The number of decisions we make in a single day is quite substantial. Consider a day in the life of an entrepreneur, and the decision-making each day goes beyond the ordinary. A slight mishap in either sector could create chaos in the whole business plan.
Hence, a reliable information system is essential for all companies.
Companies have to maintain accounts and detailed records. If not, they will face unnecessary costs and gradually move to failure. A well-advised accounting information system ensures relevant and reliable information goes into the financial statements.
Maintaining a set of accounting records is not optional. It is a law. The Internal Revenue Service (IRS) demands that companies prepare and retain a set of documents to audit. Every business should have the ability to compute taxable income by deploying an accounting system.
Why is Accounting important?
As mentioned, accounting plays an essential role in running a business. It helps you track expenditures, ensure statuary compliance, and provide government and investors with quantitative financial information.
The records generate three critical financial statements:
- The income statement provides information about profit and loss.
- The balance sheet gives a vivid picture of the financial position of your business.
- The cash flow statement creates a bridge between an income statement and a balance sheet. It also reports the cash generated and spent in a specific period.
Stats from the US Small Business Administration revealed that around half of all new small companies launched in the US tend to fail within the first five years. The chief cause of this is poor financial management.
It is critical to keep a company’s financial records clean and updated. Powerful accounting software is what you need to make it happen. It allows the business to stay afloat.
6 ways a business needs accounting software
Accounting software brings plenty of features that help to run your business smoothly. You must look for accounting software for a small business before you leap onto the entrepreneurial bandwagon.
From generating invoices to staying atop the cash flow, here are the main ways a company can benefit from the accounting software:
- It maintains control of the finances
Accounting software helps a company keep a tab on its finances. Tracking expenses is essential to get a grip on your cash flow. You can categorize the accounts to get a vivid picture of where the business money is going.
Documenting accounts on paper has always been the best method, but it doesn’t organize information. Using accounting software will help you get a complete picture of your company’s financial performance in real-time.
The business can use accounting software to upload receipts, scan them, and record information from the scanned receipts automatically. This eliminates the need to go through the hassle of maintaining documents. It gets even more efficient when companies deploy Artificial Intelligence in finance.
- It helps to make online payments
The next step after sending an invoice to your clients is to generate online payments. Collecting these payments could be overwhelming if the clients don’t have a proper system to dispatch the money.
You can integrate accounting software with several online payment gateways that offer clients a fast and secure way to pay you. Payment gateways will automatically record the payments you have received and automatically update them under a corresponding invoice in your accounting system. They also offer different payment methods like credit and debit cards.
Accounting software connected with the bank will also support different currencies. It allows you to accept payments in customer’s currency while maintaining accounts in your money. This erases the discrepancies and extra calculations when it comes to foreign transactions. There is various software online that support payments like XPay.
- It automates invoices
Invoicing and billing are the two indispensable components of a business. Managing them on paper could be hectic and bring a plethora of issues. When you have a steady stream of orders, it is not feasible to create physical invoices every time a client makes a purchase. Plus, it could be challenging to remind customers to make payments when you don’t have automated software to send these reminders.
A software will address all the financial needs of your business. You can create profiles for the regular customer orders and schedule invoices to produce automatically every time they place an order. Simultaneously, you can also include payment conditions and terms to give a heads-up to the clients about your policies.
Accounting software makes it easier to bill the customers for the expenses that occur on their behalf. It tracks all the unpaid invoices, reminds the customer to pay on time, and helps to prevent accidental missing payments.
- It allows reconciling bank payments
Bank reconciliation is a fundamental feature of every company, and accounting software streamlines it. When you connect your bank to the accounting software, it lets you grab the statements from the bank dashboard automatically.
You can wire the software to categorize and match imported bank transactions automatically. Once the transactions correspond, you have to verify and confirm them to reconcile the accounts. Accounting software helps to keep your business ready for an audit all through the year.
- It helps with project management
Robust accounting software provides a timesheet module to help the business charge its customers. You can manage projects, ranging from logging time to invoicing the customers. You can record the time spent on tasks to prevent underbilling or to overbill your customers.
You can even get the time entries approved by the clients before you bill them to ensure everyone in the chain remains on the same page. Once the project is over, a timesheet will help you compare your actual work hours to the original budget. This will allow a company to plan more accurately next time.
- It enables analysis and report generation
The accounting software will collect data through integrations with CRM, POS, and other applications as you run your company. This will provide entrepreneurs a deep insight into the business.
Most software available in the market offers reporting features. This will allow you to analyze data and track performance.
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By employing accounting software in finance, business owners can unleash new ways to upstage competitors through an improved customer experience. It will redefine the accounts management, enhancing the credibility of records and elevating the confidence of the stakeholders.
About : Ashley Rosa is a freelance writer and blogger. As writing is her passion that why she loves to write articles related to the latest trends in technology and sometimes on health-tech as well. She is crazy about chocolates. You can find her at twitter: @ashrosa2.