Selecting the right bookkeeping software for your small business is essential. This is true whether you manage your bookkeeping in-house or outsource this function; your bookkeeping software should provide you with easy access to critical financial management information. Among other things, this information needs to allow you to closely monitor cash flow and thus
make better financial management decisions.
Matching Needs and Levels of Complexity for Bookkeeping Software
The primary benefit of bookkeeping software is improved business productivity through time savings, improved efficiencies, and better organization of your financial records. Most bookkeeping software programs offer a variety of options to meet your bookkeeping needs, with varying features and levels of complexity. Before making your selection, consider your business’s bookkeeping needs and use these to choose the software program that provides the level of detail you need. Look for programs that offer scalability as your business grows without adding excess features you don’t require.
At a minimum you probably want to know, and your bookkeeping software choice should you with information on the following:
- How much money you have
- Amounts you are owed and by whom
- What you owe to others
- The type of expenses you are incurring
- Details needed to estimate your income tax liability
Online or Desktop Options in Bookkeeping Software
Another decision when selecting your bookkeeping software is whether to go with online software or software that will reside on your local computer. If some or all of your bookkeeping/accounting/tax preparation is outsourced, you may benefit from choosing one of a number of online solutions available. There are plenty of options for online bookkeeping software which grant data access to you as well as the outside service providers you authorize. You can share your financial records with a bookkeeping service and a tax accountant as well as a consultant to help you with the program. These remote systems offer flexibility allowing you to set-up different users at different locations based on the bookkeeping tasks that they will perform.
In some cases, the bookkeeping software runs on an internet server so that you are purchasing the software as a service. Alternatively, each party operates the software locally but obtains the same data from a cloud-based server on the web.
As you consider which option is best for your business, one thing to keep in mind is the management of software updates. If you run bookkeeping software on your own computer network, you are responsible for software version updates and new version upgrades. When the software operates as a cloud service, all maintenance and upgrades are automatic.
Most online bookkeeping software options are available for demo or even free trials. Use these to ascertain if the software selection is functional for your purposes and how much training you need to properly use it.
Software Education and Support
Another consideration when selecting bookkeeping software is the level of education and support provided. Evaluate how much time you or your staff will need, and realistically have available, to learn the bookkeeping software. If your bookkeeping will be managed in-house, the availability of support from the software vendor as well as well-written manuals will be critically important, particularly in the start-up phase and as new bookkeeping employees are hired.
If you plan to outsource your bookkeeping, allow the outsource service providers to present software recommendations. The programs used by your outsource bookkeeping service provider automatically limits your bookkeeping software options. Your software selection should also be compatible with your tax accountant’s system. Your bookkeeping software choice should organize business transactions in a manner that is consistent with income tax returns, assuring that you have audit-proof tax records and minimizing the cost of tax return preparation as no adjustments will be required for tax purposes.
Payroll and Bookkeeping Software- Special Considerations
Payroll accounting is an especially complex area for bookkeeping software that is driven by a different module in most software selections. If you want to produce payroll reports in-house, the software should have the capability to create them automatically. Advice from your tax accountant will help in this assessment because details on payroll reports have to match the payroll categories on an income tax return. How you accomplish this is paramount to an efficient bookkeeping system.
Putting it all Together
Bookkeeping software is a useful tool for saving time, organizing financial data and generating financial information. As good as these software programs are, you still need to understand how to read the financial statements and analyze the information to help make sound financial management decisions. If you are unsure about reading and analyzing financial statements or would just rather not, hire an accounting professional to help you interpret the information. The same principle applies to the creation of financial reports. If you aren’t familiar with double-entry bookkeeping or are unclear about the effect a debit or credit on an account, get the needed training, hire a bookkeeper, or choose a bookkeeping service. It will save you time and money in the long-run. Remember, regardless of what you choose, the reliability of reporting from bookkeeping software is only as good as the input.
About the Author
Seeta is co-founder and Director of Client Relationships at Profitwise.