Accounting has been around for at least 9,000 years. In Mesopotamia, tokens were used to record transactions between buyers and sellers. Back in those days, clay tablets with pictures of the items sold (sheep, grain, etc) were used to record the transaction of exchanging the items.
Luckily, today you don’t need to record each transaction on a clay tablet, especially with modern options like paper ledgers or accounting software. Running your own business can be daunting – you need to take care of everything, from sales to marketing to HR: and in most cases SMEs are one man band needing to know about everything that is happening in the company.
Traditionally, companies have relied on accountants or, in many cases, Excel spreadsheets. Opting for accounting software isn’t mandatory however, it can be very helpful for a growing business. Having your financial records in one place can help you save time, as well as keep your data safe and increase the visibility of your finances.
As your business grows, you’ll also likely have less time to meet with your accountant to go through your finances and tricky VAT-related questions. Having software that can help you with tax compliance and manage your payroll system can make your life much easier.
When looking for accounting software there are a number of things that you should consider. To start, you should have an idea of what features you are looking for. For example, features such as billing and invoicing will help you create invoices that are personalised with your company’s logo.
QuickBooks allows users to send invoices and alerts users when the invoice has been opened and when they are due to be paid, helping you keep a record of payments. Reviewers on Capterra mentioned bank reconciliation as an important factor when deciding on software. Xero was rated by users for bank reconciliation, noting that it allows them to have real time feed and keep better track of their finances.
Another important factor to consider before you decide on software is the budget. Once you know what features are most important to your business you can start looking for the companies that offer those ones. Most accounting software in the market requires a subscription, but many also offer some sort of trial or freemium option. So you should see what options there are for trying the software before you purchase it.
Accounting software has many benefits for small businesses. Below we cover three important areas:
Things like data entry can be simplified with accounting software, as well as streamlining processes. For example, it can help with calculating VAT and producing payslips. Most businesses rely on paper ledgers or Microsoft Excel to keep track of their finances. But as the business looks to scale and grow, business owners find themselves with less time to dedicate to keeping track of finances and deciding whether to switch to a software solution.
The owners of a web design and development Media Suite found themselves in that dilemma when they realised that they would need a more complete accounting solution that would allow them a simple way to keep track of their finances while they focused on expanding the business. By implementing FreshBooks, the company was able to automate processes that were time consuming such as auto-billing, automated reminders for late-paying clients, while also helping them stay on top of their invoicing.
Accessibility is another benefit of accounting software linked to reporting. By digitising your data, you can also access it anywhere, anytime. This is of vital importance for small business owners, as most of the time they will be out meeting new clients and this allows them to have a clear overview of the finances.
One of the advantages of reporting is that you are able to see any issues almost immediately, which will help you prepare annual reports and keep track of your company’s financial health. Deliveroo implemented NetSuite to help the company scale. Following implementation, the company was able to keep track of their costs in real time and helped the company expand to other markets.
Security and compliance
Security is key for all businesses. Software that helps companies keep their sensitive data secure is vital for business owners. Accounting software can also help you stay on top of any new tax requirements that you need to comply with by providing support and best practices on how to implement it. For example, most accounting software vendors offer support for the new Making Tax Digital initiative launched by the HMRC.