How to Choose the Right Bookkeeping Software?
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 exactly does it help you maintain the books and how can you choose the best software based on your requirements.
What is Bookkeeping Software?
Bookkeeping software is a program that allows you to record and store financial transactions. These transactions may include business invoices, 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 with your bank account to automatically import the banking transactions in your books.
Most bookkeeping software programs are now securely stored in the cloud. You can access them anywhere, anytime from any device. Some also offer mobile apps allowing you to capture and view data on the go.
Benefits of Bookkeeping Software
Most small businesses now use bookkeeping software to record their financial transactions. Here’s why:
Bookkeeping software saves your precious time by automating and speeding up routine tasks. The time saved here can be spent on growing your actual business.
For instance, many bookkeeping software allows 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.
Reduce Human Error
Elimination of human errors is perhaps the most significant benefit of bookkeeping software. It has built-in controls to detect errors and inconsistencies. The integration 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 the bank feeds, but also uses AI to categorize the transactions, making it the most popular choice among SME owners.
Since most of the data is stored in the cloud, you don’t have to worry about regularly backing up your data in case your system crashes. Your data is always safely and securely stored on the cloud servers and can be retrieved without a hassle.
Most bookkeeping software is designed to assist you in calculating your tax liabilities. Bookkeeping software for small businesses helps ensure that you have everything ready for your tax advisor. Many regimes have a regulatory requirement to maintain supporting documents for several years, and this is exactly where bookkeeping software comes to your rescue.
Reports and Decision-Making
The different types of reports extracted from bookkeeping software programs can help you make business decisions. At a glance, you can view the expenses you need to control, the customers you need to chase and the credit cards you need to pay.
Factors to Consider in Selecting the Right Bookkeeping Software
You need to keep the following elements in mind when searching for the best bookkeeping software for small business:
Ease of Use
Many small business owners do not have the resources to hire an external bookkeeper and prefer to maintain their own books. Therefore, it is important to pick (free or premium) software that avoids technical jargon and tries to simplify the bookkeeping process for you. Some software providers, such as FreshBooks, offer free tutorials to help you get started.
The online payment feature allows you to 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.
For example, QuickBooks 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 the entire business, which is often dependent on multiple software programs. Therefore, it is important to check whether external apps can be integrated with your bookkeeping software. Once the apps are integrated, the data migration process becomes automated.
Cloud functionality not only allows you to access your software anywhere but also helps keep your data safe in the company servers. For small businesses having access to the internet, cloud software should be the default choice.
For example, FreshBooks is popular cloud-based software that can be accessed from a laptop or mobile. It offers a secure medium of recording and maintaining your financial transactions.
Dashboards and Reporting
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.
Bookkeeping software is vital for all businesses. It can help you save time, reduce costs, maximize efficiency, thereby allowing you to make faster decisions.
Some small businesses and sole proprietors try using free bookkeeping software to manage their needs. However, free programs offer limited features and may prevent you from realizing the full potential of this tool. They may also become useless once your business surpasses the small size. Therefore, investing in premium 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 the choice based on the same. Once you short-list the options, search out the reviews and try using the free-trial versions, if they are offered. A quick migration to premium bookkeeping software will keep your life hassle-free, and allow you to spend your time and energy on expanding the actual business.