Small businesses can fully automate their accounting processes by using appropriate accounting software. A carefully selected accounting software saves you time and protects you from the otherwise costly mistakes you can make under manual accounting.
By spending a chunk of your budget, you can make sound decisions that could become a point of confusion. Hence, these programs are not to be understated. Let’s find out how they can be game-changers for small-scale setups and what you need to know to pick the right one for you.
What is an Accounting Software?
Accounting software is a computer-based program responsible for several bookkeeping and accounting tasks. The idea was first introduced in the 1970s and since then has been simplifying the finances for many businesses. The number and ease grew with the advent of cloud accounting software that first appeared in the early 2000s and managed countless accounts through the internet. For your business, accounting software is meant to record and manage day-to-day transactions and perform accounting functions such as budget management, financial statement preparation, and payroll, among others.
The accounting software assembles all the relevant financial information of your business in one place, allowing you to retrieve it anytime. They are an efficient, time-saving solution to conventional accounting practices that were primarily manual.
Global growth of accounting software to exceed the $20.4 billion mark by 2026.
The accounting software has built-in automated mechanisms for most accounting functions that add excellent reliability to all the estimations you make using the prepared data, such as those offered in FreshBooks. Thus, accounting software has been the need of the hour as busy business individuals are almost always short on time. This is also evident in a prediction that estimates the global growth of accounting software to exceed the $20.4 billion mark by 2026, reflecting on the program’s incredible prospects.
Benefits of Accounting Software for Small Businesses
There are numerous benefits that accounting software brings to a medium or large-scale enterprise, but their contributions to small businesses can also not be disregarded. If you run a small business, you must not miss out on accounting software. This is due to multiple reasons.
Firstly, as the market for accounting software is constantly growing, the competition is high, whereas the costs are low and affordable. For your small business to have such a program won’t be burdensome on its budget.
On the contrary, it will improve bookkeeping and accounting accuracy. Imagine life without accounting software. Did you feel struggle, agony, and heaps of agitation? Did you see yourself spending hours on a balance sheet that fails to get balanced even after multiple attempts?
Accounting software simply rids you of these worries and terrifying imaginations. As most calculations are automated, the errors reduced to none and the data peaks at the highest levels of reliability.
In fact, in some high-end cloud accounting software, some features immediately notify you when the sheet doesn’t balance and even the cause of the imbalance, allowing you to make the necessary amendments easily. Automation also helps you save a lot of your time that you can then invest in other vital activities such as relevant decision-making concerning your business.
The easy access to the company’s financial information anytime anywhere is another important benefit of accounting software. Suppose you are a small business owner, for instance, a roadside café. In that case. In that case, accounting software will keep you posted about the daily transactions, and you will not have to visit the site daily just to gather information regarding the sales.
Also, when you open up a small business, you don’t want it to stay small forever. You want it to grow into a large-scale enterprise; high-standard accounting software is essential. Only if you have a mechanism at hand that keeps you on track, maintains all your essential financial records in one place, and makes the correct estimations for you, can you expand your business. The mechanism is provided by accounting software that can convert your small-scale setup into a global corporation one day.
Potential Disadvantages of Accounting Software for Small Businesses
Accounting software also entails certain disadvantages that you, as a business, must take notice of if you want the advantages to show their effect. Accounting software can provide an easy escape if you’re going to paint a manipulative and wrong image of your business. The accounting software is a man-made element and there has to be some manual entry point where you can add relevant details concerning your finances.
If you purposely enter incorrect information there, you can easily deceive the system and let it assume that your business is on a smooth track. In the long run, this is a disadvantage because your business will collapse if it stands on falsified and fraudulent financial statements.
Furthermore, accounting software comes with an alarming risk of data security. There is always a lingering threat of information theft, no matter how confident the security claims of the software designer may be.
Cloud software often involves usernames and passwords when it’s about granting access to a person in the company and the hackers can most of the time manage to crack them, further aggravating the risk. Even the easy access that this software sometimes allows to the people in the company is dangerous as the employees may simply rotate it around and cause significant damage to the brand with their fraudulent conduct.
Another risk for companies that use accounting software is the need to constantly monitor the potential loss of data. Although there are backups that use the internet for any data transfer can simply disappear with even a minor network disturbance.
You can incur similar damage as a result of power outages. If your data is not yet backed up and there is a sudden power shortfall, you can lose several gigabytes of data within a fraction of a second that you may not be able to recover ever again. You do not face this issue when you maintain records on paper. They are not easy to disappear unless you are extremely careless and irresponsible.
Particularly for small-scale enterprises, the involvement of high costs can also prove to be another noticeable limitation. Although relatively cheaper because of the availability of multiple options, accounting software is still expensive for small-scale businesses because of the limited financial resources and tightened budgets they generally have. The greater the number of features present in the software, the higher its price. Thus, you might have to miss out on brilliant software only because your small-scale business might not afford the fee.
Things to Consider When Choosing an Accounting Software
As mentioned earlier, a wide range of accounting software is available in the market, and the number continues to increase with the industry’s rapid expansion. This does not mean that every option is reliable and you can place your finger on any of them. You need to consider some crucial factors before entrusting the key of your business’s locker, the financial records, to the software.
Firstly, you need to be sure of the size of your business. It is important to understand that not every software is suitable for every business.
Some may be solely created for small-scale enterprises and cannot handle beyond that. Similarly, some are complex and made for medium or large-scale businesses. Incorporating them into your small-scale setup might add to the confusion and invite havoc for your accounts.
You must also consider the budget. Accounting software can be very affordable or very expensive, depending on your needs. Your choice solely depends on how much you have in your business’ bank account and you can separate for a software.
You must not forget the benefits accounting software brings if you hesitate to spend on it at any point. If you choose a reliable one, it is very less likely that you will experience dangerous disadvantages. Hence, it is always a worthwhile investment to have something reputable like QuickBooks, for instance, to have your financials organized.
In deciding the right software for you, features that are most important to you also play an important role. You may not want to compromise on some of these.
In many businesses, time tracking and bank automation are important considerations. So, you should sit back and list all the features you wish to have in the software. By doing so, you can narrow down your search.
Another consideration is your familiarity with accounting. When you are unfamiliar with the complex details of a subject, you must not choose something that does not come with adequate guidance.
You can find easy-to-use and complex software with little or no customer support. Finally, there are accounting software only a master of the subject can comprehend. Your choice should reflect your level of expertise and understanding of accounting so that you can easily deal with any forthcoming problems.
In conclusion, if you run a small business, it doesn’t mean you shouldn’t invest in accounting software and instead shoulder the burden of managing finances alone. As an alternative, you should explore your options and select the one that best suits your requirements by navigating through this industry. In doing so, you can save a lot of resources and time. By not doing so, you may lose important data.