If you’re a business owner who is still handling his accounting manually or by means of a separate productivity tool, you may not be convinced why you should use accounting software. After all, you’re here to provide a good service or sell goods, not to run the numbers. Reliable accounting software can help take the burden of financial reporting tasks off your back, and allow you to focus on your core job instead. To help you understand how accounting software works, in this article we’ll introduce to the basics of how it can handle running numbers on expenses, sales, profits, taxes, and much more for you.
Accounting software integrates data from various parts of your business operations to provide you the big picture or access related data fast to make quick but informed decisions. Instead of looking into separate records the software collates them and gives you an insight on the integrated data.
For instance, you’re talking over the phone with a supplier and you want to find out if that party is high profile or not. Instead of scouring filing cabinets for invoices, profiles, and receipts relating to that supplier, with just a click away the accounting software can churn out all these records in one integrated report and let you see your business relationship and dealings with that company at the other end of the line.
Likewise, the software has usually a set of pre-configured reports and statement sheets that you can simply key in your data and the report will auto generate calculations. This saves you from configuring an Excel file for example or coming up with your own set of rows and columns.
But an accounting software will not automate everything for you. You still need to input data on individual reports before the software can interpret them together.
A basic accounting software product bundles together standard financial tools and payroll. You can build on these basic modules with paid add-ons like inventory and customer relationship management as your business and accounting demands grow. In fact, there are 4 types of accounting products for small and medium business. Likewise, be wary of these 6 hidden ERP accounting software licensing costs.
As a business owner, you want to see all aspects of operations to check for a weak link. For instance, you want to cut costs somewhere, but you’re unsure where. Doing this manually or using different sets of productivity apps—talking to each department head or browsing through their reports one at a time—will use up all your day.
The accounting software allows you at once to see data from other processes in the context that you set (cost cutting). You can check salary scales, work turnarounds, or administrative expenses per department. You can cut work turnarounds or meet with the department with high administrative expenses and see where the problem lies, instead of talking to each business units.
You can also monitor processes behind every sale transaction to track receivables and payables for a smoother cash flow or categorize your customers. By seeing the larger picture, you can quickly make informed decisions, such as: which customers you should extend or cut credit; suppliers to prioritize payment; and collect past dues from inactive customers.
Moreover, by segmenting your accounts in different combinations (e.g., by no. of sales, costs, or price) you can analyze the worth of a product line or a division. This is helpful particularly if you start to have more business units to manage.
In summary, here are the benefits:
- Access data faster
- Get an insight from collated set of data
- Identify weak links
- Automate generation of reports and statements
- Configure reports using different combinations of data
- Squeeze out time from processing financial reports and into selling or thinking new ideas
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