Is Accounting Software Worth It? 10 Benefits for Small Businesses
Small business owners often find themselves juggling numerous tasks simultaneously, from managing operations to handling finances. So when our clients ask, “Do I NEED accounting software?” our answer is always a resounding YES!
Ok, there’s no law requiring you to use a program. And yes, it can be another expense that can feel like a lot when starting out. But the benefits of accounting software are well worth the investment! It streamlines financial processes, enhances overall business efficiency, and, most importantly, prevents costly errors.
Read on to learn why we advise using small business accounting software, even if hiring an accountant is not yet in the budget.
What Can Accounting Software Do for Small Businesses?
Accounting software provides many features and capabilities to take the number crunching off your plate. At a glance, these systems handle:
Bookkeeping: Automated recording and categorization of transactions
Invoicing: Efficient creation and distribution of invoices, along with tracking payments
Expense Management: Simplified tracking of expenses and receipt management for accurate recordkeeping
Financial Reporting: Generation of various financial reports such as balance sheets, profit and loss statements, and cash flow statements
Tax Preparation: Streamlining business tax preparation processes and generating necessary reports for tax filing, ensuring compliance
Let’s take a closer look at the benefits of accounting software and how it eases the burden on your team below.
10 Benefits of Accounting Software
1. Boosted Efficiency
Accounting software automates repetitive tasks like data entry, reconciliation, report generation, and payroll processing. This speeds up processes that would otherwise demand significant manual effort, freeing up time for you and your employees to focus on core operations and growth strategies.
For example, software automation processes payroll and even pays payroll taxes. It can also schedule tax payments by filling out tax forms and filing them with the IRS.
Many accounting systems even allow you to schedule journal entries for recurring activity, such as monthly depreciation or payments—but remember, it doesn’t process the payment for you. For example, if you pay rent monthly, you can set up an automatic journal entry to post the debit and credit. All that’s left for you to do is make the payment.
2. Error Reduction
Another beautiful result of that automation? It minimizes human error that often accompanies manual calculations! Accurate data entry and automated calculations contribute to precise financial records, reducing the likelihood of costly mistakes.
3. Accessibility & Remote Operations
Cloud-based accounting systems like QuickBooks enable access to financial data anytime, anywhere. This flexibility and visibility:
Allows for remote work
Promotes collaboration and prevents department isolation
Aids seamless communication with accountants or advisors
Mitigates mistakes and redundancies
Maintains accountability
When everyone has access to the latest data, it fosters better decision-making. This leads us to our next benefit of accounting software…
4. Real-Time Financial Insights
Instant access to real-time financial data is invaluable. Accounting software makes it easy to monitor cash flow, track expenses, view inventory, gather comprehensive transaction details, and assess revenue trends. In turn, you’ll be equipped to:
Plan and forecast based on actual data
Remain proactive and agile
Make informed decisions for improved financial health
These accurate, up-to-date financial insights drive your business closer to your goals.
5. Improved Invoicing & Payment Processing
Creating and managing paper invoices is a hassle and risky—after all, they can result in mistakes, be overlooked, or simply get lost. That means potentially missing revenue!
Accounting software simplifies invoicing so you can create professional-looking invoices quickly and customize them with your logo and company information. Whether you provide products or services, you can create templates for items and packages to easily select and fill out invoices and proposals.
Additionally, features like automatic reminders for overdue payments help expedite cash flow, ensure you make payments on time, and avoid late fees.
6. Tax Compliance & Reporting
As a small business owner, filing monthly, quarterly, and annual taxes can lead to significant stress. There are self-employment taxes, payroll taxes, and sales and use tax (as applicable), just to name a few common filings. Your taxes also depend on your business structure—it’s a lot to keep up with!
Fortunately, many accounting software solutions have tax features that facilitate compliance with tax regulations and take care of ALL of these for you. They’ll generate accurate reports necessary for business tax filing, simplifying the often complex and time-consuming tax preparation process.
Accounting software also allows you to accurately track all vendors and contractors you’ve paid during the tax year. That way, you can efficiently process their 1099s without missing anyone and avoid potential penalties.
7. Bank Account Integration
Every dollar matters as a small business, so you need to know exactly what’s coming in and out of your bank account. Syncing accounting software with bank accounts automates bank reconciliation, saving time and effort. This integration ensures that transactions are accurately recorded and helps you spot any errors or signs of small business fraud immediately—just be sure to monitor it regularly.
With this integration, your accounting software will pull your bank statements automatically. As with the automatic journal entries mentioned earlier, you can also set your system to categorize and match imported bank activity. All you’ll have to do is review them to reconcile your accounts.
You can also set up check runs to streamline check processing, allowing you to easily input data, print checks, and create scale in your AP process.
Thanks to these features, bank account integration is another essential benefit of accounting software that reduces errors.
8. Customization & Scalability
Regardless of your stage, you likely have a vision for your business’s growth. And with growth comes increased complexities in your accounting procedures, accounts payable and receivable, client database, inventory, and payroll.
Accounting software often provides customizable features that can be tailored to the specific needs of a business. These scalable solutions accommodate growth and changes in business requirements while maintaining continuity.
9. Audit Trail & Security
Accounting software maintains a detailed audit trail, logging all financial activities. This level of transparency:
Promotes compliance and enhances security by tracking unauthorized or suspicious transactions
Protects sensitive financial data from potential breaches with encryption and secure backups, which is vital for cloud-based accounting software as it uses a remote server
Keeps sensitive information safe if a device is lost or stolen or a disaster occurs (e.g., flood or fire)
10. Cost Savings
Despite the initial investment, the efficiency gained from using accounting software can lead to significant cost savings in the long run. RReducing manual labor, avoiding errors, and better financial management often outweigh the initial costs.
Plus, cloud-based accounting software updates automatically, meaning you won’t have to pay to upgrade to the latest version, buy hardware, or maintain/integrate systems. It’s all built-in!
Excel vs. Accounting Software
So, the benefits of small business accounting software sound great—but what about that upfront cost and learning curve? You may be wondering why you can’t just use Excel. After all, plenty of templates and tutorials are available, so why not save some money?
Yes, Excel is a powerful spreadsheet program. It provides wide flexibility and customization and can perform highly complex formulas and functions like inventory management. Most have access to Excel, and sharing files and collaborating is easy. It’s also inexpensive, and you likely already have it if you have Microsoft Office.
However, accounting software beats Excel in several critical areas, including:
Automation: Unlike Excel, software automates many tasks, reducing manual effort, saving time, and—as we’ve highlighted several times—preventing errors.
Real-Time Updates: On that note, accounting programs also make real-time updates, while Excel files need constant manual updating.
Complexity Handling: Accounting software efficiently and accurately manages complex financial tasks, while large datasets can slow down Excel and result in errors.
Reporting & Analysis: Accounting software typically offers more robust reporting and analysis tools than Excel’s capabilities.
Accounting Software: A Worthy Small Business Investment
Accounting software significantly eases the financial management burden for small businesses. If you’re not quite ready to hire an accountant to manage your books and financials, a program is the next best thing. It will:
Speed up your accounting processes and lighten the load on you and your team
Lower risks, thanks to security features and reduced probability of errors
Empower you to make informed decisions based on accurate and accessible data
Keep your business organized and compliant, so you’re in a better position when you ARE ready to enlist an accountant’s help, saving you more time and money down the road!
Are you ready to invest in an accounting software solution but need guidance on where to start? Book an intro call with JLS Accounting for recommendations. And if you’re ready to hand off those pesky accounting responsibilities, we can help with that, too!