5 Questions to Ask Yourself Before Investing in Accounting Software
1. How many transactions do I have to track each month?
Do you have daily deposits? Regular vendor payments? Or just a few withdrawals a month? The more often money flows in and out, the more important a solid tracking system becomes. Many business owners I’ve worked with have started with spreadsheets or free online tools, but the risk of losing data (or the file becoming corrupt) can become a HUGE issue once the volume of transactions increases.
2. What are my tax reporting requirements?
What is your current business structure? All business structures are required to report their annual financials to the government at tax time.
Are you incorporated? Incorporated businesses often need more detailed information to complete their year-end taxes, so the ability to run reports quickly through accounting software may actually save time at year end. A sole proprietor (self-employed) can still benefit with accounting software; many will link directly with income tax programs (like TurboTax), which helps make sure you’re not missing any valuable deductions.
Are you required to collect & report sales taxes? This means additional tracking on the bookkeeping side of your daily operations. Sales Taxes usually need to be tracked separately, and you’ll want to be able to quickly see the tax portion of every sale or purchase. Most accounting programs have this feature built-in, and you can easily run a Sales Tax report when you need to file & pay those sales taxes.
3. What’s more important to me right now: Money or Time?
Accounting software often comes with a variety of Integrations to help streamline monthly transactions. Things like receipt capture (take a photo and the details get entered into the software), syncing bank & credit card feeds from online banking, auto-tracking mileage, integrating with e-commerce tools like Square and Shopify to auto-import transactions… all are features which can save precious time.
However, there is usually a monthly software fee, especially if working in a cloud system (which I highly recommend for ease and convenience). That being said, I know a lot of business owners who gladly pay for software knowing it simplifies their bookkeeping and they can spend valuable time on other areas of their business.
4. What business insights are important to you?
One of the big pros of using accounting software is the ability to run different types of reports that provide incredible insights into how your business is running. Many accounting programs will track things like:
- Accounts Receivable: send invoices to clients, track who owes you money, and when payments are due
- Inventory turnover: how long are your products actually sitting in inventory? Are there products you will want to drop from your catalogue? Is it time for a sale to move old stock?
- Budgets: am I at risk of a cash-flow shortage?
- Profitability: what are my best-sellers/lowest earners?
- Seasonal Trends: what are my average sales during the holiday season? summer months? Any big spikes or dips in revenue/expenses over the year?
5. Do I have/need employees?
If you are running payroll, software is a MASSIVE time saver. There are employment taxes that need to be tracked & paid regularly, year-end tax forms, special documents to process a termination, etc. Some programs even offer timesheet tracking & direct deposit for your employees. Depending on the volume of employees on your payroll, finding a software program with a good payroll module can be a MUST!
Okay; I think I need Accounting Software! What’s next?
If you’re considering moving to accounting software, most will offer a free trial. That will let you get hands-on with the features and see if it’s a good match for you!
My #1 recommendation for small-to-medium businesses (for both corporations & sole proprietors) is QuickBooks. It’s affordable, user AND accountant-friendly, and has a wide variety of features and integrations to make your bookkeeping a breeze! Their support is stellar if you have any questions, and there’s a ton of video & web training resources if you’re looking for help.
Feeling overwhelmed by the money side of your business? The waitlist for Bookkeeping 101 for New Business Owners is now OPEN! This is a hands-on course created specifically for entrepreneurs who want to save time, get better prepared for their mandatory tax reporting, and have complex accounting topics broken down into real people language so they can confidently make better decisions for their business.
The next Bookkeeping 101 for New Business Owners program opens on the 1st; CLICK HERE to get started.
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