Every entrepreneur works hard to turn their startups into successful businesses, but staying on top of accounting is challenging.
Managing your tax and accounting needs is never easy and affordable for small businesses tight on budget. However, accounting software can be a great and cheaper option for hiring accountants or outsourcing services, but not an alternative.
With them, you don’t need a room full of cabinets to store paper records and manually keep track of your accounts; there are no extra employee payments or distractions from core business activities.
Plus, under Making Tax Digital, every UK business must use compliant taxes and accounting applications. As for Making Tax Digital for VAT since April 22, every VAT-registered business must maintain digital records and file their returns through approved software to HMRC.
This post will share the need for accounting software for small businesses.
Table of Content
What do you understand about accounting software?
Accounting software for business is a typical computer program to manage your financial records, track income and expenditures, prepare invoices, generate financial reports, and more.
New businesses prefer online accounting software or cloud-based solution that are more affordable than traditional ones. You don’t need to purchase or install this software on each computer you use at the office. They offer easy accessibility, flexibility and scalability.
Accounting software can help you with inventory management, sales tracking, managing customer contacts, and providing merchant account support. Besides these, it assists you in budgeting, estimating, payroll, and business tax reporting.
Why use accounting software in a new business?
New businesses usually lack resources, including humans and finance. Hiring a professional like an accountant can drain all their profits, but having them behind you is a plus point. Thanks to accounting software that serves your preliminary needs during the initial years.
The best accounting software can help you cross several unseen hurdles and assist in business growth. However, this doesn’t mean you don’t need an accountant at all.
Here are a few reasons why you need the best accounting software for small businesses.
1. It outweighs the costs
Hiring an accountant means paying them employee benefits above salary, and outsourcing to a third party can also be costly. But, as your business grows, it’s good to hire an accountant and reclaim a part of their charges on your tax return.
To avoid business overheads, getting accounting software can be a cheaper solution. They save you from costly mistakes. A few cloud accounting software offers free trial periods, during which you can learn the functionalities and check if they fulfil your needs.
2. They save time
For new businesses, every minute is valuable. Focusing on accounting needs is not only hectic but needs much attention, dedication, and time. New entrepreneurs can avoid wasting time in manual accounting processes with software and focus on their business operations.
It improves accuracy
Manual tasks are prone to errors, which may lead to costly penalties in financial and accounting activities. Automating the systems with free accounting software can produce accurate results and avoid tax and legal complications.
3. Offers digital storage space
Accounting software eliminates paperwork and helps you store records digitally. You don’t need to make large cabinets and keep all paper receipts and bills for tax return filing or an investigation. All your digital records are safe with this software; however, consider their data security.
4. Easy accessibility
You don’t rush to look for a receipt during weekends, but scroll down the records stored on your software. You can access cloud accounting software from any device with a good internet connection and work on them.
5. Provide a good business outlook
The best accounting software for startups can help you integrate with suitable systems. It means you can look at different bank data, tasks in the client life cycle, payroll, inventory, financial reports, and others from one platform. It reduces the stress of finding information from different systems and gives a better view of your business.
When should I switch to accounting software?
Your business may indicate the need for accounting software. Here are a few such signs to consider:
● Business is experiencing rapid growth
● Handling a large volume of business data is challenging
● You are spending valuable business time on tedious accounting tasks
● Increasing manual errors on your reports, tax returns and everywhere
● You didn’t master accounting skills
● Switching between different tools to handle tasks separately
● Scrambling during tax season
How to choose the right accounting software?
Some of the best accounting software for small businesses are Xero, Zoho Books, QuickBooks, FreshBooks, Sage Business Cloud, Wave, and others. The hurdle for entrepreneurs is to select the right one for their business.
Most people choose cloud accounting software over traditional ones now. Though purchasing traditional desktop software is a one-time purchase, you need to manually update and install them separately on every computer in use. They miss out on unique functionalities compared to cloud-based solutions.
To choose the right accounting software, you can consider these:
● Basic features
● Whether they fit your company
● Offer customisable solutions
● Data security
● Allow third-party integrations
● Subscription charges
● HMRC-compliant
● Scalable
● User-friendly interface
Specific software is hard to use and is programmed for professionals. If you have difficulty using them, look for an expert or opt for easy-to-use software.
Can accounting software eliminate the need for accountants?
Accounting software can never eliminate the need for accountants, but it can improve their way of working. Such tools help in automating the tasks of an accountant. However, this software is a lifesaver for new businesses with little accounting complexities.
The smartest choice for businesses is to combine an accounting system with services. Or, if you are outsourcing, ask a third party to provide software-enabled services.
Conclusion
Introduce accounting software for your new business and take a significant step towards a positive change. Embracing software can help you adjust amid expansion and handle loopholes in the business to find new opportunities.
