30-Second Summary: Bookkeeping is the process of recording all...
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Bookkeeping is the process of recording financial transactions conducted...
Bookkeeping refers to the process of recording all the financial transactions conducted by a business. The recorded information is then used to make business decisions, and also assists in the preparation of tax returns.
Bookkeeping differs from accounting as the former involves an administrative role of handling the day-to-day transactions, whereas the latter involves applying subjective judgment to produce financial data. Therefore, the process of selecting the right bookkeeping software is not necessarily the same as selecting accounting software.
Let’s delve into what bookkeeping software is, how it helps you maintain your books, and how to choose the best software for your business needs.
Bookkeeping software is a program that allows you to record and store financial transactions. These transactions may include business invoices, payroll services, expenses, cash receipts, payments, and internal fund transfers.
The sole objective of all bookkeeping software is to make your life easy. These programs are often integrated with a range of other applications to automate the recording process. For instance, some of the best bookkeeping software can be connected to your bank account to automatically import banking transactions into your books.
Since most bookkeeping software programs are secure cloud accounting apps, you can access them anywhere, anytime from any device. Some also offer mobile apps allowing you to capture and view data on the go. Most allow you to interact with third-party apps and import spreadsheets from applications such as Excel.
Most small business owners now use bookkeeping software to record their financial transactions. Here’s why:
Bookkeeping software saves precious time by automating and speeding up routine accounting tasks and data entry. It can also help with inventory tracking and inventory management, expense tracking, payment processing, time tracking, payroll services, sales tax calculations, forecasting, and other accounting needs. The time saved here can be spent on growing your actual business.
For instance, many bookkeeping software programs allow you to automatically record recurring expenses on a pre-defined date. You don’t have to worry about missing the expense and the associated benefit in your tax return.
Since the bookkeeping software can itself take care of routine tasks and maximize the efficiency of existing bookkeeper(s), you will need fewer resources, which means you’ll save money.
Elimination of human errors is perhaps the most significant benefit of bookkeeping software. It has built-in controls that automatically detect errors and inconsistencies. The integration of bookkeeping or other online accounting software with different platforms, such as bank accounts, also eliminates the need to manually enter data, which is otherwise prone to error.
For example, QuickBooks can be integrated with your bank account. It not only automatically imports bank feeds, but it also uses AI to categorize the transactions, making it the most popular choice among SME owners.
Since most bookkeeping software programs operate in the cloud, that’s where your data is stored, so you don’t have to worry about regularly backing up in the event of a system crash. Your data is always safely and securely stored in the cloud and can be retrieved without hassle.
Most bookkeeping software is designed to assist you in calculating your tax liabilities. Bookkeeping software for small businesses and mid-sized businesses helps ensure you have everything ready for your tax advisor. Many regions have regulatory requirements to maintain supporting documents for several years, and this is exactly where bookkeeping software excels.
The different types of financial reports generated by bookkeeping software programs can help you make better-informed business decisions. At a glance, you can view a wide variety of financial data, everything from expense tracking and pending credit card and PayPal transactions to available cash flow.
You need to keep the following elements in mind when searching for the best bookkeeping software for small businesses and mid-size businesses:
Many SME owners do not have the resources to hire an external bookkeeper and prefer to maintain their own business finances. Therefore, it is important to pick an accounting solution (whether it’s premium or free accounting software) that avoids technical jargon and tries to simplify the bookkeeping process for you. Some small business accounting software providers, such as FreshBooks, offer free tutorials, so you can get a simple start.
The online payment feature allows payment processing so you can set up and send invoices or payment reminders to your customers. Linked with secure payment gateway providers, the payment button lets your customers pay online directly via their email. Some bookkeeping software even automates the process.
For example, QuickBooks Online can be used to collect instant payments from customers once they enter the payment details in the emailed invoice.
Bookkeeping is often a small part of an entire business, which is often dependent on multiple software programs to function effectively. Therefore, it’s important to check whether external apps can be integrated with your bookkeeping software including Google Sheets, Excel, or other spreadsheet applications. Once the apps are integrated, you can automate your data migration process. Be sure to look into any mobile app features for Apple and/or Android bookkeeping software access.
Cloud functionality not only allows you to access your software anywhere but also helps keep your data safe in the company’s servers. For small businesses with access to the internet, cloud software should be the default choice.
For example, FreshBooks is a popular cloud accounting app that can be accessed from a laptop or mobile device. It offers a secure and user-friendly interface for recording and maintaining your financial information.
Unlike accounting, bookkeeping does not involve producing complex financial reports. However, this does not eliminate the need to review business performance. You never know the type of information you may need for future business decisions, which is why you should select a program with a customized reporting feature.
For example, Oracle NetSuite offers power dashboards and reporting features that can be used by organizations of any size, even ones with multi-currency needs.
Other accounting features you should consider are whether or not the program is user-friendly so that it can genuinely improve workflows at your business. Also, does it accept additional users or unlimited users? Customizable permissions are also advantageous and are generally offered by the best accounting software and bookkeeping software.
Bookkeeping is vital for all businesses. It can help you save time, reduce costs, and maximize efficiency, thereby allowing you to make faster decisions. , and bookkeeping software is especially helpful. It can help you save time, reduce costs, and maximize efficiency, thereby allowing you to make faster, smarter decisions. Some small businesses, freelancers, and self-employed proprietors try using free bookkeeping software to manage their business needs. However, free programs offer limited features and may prevent you from realizing the full potential of these tools. They may also become useless once your business surpasses a small size. Therefore, investing in premium, scalable software at an early stage would be a wise choice.
All bookkeeping software varies in terms of price and functionality. Make a list of features necessary for your business, and narrow down your choice based on what you need. Once you have a short list, search out the reviews and experiment with free-trial versions if they’re offered. Just know that premium bookkeeping software will keep your life hassle-free, and allow you to spend your time and energy on expanding your business.