Do You Need Small Business Accounting Software in 2024?

According to data from the Bureau of Labor Statistics: about 20% fail in their first year, and about 50% of small businesses fail in their fifth year.  One of the primary reasons why small businesses fail is a lack of funding. 

Typically, business owners are aware of the amount of capital needed to keep operations running on a day-to-day basis, including payroll; paying operational expenses, such as rent and utilities; and staying up to date on vendor invoices. That said, failing companies are often less aware of the amount of revenue generated by sales of products or services. This oversight creates funding shortfalls that can quickly close the doors of a business.

To help better manage common errors like the above, business owners can look to establish a realistic operation budget and be prepared to provide some amount of capital from their own reserves when launching. To accomplish this effectively, the use of an accounting software tool will enable a business to clearly grasp their overall cash flow against their operational budget.

Here are some of the top benefits of using accounting software to automate tasks when starting a small business.

What is accounting software?

Accounting software does various accounting and bookkeeping tasks. It assists in recording and reporting financial transactions. Implementing software of this nature makes money flow calculations easier to analyze and understand. It doesn’t require a bookkeeper or accounting skills to successfully leverage this tool and you can typically access most modern accounting software from any internet-connected device.

Why your business needs accounting software

As a small business owner or aspiring entrepreneur, investing in the right tools can mean the difference between growth and stagnation. Maybe you’ve considered investing in accounting software in the past or just started researching your options, but you’re still not sure why you should purchase it. 

To help you work through this process, here are a few key reasons why investing in accounting software may be valuable for your business.

1. Manual process reduction

We all know time is money when running a business. Business owners would tell us that they would much rather focus on the work of the business itself. Rather than manually entering data for the ‘run-the-business’ actions. A successful business owner knows the importance of capturing business transactions, keeping current and accurate customer and vendor data, and staying on top of bills and invoices. 

Therefore, any task that can be automated within the software can greatly expedite the focus back to the growth strategy for any business owner. Reducing manual entry by task automation within the software can greatly reduce the time that is spent invoicing clients and vendors, updating client records, recording sales, and reconciling their books. 

This can in turn help to reduce costs for an employee whose job function would have been to manually perform data-entry tasks. Which can result in using that employee more resourcefully within the business. 

2. Financial data sync

Allowing financial data from individual sources to be captured and displayed in one place saves the manual tasks of having to download transactions from each source and importing them into the software individually. Again, this availability eliminates the possibility of human error during an import. 

Once the banking and credit card accounts have been connected to software like QuickBooks, accounting tasks become much more seamless. This allows users to more easily detect a discrepancy during a reconciliation because all of the banking data is available in one place. As an example,  QuickBooks allows both banking and credit card data to sync to a company file through the use of API. The accuracy and automation of the financial data are more accurate and reliable with this technology. Knowing this not only secures the health of the business but gives the owner peace of mind knowing that the accounting is reliable. 

3. Reporting automation

A major advantage to incorporating accounting software into the workflow of your business is the wealth of data and reporting that is available with the click of a button. Creating customized dashboards and standardized reports can help you understand your profit & loss, improve profitability, insights into spending, and overhead. Because the data that is entered into the program is being managed and manipulated automatically, the accuracy of each report generated is much higher than a report that has to be created manually by a person. 

Custom reports may also need to be manually set up and the software can save the report to be used again. Reporting is a key tool that will assist any business with budgeting and decision-making throughout the journey of a successful business. 

4. Business tax purposes

For any business starting out, ‘taxes’ can be an intimidating word. Businesses are expected to keep track of all financial transactions that occur, both money in and money out. If tracked incorrectly, a business can be heavily penalized and at the mercy of the IRS. This alone can threaten the future of a business and has been known to force many to close their doors. 

Ensuring that all of a business’s data is captured accurately can greatly reduce the risk of hefty tax liability. Another added benefit to tracking records, transactions, and tax liability is always being prepared for an audit by the IRS. 

Tools like QuickBooks allow receipts and other documents to be captured and attached as updated dot specific records and transactions. The simplicity of snapping a receipt & documents with your phone, and uploading them into the accounting software eliminates the need to physically store paper for long durations of time. Having such data available with just a few clicks makes a tax audit proceeding a much less cumbersome process. 

5. Ongoing cost reduction

Automation is directly correlated with reducing costs within a business. The benefits truly arrive once a workflow has been established within the accounting software. The automation and accuracy associated with these tasks will give a business a clear picture of opportunities and drawbacks. Things like an increase or decrease in staff, and again using their employees for more profitable work within the business. 

The starting cost, implementation, and training of the software may be pricey in the beginning of the business’ journey. However, the return on investment will be more valuable to the business in the long term. This is a true investment in the operation of any business. It can separate them from competitors who are without accounting software and spending much more on overhead.

What to look for in business accounting software

You may know that accounting software can help you better run your business, but which software should you choose? Here are a few key features to consider as you begin vetting and comparing different accounting software.

Ease of use

Having real-time access to your data supports smart business decisions and better ensures a healthy cash flow. A few go-to features to be aware of include:

• Dashboard — Capture and organize receipts, purchase orders, invoices, tracking income and expenses, bank reconciliation, financial statements and balance sheets, time tracking, accounts payable, and receivables.
• Settings and Options — User roles, permissions that allow you to control what users can see and do.
• Record creation — Product and service records, inventory, purchasing information, product and service description.
• Chart of accounts — An index of all your financial accounts broken down into subcategories can be complex. Setting up the chart of accounts is simplified with accounting software. Most software comes complete with standard accounts and the ability to create your own. It will also allow quick categorization, edits, removal of accounts, and account number additions if required.

Pricing that fits your budget

A good rule of thumb is to acknowledge there is a difference between price and value.

• Consider that you will want to maintain your accounting solution for several years
• Evaluate the cost of ongoing support and industry-specific consultancy 

Reporting that meets your needs

As a company grows so do the number of data points. Reporting enables you to pull data for custom reporting that allows you to conduct a deeper analysis of the business.

• Limitless lists that allow for classes, charts of accounts, and projects.
• Custom benchmarking with the ability to customize KPI’s. This easily allows you to zero in on the ones that impact bottom lines the most.
• Dynamic dashboards that synthesize information and aggregate multiple data sources in a single space for a complete picture of performance.

Leverage accounting software for growth

With growth as the goal, an accounting system that scales with your business is key. Accounting solutions that provide powerful automation, enabling efficient and reliable processes are what make the difference between a business’s success or failure. 

Software solutions that offer advanced features will better position you to scale—as the capacity to grow with your business. Don’t settle for less than a system that supports advanced reporting, intuitive dashboards, custom benchmarking, and powerful automation functionality.

Automate your small business accounting with a 12 month discount on QuickBooks Online and extended free access to LivePlan business planning and financial forecasting software.