There comes a point in your business when it is time to ditch the spreadsheet and upgrade to an automated process to manage your income and expenses. As your business scales, it becomes even more important that all of your transactions are properly captured. Oftentimes a business owner is relying on spreadsheets and that can cause deductions to be missed and presents a limited view of the company's financial picture. We are going to discuss why you need to upgrade to an accounting system in order to grow and manage your finances properly.
Running a profitable business can't be sustained on a spreadsheet. Even if you are tracking income and expenses, the spreadsheet or even the bank statement method will oversimplify the state of your business. If you want more insight into what lines of business work best for your company, all of this information is going to be used to develop financial reports that can show detailed and summarized views of the business. This is where cloud accounting comes in, an online platform that tracks financial activity in business. This software allows you to track performance, keep track of money owed, and reduce mistakes. Cloud accounting really goes beyond just tracking what goes in and out of the business bank account. An accounting system shows you trends and opportunities so that you can make more strategic decisions on the growth of your business.
Which software should I use?
There are plenty of options including FreshBooks, Zero, and Wave, but we recommend QuickBooks to our clients. Although there are some differences, they all rely on consistently using the business bank account for recording all transactions.
The system will automatically download all your activity and that your bookkeeper can then use to categorize on a regular basis. We recommend you do this weekly or bi-weekly. In addition, you can capture activity that hasn't even hit your account yet. You can also invoice directly from the system so you receive payments faster and are able to easily track outstanding or overdue amounts.
Key Components of QuickBooks:
Contains many third-party integrations allowing you to connect software you already use, like Dubsado
Can track recurring and upcoming bills to plan better cash flow
Ability to organized earned amounts by department or project
Click HERE to take advantage of our referral discount to sign up for QuickBooks, our recommended cloud accounting software platform.
I don’t have an accounting system. How do I make this switch?
Do not be alarmed, it’s not too late. Here’s the steps you should take to set the foundation for your accounting system, categorize all future transactions and help build the financial picture for the future of your business.
Make sure you have a separate business bank account. This is going to be a foundational step that will allow you to categorize transactions without the overlap with personal expenses.
Sign up for an accounting system software. As mentioned previously we recommend QuickBooks. Whichever one you choose, make sure that you watch the training videos so that you can get acclimated with how to categorize transactions and pull reports.
Make sure that the system downloads transactions from the beginning of the year because by the end of the year, you want a full picture. If you don't start using an accounting system until the middle of the year, you still want to know what has happened in your business since January. If you've been using your personal account, this is the time to pull your bank statements, go through using the old school method of highlighting all of the business transactions and then manually input them into your system.
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