It’s not hard to see why a company would like to invest in accounting software these days.
Accounting systems are making it easier for businesses of all sizes to reduce costs, improve efficiency and maximize profitability.
This article will explore the many advantages a company can reap when they invest in the right software.
First, let’s cover some basics about accounting systems: What they do and what they can help you with.
Essentially, every business needs to keep track of their money-in and money-out at any given time (or period).
This is your income statement or profit & loss statement (P&L).
That’s one of the primary purposes of accounting. I.e., it shows how much money you take in during the period and how much you spend on expenses (which also includes any business costs for your products or services).
Your P&L is used to calculate your net income (the difference between total revenues and total expenses), which is then used as a measure to judge and evaluate the performance of a company.
There are two prevalent operating systems (OS) types for accounting software:
Multiple User System
This type of system usually involves one user, like a small business owner or manager, opening up several accounts at once.
Such systems also allow management to enter transactions from anywhere in the accounting application at any time.
Single User System
This type of system usually involves only one user opening up an account. These applications allow users to enter transactions from anywhere in the accounting software at any time.
It’s important to understand these two types of systems because they significantly affect how your company can utilize the software and the way you can use it.
Firstly, if your business is small (with limited resources), you may only require a single user accounting system and maybe a set of templates or standard reports.
Secondly, suppose your business is a large-scale organization (with many people working for it). In that case, you may need a multiple-user system with the ability to have pre-defined reports that you can send from anywhere into the accounting system.
Now that you have an idea of what type of accounting software you require, let’s explore some things which your company can gain as they invest in the software (or any other technology):
Save Time
One essential thing about software is that it will save you time and effort.
For example, imagine you work for an accounting software company and create a tax statement. You would then have to employ a tax professional to generate the report because they would need access to all your internal messages.
With accounting software, you can generate your own from any of your internal reports in a matter of seconds.
Save Money
Another important thing about software is that it will save you money by doing things automatically or by doing them quicker and more efficiently than what a person can do manually (or at least as much as a person can do manual tasks).
If you were to hire an accountant, which is probably more than you pay yourself, to create your tax statement manually, they would have to spend a lot more time making the financial statements than you would if you just started it yourself through software.
Reduce Risks (And Cost)
In order to prevent financial losses or reduce the cost of making a loss, accounting software can allow management to monitor financial activities in real-time.
For example, suppose a business knows that they have trouble meeting revenue targets or overspending on some products or services. In that case, they can quickly adjust their expenses to make up for it and avoid making a financial loss.
If you have customers who cannot pay on time or have lost the means to pay promptly, the software can even allow you to set up automated payment plans. This is far more preferable to not getting paid at all.
Analyze Your Results
This is one of the essential things that accounting software does for a business.
It tells management what their financial situation is and where they are headed (or potentially going). It keeps management informed so that they can make decisions that will make their company better.
We mean by ‘informed’ that when an accountant performs some analysis on the data from accounting software, it will highlight specific areas or trends that are causing problems or inefficiency.
The accountant can use these as points of comparison when comparing different years or different companies.
Get An Accurate Report
This is a crucial thing for a business to have. Reports are used for management to see how their company is doing at a glance.
They can be financial reports or operational reports, which state the business’s status, such as sales, manufacturing, and services.
Reports tell management how well their company is doing and where they are headed (or potentially going).
It is also easy to lose track of unpaid invoices. By using debtor management software, you can track invoices across multiple customers.
Implement New Ideas
A company that invests in accounting software can implement new ideas much quicker than relying on manual processes.
For example, suppose you want to introduce a new product into your business but don’t want to spend time creating reports for it, so you use accounting software.
You can then configure your accounting software to create the reports for you.
No Duplication Cost
It can be costly if a company creates multiple copies of the same report due to no fault of their own (for example, if the original copy burns and has to be recreated).
With accounting software, management could export their report from their accounting software into another format like HTML or excel.
This way, they could still maintain a copy of all their financial reports without incurring additional costs.
Support
Accounting software support staff can help you with any problems or technical errors and will be able to fix any issues that arise.
If you have decided that you want to use accounting software, it is best to hire a consultant who has experience in accounting software since many may not have experience in this area and can cause problems.
Accessibility
The type of accounting software you select should be appropriate for your company and not be too complex where it requires too much time or effort to use it (e.g., there is no one else who knows how to use the system).
If the software doesn’t meet your needs, then don’t buy it. Accounting software is something that you don’t want to get stuck with and have to use.
Your company might be doing well, but even if it’s been growing year-over-year for fifty years, it can still go out of business due to intense competition.
I’m not saying that this will happen, but I don’t want you to feel like you’re invincible and ignore the signs of a potential problem.
This is why investing in accounting software becomes so crucial because it impacts your profitability and the health of your company!
Summary
The world of accounting software can be impenetrable even for the most seasoned business owners.
If you’re not familiar with it, you probably associate it with things like double-entry, ledger books, and calculators.
However, accounting software is far more user-friendly than you might think, and it can do a lot for your business.