Running a small business often means wearing many hats — sending emails, paying suppliers, invoicing, crafting workflows, and building financial reports. All these are must-dos, in addition to actually delivering the job that customers or clients pay for.
Of all the extra tasks small business owners have on their plate, none are quite as important as accounting. Solid accounting practices keep your business in top financial shape and help you make better decisions, while dropping the ball on accounting can cause business collapse or trouble.
Thankfully, small business software solutions are making it easier to outsource tasks to technology. These accounting tools help business owners to track accounts receivable and payable, pay sales tax and
Bookkeeping software vs. accounting software
The easiest way to understand the difference is to think of bookkeeping as the basic and accounting as the advanced. Bookkeeping software is used for data entry and storage — e.g., logging revenue and expenses. The best bookkeeping software will make that process smoother than, say, a spreadsheet. You can run double-entry accounting: managing incoming and outgoing expenses and payments for better oversight.
Accounting software is like the upgraded version of bookkeeping software. Accounting software should have the same functionality — data entry and storage. In addition it gives you more analytics and actionable accounting features, like forecasting and cash flow analysis.
Bookkeeping and accounting software both reduce the amount of time spent on data entry. Users can simply sync business bank accounts and credit cards. Automation takes uploading out of your hands. For the purpose of this article, we will focus on accounting software.
Why accounting software is important for small businesses
Oversight helps you to plan, spot potential issues, identify strengths and prove business viability. With this information, you can confidently make investments, ask for loans and predict what your tax requirements will be.
Here are seven features that make accounting software so impactful for small business owners:
Bank and credit card syncing
Syncing your bank account and credit cards with your accounting software is the greatest timesaver that accounting software can give you. Removing manual input of financial data gives you back hours of your working life to focus on other important business tasks.
Invoicing
Invoicing software is an important feature of your accounting platform. It means that once the payment is made, it’s automatically registered as paid. With your bank and credit card synced, and your invoice logged as it’s sent out, your accounting system will pick it up once paid. No data entry is required from you once the invoice is sent. Most solutions will include templates.
Accounts receivable
By adding your invoices to your software solution, you are able to have a view of your accounts receivable. This means the amounts owed to the business. Overview of your accounts receivable is helpful for financial reporting.
Accounts payable
Accounts payable is essentially expense tracking: all of the invoices or expenses that the business is due to pay. Your accounting software can make it easier to manage these by putting them in the system. Adding due dates and having this chart of accounts easily viewable helps you prioritize payments and not let any fall through the cracks. Registering this information also allows you to assess your profitability based on your incoming and outgoing payments.
Online payment collection
Most accounting software tools will have features that allow you to collect online payments from customers. This makes it easier for customers to pay their bills, which helps you secure payments in a timely manner.
Shared access
There are a few benefits to shared access that are both within and outside of your organization. Internally, you can share access with any team members that may send invoices to clients or are responsible for paying company bills. Outside of your business, you can share access with your bookkeeper, accountant, and tax professionals to make their life easier, saving them time and saving you money that would have been spent on their time.
Financial statement preparation
Your accounting software can help you easily prepare balance sheets, profit and loss statements, and cash flow statements. With all of your financial data in one system, the analytics capability lets you create complex reports quickly.