existing manual accounting workflows first; compare optimal workflows in software. Review automation range across key processes – speed, flexibility, rules depth Gauge ease of generating and customizing reports – pixels to knowledge? Assess mobile apps, dashboard views, and multi-user access mechanisms. Get clarity on finance customer support competencies and training resources.

Benefits of Cloud-based Accounting Software for Managing Company Finances

With affordable monthly charges, online subscription models for accessing accounting software offer greater convenience for modern businesses over desktop-only options:

Access the platform from anywhere, anytime, on laptop, tablet, and smartphone apps. Automatic saves ensure version control. Data backups provide greater redundancy Direct bank data integration and updates round the clock without manual uploads Quick configuration changes without waiting for on-premise IT personnel Regular feature add-ons and upgrades included from software vendor.

Streamline Your Business Finances With Jaz

Utilizing cutting-edge accounting software is no longer an option but an imperative for ambitious small businesses aiming to sustain growth in competitive markets. The automation edge, real-time financial insights, and compliance rigor provided by trusted platforms can catalyze growth for startups like nothing else.

Jaz is the all-in-one accounting solution and one of the best accounting software built to simplify and automate your most complex accounting tasks like invoices, bills, bank reconciliations, payments, and more so you can get back to growing your business or serving more clients.

Get Started for free and take control of your financial operations with Jaz.

Frequently Asked Questions (FAQ)

1. Why should I use accounting software for my business?

Using accounting software can help you keep accurate records, manage your finances, and analyze your financial information efficiently, saving you time and money in the long run.

2. How can accounting software benefit my business if it's just starting to grow?

As your business grows, you will need software to help you organize and track your expanding financial transactions and data. Accounting software can provide the necessary tools to handle this growth effectively.

3. What makes accounting software ideal for businesses in different industries?

Accounting software can be customized to suit the specific needs of different industries, providing features and functions tailored to each business sector's particular requirements.

4. How can I choose the best accounting software for my business?

When selecting accounting software, consider factors such as the size of your business, the complexity of your financial tasks, and the level of support and training offered by the software provider. Choosing a product that aligns with your business's unique requirements is essential.

5. Can accounting software help me create and analyze profit and loss statements?

Yes, most accounting software solutions allow you to create detailed profit and loss statements, track expenses, and monitor revenues, providing valuable insights into your business's financial performance.