When a person starts a small business, they have to perform a lot of functions like sales, marketing, maybe even manufacturing of products. They may have to invoice and collect money from customers.
While a small business owner may be good at making the product, and maybe selling it, they may have a problem with financial management. Already the business owner is overwhelmed with work, and already plays a lot of roles. Meanwhile he/she cannot afford to have a financial manager or an accountant. The best way is to do as much as possible in terms of accounting.
All small business owners know that they have to keep records. At some point they approach the bank for a loan and the bank asks for financial information. That is when they learn that they must keep their data safe. Some only start keeping their documents when the tax office asks for information. So they give their paper work to an accountant for processing, for a fee of course. Accounting fees become an added expense which the business might not afford.
Business owners who are more computer savvy capture their records on a spreadsheet, with a column for expenses and a column for sales. This administrative work takes a lot of time which the business owner does not have. It is a necessary task that saves on accounting fees. Yet, not every business owner knows that inventory is not an expense or a cost until it is sold. Nor does anyone know that the cost of vehicles, machines and office furniture must not be expensed since those are fixed assets. So the spread sheets are not exactly accurate.
So far only trained accountants knew what is what in a business, and accountants come at a cost. Accountants mostly use the traditional desktop accounting software which most small businesses do not understand. And sending data to accountants tends to be too manual and time consuming.
But in the past few years, things have changed. Now there is new software on the market, called online accounting software which solves all the small business owners’ problems.
Online Accounting Software
Online accounting software is an accounting program that is accessed through an internet browser. It is designed to service thousands, and even millions, of businesses at once. All the customers are subscribers who pay a monthly or annual fee.
The goal of online accounting is to help small business owners to track business expenses, sales and cash flow, in order to facilitate the running of the business.
Gone are the days when business people needed to keep piles and piles of files and shoe boxes full of business data. These days you can go paperless right from the beginning. Since you cannot control how your suppliers do business, you will get printed receipts and invoices. But at least you can minimize the amount of paper that you generate.
Now you can do all your accounting functions electronically, i.e. invoicing, generation of monthly statements, purchasing, payments and receiving of money.
Online accounting packages have the same purpose as the traditional accounting packages that are used on the desktop. The one difference is that online accounting software was designed with the business people in mind. It is much easier to use than traditional software. It uses plain English terms. It is simple and user friendly, so that business people do not need to rely on spreadsheets any more.
As a business person, you can do your own accounting all month every month. The more you understand accounting and use it to guide your operations, the more successful you will be. In most cases you will need an accountant a few hours per week to perform certain functions like bank reconciliations and for report writing. Yet, before the accountant writes a report, you have a good idea what is happening in your business.
If you are using spreadsheets right now, consider subscribing to one of the current online accounting packages. If your business is using a traditional accounting package which you don’t know how to use, then consider using an online package that was made simple for business people like you. If you are not doing any accounting at all, consider using software. It is easier than you might imagine.
Here are 7 reasons why you should go for online accounting for your small business.
1. Convenient and Easy to Start
Online accounting is the most convenient accounting system you can ever have for your business.
• You do not have to buy an accounting package which you must install on your computer, and for which you must pay annual licensing fees and buy upgrades. Also you do not need to employ a full time bookkeeper. All you do is to join as a member of an online accounting package, and you get your own web page where you create your business’ chart of accounts. You can do most of the accounting yourself by following instructions. This is a very cost effective way of doing business.
- Instead of worrying about the cost, you may start with a cheaper and very basic service. As your business grows you can upgrade to an intermediate service which offers you more benefits. When you can afford it and you need it for your growing business, you can upgrade to the highest level of service. This again is very cost effective.
- You do not have to buy a server for your business as it grows. Online accounting software packages sit on huge servers housed in huge data centers. Security of the servers is not your problem. Data centers have several layers of security for all the servers that they house.
- You do not have to worry about backing up your files. The software company replicates the data in their servers to ensure safety of your business data.
- The software company maintains the software and automatically installs the updates, so you will always be using the most up-to-date version of the software anytime. The added benefit here is that you do not have to maintain several versions of software in your office. You only have one version that is updated without disrupting your business. This is something that you benefit from without even knowing that it is happening.
- Since online software is accessed through an Internet-connected web browser or app, it doesn’t matter which operating system you’re using. All you need is internet access, whether you are on Apple or Windows is not an issue.
- Easy Access to Help. There are online guides, videos and FAQ which you can use when you first use your software. They explain to you everything that you need to know about capturing your business data. If you do not understand anything, you can contact the support team of the software that you use. They will view your data and they will advise you on the best way to handle your data.
- When you start a new business you may have borrowed the money, and you are accountable to the financiers. Alternatively you may have used your hard earned savings or pension money. Obviously you want to keep track of every cent that comes in and goes out, you want to get paid quickly and you want to maintain a good level of your inventory. An online accounting package will help you to keep track of everything since you can check your records at any time and from anywhere in the world.
- You can work with any accountant in any country since your accountant does not need to visit your premises. If your accountant needs to discuss anything, you can speak on Skype or any other free service available.
- You can change your accountant any time. Since you control access to your accounting data, you are not worried when your accountant can no longer work with you. You can take away his/her access to your accounts and give access to a new accountant.
- As your business grows, it becomes necessary to make bigger and costly decisions. Big decisions have a large impact on the financial health of your business. With online accounting, your employees have access to real time information which they can use for decision making. And good decision-making is what you need to grow your business.
- Collaborating with your accountant/bookkeeper and employees is easy. You can give your accountant and staff members access to certain sections of your accounting package, while maintaining control over what each one can see. Instead of emailing or physically sending a file, you can extend invitations to others to view the exact same file. You can invite your bookkeeper or accountant to look at your file from their office while you’re talking to them on the phone. The accountant can do the same with any staff member who has access to the accounting software. This speeds up the time it takes to troubleshoot, explain or advise on your financial data.
2. Easy Access to Real Time Financial Information
Online accounting is internet based. You can access your business financial information from any device as long as it is connected to the internet. So if you have a smart phone, a tablet or a laptop, you can access your financial information even when you travel anywhere in the world.
At any time you can view your profit and loss account, your tax summary, your expenses report, your sales report, your list of accounts receivable and much more. You have access to real time information about transactions on your bank account and your credit card. You basically have your finger on the pulse of your business. You can tell whether everything is going according to plan or not.
3. Invoice Quickly and Get Paid Faster
When you use online software, you can create professional looking invoices complete with your own logo. You can quickly invoice on the job even when you are away from the office. As soon as a job is finished, you can use your phone or tablet to prepare the invoice which you send by email. Your customer receives your invoice and prepares the payment long before you even reach your next destination.
If a customer does not pay an invoice on time, the system generates and sends them automated payment reminders.
For recurring billing, you set up the recurring invoices and the system sends the invoices on the designated dates. That means you do not need to remember everything and no customer will ever be forgotten. With online accounting, you basically spend less time on paperwork, freeing up time so that you focus on your business.
4. Your Business Information is well Protected
Your business data is stored in the cloud. It is protected by industry-standard encryption (same as the one used by banks), secure data centers and many other layers of security. You will never lose your data again.
5. Suitable For all Business Types
Like any other accounting software, online accounting software is suitable for all types of businesses:
Retail: With your online accounting software, you can streamline your processes by integrating point of sale, inventory management, shipping and payments. So you can continuously monitor inventory, daily and weekly sales and daily and weekly cash flow.
E-Commerce: You can connect your accounts with leading shopping carts, inventory management, marketplace and sales tax packages.
Non-Profit Organizations: You can use online accounting to keep track of your donations, expenses and volunteers. With all your accounting data easily accessible you can be transparent to your donors, board members and volunteers. You can do all this without paying a high salary for an accountant and focus more on your real work.
Legal Entities: You can keep track of your billable time, clients, and rates so that you have total control of your finances. At the end of the month you easily and quickly send invoices and receive your money faster. If the customer fails to pay the system sends automated reminders.
Hospitality Business: If you run a bakery, a café, restaurant, catering business, or food truck, you can make sure that your accounting system is integrated with POS, rostering and inventory management.
Amazon Sellers: Just as in any retail business, you can integrate your accounts with inventory management, sales tax and other key Amazon add-ons.
High Tech, Creative work, and construction business, etc.: It does not matter what kind of business you are into, online accounting is the way to go these days.
6. Keep Track of Business Activities
For all your business related expenditure, you snap the receipts using your phone or tablet. You can organise all your expenses and keep track of all your expenditure. There are definitely no surprises because at any moment you know how much you have spent.
You can track time for all your team members and easily update your team members’ timesheets. You can then set up customized rates for your customers, and at the right time you automatically bill for your time.
Most small businesses use spreadsheets to capture their business information. This is sufficient for historical record keeping. However, you get more value out of accounting software. Instead of having a historical record seen by the taxation office only, you can use accounting software as a tool to review and improve the performance of your business.
7. Online Accounting is Better Than the Spreadsheet
For a small business, the basic purpose of accounting is to keep track of sales and expenses. This can easily be done using a spreadsheet. In fact many small businesses do just that. But, as a business grows, the number and types of expenses grow and the whole thing becomes complicated. It becomes difficult to see exactly what is happening. If you cannot control your costs then you can easily kill your business.
Also, as the number of sales and expenses increases, it takes more time to capture every transaction on a spreadsheet. And there are more errors made in the process. Yet all that can be automated using online accounting software. Accounting software automatically calculates your taxes and it can electronically lodge tax forms for payroll.
With spreadsheets it is difficult to track, analyse and compare accounting information over time. With accounting software, you can get any information that you want in seconds, even without the assistance of an accountant. But with the help of an accountant, you get even more valuable information as your accounting expert can analyse and interpret more figures for you.
With accounting software, you don’t just keep track of expenses. You keep track of inventory, accounts receivable, accounts payable and fixed assets too.
But, as mentioned earlier, traditional accounting software is usable by accountants only. Online accounting software is useable by you, the business person. With online accounting software, you have total control of your business.