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How to choose the best small business accounting software?
Top 10 questions to ask before buying accounting software
Analysing accounting and financial needs of your business is the first step of choosing small business accounting software. Here are some of the accounting related questions to consider.
Does your small business have employees? Yes
Then, choose an accounting software that calculates payroll tasks such as PAYE, leave, etc.
Does your business sell goods? Yes
Then, choose an accounting software that keeps track of inventory and orders.
Does your business have multiple bank accounts? Yes
Then, find an accounting software that manages multiple bank accounts.
Does your e-commerce business sell to foreign buyers? Yes
Then, choose an accounting software that manages foreign currency.
Does your business accept online and mobile payments? Yes
Then, find an accounting software that integrates with online payment platforms.
Does your business keep track of customer behaviours? Yes
Then, choose an accounting software that integrates with Customer Relationship Manager systems.
Bookkeeping and accounting processes of new small businesses, freelancers and self employed professionals are often managed by using simple accounting templates. Small businesses can download free Excel accounting templates and use them for various functions such as creating quotes and invoices, keeping track of income and expenses.
On the other hand, there are small business owners that the level of their engagements in their accounting processes is lower due to lack of time or financial illiteracy that make them completely rely on their bookkeepers and accountants for their accounting needs.
For financially literate business owners transition from Excel accounting templates to an accounting software is smoother. It makes sense for them to subscribe and pay for accounting softwares but for busy business owners passing shoeboxes full of receipts and invoices to bookkeepers is still the best solution.
You need an accounting software if you have outgrown Excel accounting templates and these are signs:
1- Managing increased transaction volumes becomes time consuming.
2- Finding more errors as a result of manual data entry and record-keeping
3- Tracking and analysis of income, expenses and cash flow forecasting become difficult.
4- Entering, managing and reporting financial data take too many accounting templates
5- Accounting template functions won’t scale as your business operations grow
6- Accounting template formulas can’t automate business processes of your business
7- Accounting template dashboards won’t give a real time report of KPIs, business activities, costs, revenues and efficiencies.
Industry specific accounting software is exclusively designed for a niche business sector or industry. You can use industry-specific accounting software to answer unique operational needs of your business within an industry. For example, if you have a construction business and prefer to use a construction industry-specific accounting software with project accounting features you can access unique accounting software features that relate to your operations without requiring you to get into complex accounting customisations. Instabooks industry specific software is available for new businesses in accounting, advertising, marketing, construction, consulting, design, architecture, engineering, farming, hospitality, tourism, IT, legal, manufacturing, transport, real estate, trades & services industries.
In addition to considering your accounting needs, features, integrations and industry specificity -in choosing the best small business accounting software- you still need to have a good assessment of your accounting skills as a business owner. Most likely as a new small business owner, freelancer and self employed professional you are the first user of your small business accounting software. If you are not financially literate enough to be able to record accounting transactions related to expenses, income of your business, you can not get any value from your costly accounting software. This is why it’s very important to match your accounting skills with any potential accounting system that you may want to acquire for your business or alternatively use a smart and automated accounting software such as Instabooks.
Online accounting softwares have transformed the way small businesses manage their accounting and financial operations. Here are some benefits of cloud-based accounting systems.
1- Online accounting systems speed up bookkeeping tasks by automating workflow processes. Businesses can send out recurring invoices and also put suppliers on scheduled payments. On the other hand such automated accounting features are very limited in desktop accounting softwares.
2- Cloud accounting softwares offer real time updated data by tracking transactions, invoices, receipts, income and expenses. In contrast, accessing real time data in desktop accounting softwares is impossible.
3- Online accounting systems are accessible anytime anywhere and on the go on any mobile device to update you about your financial data. On the other hand desktop accounting softwares are only accessible on a business’s location.
4- Since online accounting softwares are hosted in the cloud, you can invite your bookkeeper and accountant to access your business financial data to collaborate with you to create financial reports. In contrast, business owners had to personally deliver their accounting data to their bookkeepers and accountants.
5- Boot strapped small businesses don’t need to spend their accounting budget to buy and install an accounting solution on their system that requires regular maintenance. Instead they can easily sign up to a cloud accounting software on their laptop or mobile phone to access their accounting software. Operating desktop accounting softwares, in contrast, is very costly.
6- Most cloud accounting software companies offer 24/7 customer service through chat bot, email, call centre, social media groups and pages. This is to support businesses to move from accounting templates on desktops to cloud accounting.
7- Online accounting softwares that save financial data in cloud systems apply the following settings to keep their financial data secure. Cloud accounting user permissions help businesses to define what tasks software users are allowed to perform and what financial data they can access. In addition, assigning approval authority for invoices, expenses, and payments to users reduces the risk of unauthorised individuals accessing and manipulating financial data. Also, two factor authentication when signing in to accounting software increases the cloud accounting systems securities. Finally, session security settings enable viewing and controlling user sessions.
8- Unlike desktop accounting softwares, cloud accounting systems can scale to accommodate needs of businesses as they grow.
9- Cloud-based accounting systems can easily integrate with other business softwares such as payroll systems, inventory systems, online payments and financial dashboards. On the other hand desktop accounting softwares are not designed to offer such level of integrations.
There are various accounting softwares available for different industries, annual turn over, number of employees and legal structure of businesses. For example, sole traders, freelancers and self employed professionals have simpler legal structures and tax compliance obligations than small and medium size businesses with high number of employees and revenue which mean sole traders need simpler accounting software and limited number of accounting features. Some freelancers prefer to download bookkeeping and accounting templates for their basic accounting needs but others subscribe to a single invoicing or expense management app to run their business or try a full feature accounting software. The cost of accounting subscriptions start from about $10 and may exceed $50 per month.
This depends on your accounting needs and also business models of accounting software companies. If you're a freelancer or sole trader with low annual turnover, no employee and inventory then, free accounting softwares may be the answer however you need to pay attention to accounting software companies such as Wave accounting that offer free options but charge businesses based on the amount of payments. Wave accounting charges 2.9% + 30¢ fee to process most credit cards (with 3.4% + 30¢ fee for American Express), and 1% for bank payments (where available). On the other hand there paid accounting softwares such as Xero that charge for certain accounting features separately that may increase the monthly subscription significantly.
Choose accounting features based on your accounting skills, business needs, your industry and budget and time you are going to allocate to use those features. Here is a list of some essential accounting features that are offered by best software companies.
Cash Flow Calculator
Sales Tax Calculator
If your business has a bookkeeper or accountant, it’s really important to ask for their advice before choosing an accounting software. In most cases your accounting systems must be compatible. Also, your accountant is a person that can provide software training and accounting software setup when you start. In addition, they can introduce options that have collaborative features so they can access your accounting software.