6 Reasons Your Small Business Needs Accounting Software
Discover how accounting software can save your small business time, cut errors, and simplify tax season.
Key takeaways
- Switch from spreadsheets to accounting software to cut manual errors and keep your books organized.
- Sync your bank and bill pay tools so your data updates automatically and tax season stays simple.
- Choose software that fits your budget, connects with your tools, and grows with your business.
- Involve your accountant or bookkeeper to pick the right tool and set it up correctly.
Spreadsheets are not enough
Although many businesses are more comfortable with simple spreadsheets, managing your finances with them isn’t the most strategic choice.
You can budget and plan that way. However, manual solutions can be nearly impossible to navigate and hard to organize.
And it’s often harder for more than one person to keep track of changes at a time. For money, time, and organizational purposes, investing in cloud-based accounting software is the right choice.
What is cloud-based accounting software?
Cloud-based accounting software is an online tool that records, stores, and analyzes your financial transactions. It tracks money in and out, then updates your books in real time.
Online accounting software stores your information securely in the cloud. It syncs with your bank, credit card service, and other online tools. Because it’s all online, you can access your data from anywhere.
Different kinds of accounting software do different things. Most of them—like QuickBooks and Xero—automatically enter, store, and analyze financial data. This means closing the books is a much easier process. Accounting software also offers tools like invoicing, payroll, and financial reporting.
Why use accounting software
Accounting software helps small businesses cut manual errors, save time, stay tax-ready, and see their numbers clearly. Here are the main reasons it’s worth the switch.
1. Reduce manual errors
Owning a business often means seeing a book with hundreds of pages and piles of invoices on your desk. You know better than anyone what a nightmare it is to keep everything in order when doing so much at once.
Fewer manual errors: Accounting software captures information straight from the source, like your bank account or bill pay tool. It also prevents data loss from missing documents.
2. Sync data with your bank and other financial tools
When financial data from different sources is captured and displayed in one place, you save time and avoid double the work. Once your bank and credit card accounts connect to software like QuickBooks, accounting tasks become much more seamless. Plus, this helps you detect discrepancies much faster.
Some accounting software, like QuickBooks Online and Xero, syncs with online bill pay tools like Melio. This means all your invoices and bills are synced between the systems. Every payment you make through Melio is automatically updated in your accounting software.
3. Make it easy come tax season
Tax season is every business owner’s least favorite time of year. Businesses are expected to keep track of all financial transactions throughout the year, including money coming in and out. If it’s tracked incorrectly, you can be penalized and at the mercy of the IRS.
Using accounting software helps make sure all your business data is captured accurately. So when tax season comes around, you can be confident that all your paperwork is in order. And you’ll also be ready in case of an IRS audit.
4. It’ll save you money in the long run
Accounting software has a cost, but it pays off. By catching errors and saving hours of manual work, it usually saves you more than it costs over time.
5. Involve more people in the task (and free up time for yourself)
When your finances are messy, involving more people to help organize them can complicate things and create more problems. But when you use online accounting software, multiple people can collaborate and do tasks at the same time.
Most accounting software tools let you give specific permissions to users, so you remain in control and the final say stays in your hands.
6. It’s not as complicated as you think
Business owners want to focus on the day-to-day operations of the business itself. No one loves to deal with the finances. However, any successful business owner knows the value of a few key habits. That means tracking transactions, keeping customer and vendor info up to date, and staying on top of bills and invoices.
And yes, you’ll need to learn how to use accounting software. But most tools are quite intuitive, and you can learn to use them on the go. You can even consult a professional accountant or bookkeeper who will help you choose the right software for you (and help onboard your company).
What to look for in business accounting software
Sold on the idea of shifting to digital accounting but not sure how to pick your software? Here’s what you need to look out for.
Easy-to-use dashboard
Easy-to-use dashboard: Using new software is always intimidating, but some are more intuitive and user-friendly than others. Many of them offer a demo or free trial period. Try some out to find the best one for you.
Ability to sync with your bill pay solution
Ability to sync with your bill pay solution: Your accounting software’s most important task is keeping your data accurate. To help it do that, choose one that syncs with the other tools you use.
Melio syncs with QuickBooks and Xero, so be sure to check them out.
Cost
Cost: Accounting software ranges from free options to paid plans. Paid plans typically start around $15–$38 a month and run up to a few hundred a month for advanced features.
Before you commit to one software, make sure you do proper research. Hiring an accountant to manage the transition for you is a good idea.
Accountants and bookkeepers can usually reduce the subscription fees for you (and do the heavy lifting as well).
Scalability
Scalability: With business growth in mind, an accounting system that scales with your business is crucial. Choose accounting solutions that provide automation and enable efficient, reliable processes.
How to choose the right accounting software
Choosing the right accounting software comes down to matching a tool to your needs and budget. Work through these steps to find your fit.
- List the tasks you need it to handle, like invoicing, expenses, or payroll.
- Set a monthly budget you’re comfortable with.
- Check that it syncs with your bank and your bill pay tool.
- Try a demo or free trial before you commit.
- Ask your accountant or bookkeeper for their input.
Embracing change
When running a business, we often tend to rely on our familiar ways. If something works, we don’t see any reason to change it.
However, when you look deep into the state of your finances, you’ll see that old methods of data tracking are more prone to mistakes.
New forms of technology can do wonders for your business and help its financial health and growth. When they work together with your other financial tools, Melio for example, they can make the entire process smoother.
Melio syncs with QuickBooks and Xero, so your bills and payments flow straight into your books. Get started with Melio.
Accounting software FAQs
What is the easiest accounting software for a small business?
The easiest tools have a simple dashboard and a free trial, so you can test them before you commit. Many small businesses find cloud-based options quick to set up and learn on the go.
Is there free accounting software for small businesses?
Yes. Some tools offer a free plan that covers the basics, which can work well for very small or new businesses. Paid plans add features as you grow.
What software do most bookkeepers use?
Many bookkeepers work in cloud tools that let them collaborate with clients in real time. The right one for you is often the tool your bookkeeper already knows well.
Is there a cheaper alternative to QuickBooks?
Yes. Several tools cost less than QuickBooks, and some offer free plans. Compare features and make sure your pick syncs with your bank and bill pay tool.
*This blog post is intended for informational purposes only and is not intended as financial advice.
**Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.
7 Ways For eCommerce Businesses To Increase Cash Flow
Learn practical ways to increase your ecommerce cash flow and keep your online store financially healthy.
What Are Phishing Attacks And How To Protect Your Business
Phishing attacks target individuals and organizations worldwide. What’s phishing, how does it happen and how can you protect yourself from it? Read this article to learn more.
How to Reduce Business Expenses: A Small Business Guide
Start acting like a startup, keep your business lean, and hold on to more of the money you earn.
