Some businesses that have just gotten their big break in their niche industry prefer the old accounting methods.
They think that by using spreadsheets, it’d be easier to track income and expenses. After all, their business is not large nor employs more than a hundred people.
So why feel the need to incur more expenses through buying accounting software?
However, the problem with keeping track of income and expenses begins when you want to start planning your small business accounting.
Some owners want to take charge of everything at first, including employee hiring and office hunting. While these are essential steps you can do alone, managing your bookkeeping process is a whole other story.
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Will you have time to input, monitor, and analyze your financial data? And is it easy to access these data through spreadsheets without unneeded digging through files?
Of course, getting software makes you hip and modern, but do you need it now? Well, it all depends on several factors. So let’s list them here!
Size of Your Business
The way accounting is done in Samsung Corporation is different from how it’s done in a small mom-and-pop shop.
If you’re a freelancer or independent contractor with a few transactions per month, you can use spreadsheets for inputting financial data.
But if you see that the flow of transactions increases each month and spreadsheets are piling up in your cabinet, then it’s high time to invest in accounting software.
Number of Customers
If your customers are few and the majority pay upfront, then you’ll get by using spreadsheets to monitor your data.
However, when your customers increase and request to pay you in installments, that’s when you have to look towards utilizing the software.
Knowing how much each customer owes you can become a problem when dealing with spreadsheets. Accounting software can help you identify late payments or deadlines in a simple search that takes a few seconds.
Level of Data Analysis
If you’re running a consultancy firm that deals with one service, for example, factory food safety advising, spreadsheets will do just fine to manage your income per client, car mileage expenses, and profitability.
But if you own a firm that oversees food safety protocols, employs food inspectors, and sells chemicals to prevent safety hazards, then you’re definitely going to need software.
Accounting software can aid you in analyzing more complex data such as cash flow statements, income statements, profitability, sales by product line, sales by customer, sales tax, etc.
And if you’re unsure about which accounting software to choose, you can consult a certified Toronto accountant to help you make the best decision for your business.
Presence of Inventory
If you’re a service provider who doesn’t sell any product, inventory tracking doesn’t concern you.
But when you have a business like a restaurant with a lot of inventory and stock to maintain, you need a more organized system to manage your products.
Using accounting software will ease inventory tracking by automatically reducing inventory after every sale and increasing it after every purchase.
Moreover, it can also provide you with information on which products are selling the most. This way, you can realign your sales strategies and increase your profits.