According to statistics, one in every three small businesses fails to stand for 10 years. That represents a 33.3% survival rate, while the same report suggests a survival rate of between 45% to 51% within the first five years. It’d be good to note that one of the reasons why small businesses are likely to be unsuccessful can be linked to the lack of funding and poor cash flow management.
As an entrepreneur, it’s essential to be aware of the amount of capital required to keep your business running, which includes operational expenses like utilities and rent, employee wages, and paying the suppliers. And the lack of awareness in these crucial areas can contribute to the downfall of your enterprise. In fact, most failing companies are usually less aware of their operational costs and the total revenue generated from product and service sales.
While there is no one answer to these financial-related problems, you can start with proper budget management. And for this to be effective, you’ll need to understand your company’s cash flow inside out. That’s where small business accounting software comes in handy.
What Is Accounting Software?
Bookkeepers can use accounting software to manage and record daily business transactions. A proper accounting system can help track all the organization’s liabilities, assets, expenses, and revenues. The best part is that this computer program populates all the records in real-time, making it easier for accountants to monitor the business’s current financial performance.
Benefits Of Accounting Software
If you’re running a small business, accounting software should be one of your priority investments. Here are some of the reasons why:
- It Automates Repetitive Tasks
Manual tasks can be exhausting, especially if you have to repeat them every few minutes. For instance, filling out the same forms after every transaction is a common occurrence in a typical accounting system. This ensures that the accountants keep current and accurate customer data, which is crucial for the success of the company.
Keeping these records also gives the business owner the power to be on top of bills, invoices, and other important transactions. Although manual recording can suffice for a small business, automating these tasks can further enhance the process. Automated accounting can help simplify the process of calculating profit margins and generating profit and loss statements. Rather than using your calculator, you’ll only need to input the necessary numbers, and the program will automatically generate all the required results.
- It Enhances Accuracy
It’s imperative that every business collects and thoroughly analyzes its financial records. Doing so allows the business owner to monitor performance and make informed future plans. But it’s worth noting that the effectiveness of these plans will largely depend on the accuracy of the collected data. And as such, accurate records are a vital component for your organization’s financial health.
Manual bookkeeping generally requires accountants to do all calculations by hand. This increases the potential for human error, which could have serious repercussions on the company’s financial strategies. But with accounting software in place, business owners can minimize these errors through its automation features and an inbuilt calculator.
Keep in mind, though, that technology isn’t foolproof and may not be able to eliminate human errors resulting from data entry completely. And so, if not checked, the program could propagate that error, leading to inaccurate results. Therefore, be sure to countercheck every entry at the initial stages before generating your reports.
- High Processing Speed
Although manual accounting doesn’t necessarily constitute time wastage, the amount of time used in these processes can be reduced significantly. If your finance team still requires several hours to compile a few transactions, then accounting software may just be the solution you need. This computer program allows your accountants to process the numbers with greater speed and efficiency. This way, a task that a human brain generally takes several hours to process could be done in minutes or even seconds.
Furthermore, accounting software also eliminates paperwork. As such, this contributes to a high level of organization in the company’s accounting system. And in return, the productivity of your operations and employees can increase substantially.
- It Can Reduce Overall Costs
As a small business, one of your primary goals should be the generation of revenue using as little capital as possible. And to enjoy this, you’ll have to start by reducing operational costs, and that also applies to your accounting department.
Manual accounting involves hours of crunching numbers, which, as mentioned, could be prone to human errors. And as your accountants carefully go through all the paperwork, operations in other departments could be slowed down. In the long run, this could cost your business time and money, not to mention the repercussions that come with the associated human errors.
With that in mind, utilizing accounting software can help lessen the time and number of personnel required for every task. And while this approach can allow you to reduce the number of staff in your accounting department, the software doesn’t necessarily replace human power. Instead, it allows your employees to focus on higher-value work. You’ll, therefore, have a manageable number of employees who are also productive. And from a business perspective, this means lesser monthly wages paid for even better output.
- It Helps With Your Taxes
Filing taxes for your small business can be quite complex, especially when your financial information is scattered. However, with accounting software, all your transaction records can be kept in one place. The program allows you to store your receipts, expenses, receivables, and any other data that’s crucial in financial calculations. With everything compiled and ready to use, filing your returns can be simplified instead of it being a complex and tedious process.
Keeping accurate financial records is an essential component of your small business. Inasmuch as manual accounting can do the job, it may not be as efficient and accurate as using a dedicated computer program. That’s why many businesses today are investing in accounting software.
Apart from enhanced accuracy, this software program also allows bookkeepers to automate repetitive tasks. It has a high processing speed, which, in turn, can help improve overall business productivity and reduce unnecessary operating expenses. And while you’ll incur initial costs when purchasing and installing the system, the long-term benefits of accounting software could still be worth the investment.