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If you're among the tens of millions of small business owners who won't commit to using accounting software, you should really rethink your position. Many programs are quite affordable, and most don't require you to have an in-depth knowledge of accounting. Additionally, they can save you time on rote tasks and implement rigorous security measures beyond those you can set up yourself. Believe me, as someone who has covered financial software for more than 30 years, the benefits far outweigh any hesitations you might have.
This article was made possible in part by Intuit Quickbooks. It was written and edited independently without partner oversight.
But I haven't even mentioned two of the most compelling reasons to use accounting apps: Regardless of how small or large your business is, accounting services can keep your cash flow running in a positive direction and ultimately improve your customer relations. Here's how:
1. Accounting Software Improves the Accuracy of Your Books
Accounting apps directly impact the accuracy of your financial records. First, they import transactions from your online checking, credit card, and savings accounts. In other words, you don’t have to work from a paper register or ledger book. As transactions come in, you can categorize them so you know what you’re receiving and spending, and in what areas. The sites display real-time balances for all of your accounts based on the transactions you’ve imported or recorded manually.
Accounting apps do all the required math for you, so your numbers always add up. They track sales tax correctly, too, which is extremely difficult to do manually. The software also includes templates for product and service records, so your pricing and descriptions are always correct in transactions (more on that in a minute). Some apps, such as Intuit QuickBooks Online, allow you to track the related costs and profitability of projects, ensuring that you assign and bill revenue and expenses from them.
Benefits: It’s much easier to make mistakes in managing your account registers, multi-part projects, and sales tax obligations when you do it manually. Accounting apps ensure your data is accurate (as long as you are), so you can trust the feedback they provide on your cash flow. Customers will lose confidence if they receive invoices and statements with errors. They might even leave you as a result.
2. Accounting Software Helps You Build Customer Records and Track Interactions
If you do your accounting manually, creating, finding, and storing customer information can quickly become a frustrating and time-consuming operation. Accounting applications offer templates for your people records. These include fields for contact information and other details, including credit limit, current balance, and terms. Some apps, such as Xero, display lists of existing data (like projects and transactions) with each, as well as links to new transactions (like estimates and time activities). Customer master lists display totals that show, for example, how much money is attributable to unbilled income and overdue invoices.
You can pair some accounting solutions with customer relationship management (CRM) software, which helps keep expanded customer information comprehensive, easy to access, and up to date. Zoho Books, for example, tightly integrates with Zoho CRM. You can connect FreshBooks, QuickBooks Online, and Xero with multiple CRMs, too. These solutions generally store more than information about your interaction. You can often access each customer’s financial history along with their past communications.
Benefits: One side of your cash flow (money in) depends on your sales volume. When you demonstrate that you understand their specific needs, customers feel like you see them as individuals and value their business. This level of care can steer them toward you rather than a competitor.
3. Accounting Software Automates the Process of Billing Customers
You can tell when your business receives a bill, whether someone just entered it as a Word document or it originated in some kind of financial software. Similarly, the sales forms you send to customers reflect on your company’s brand and professionalism. Accounting software, like Wave Pro, contains tools for creating and customizing attractive estimates, invoices, and other sales forms that incorporate your logo and sometimes your choice of colors and fonts. Once you send a form to a customer through email or US mail, its details appear in reports, as well as customer and project records.
When you create an invoice using an accounting website’s well-designed templates, you need only to select the correct customer and products or services from the records. This eliminates the possibility of duplicate data entry. Once you enter an address or a product price or a sales tax rate, you never have to do it again. All you need to do is add details, such as a customer message and a quantity. You can set up recurring invoices to avoid having to enter the same information every month, quarter, or year, too.
Benefits: You can bill customers much faster using accounting software, which can lead to more timely payments and help keep your cash flow in balance. Neatness counts when it comes to sales forms. Your customers will appreciate attractive, professional documents, and your effort contributes to their impressions of you.
4. Accounting Software Accelerates Your Receivables
Probably every business has to deal with customers who pay late. Accounting applications encourage more timely payments by providing tools to quickly create and dispatch invoices, as mentioned. You can set up automatic email reminders to customers, and even add finance charges as an incentive to send remittances on time. It's possible to offer discounts for early payments and to reward longtime customers, too. Accounting apps can create and dispatch statements to jog the memories of customers who don’t remember what you have billed them and what they’ve paid.
One of the most effective ways to get customers to settle up with you quickly is to accept credit and debit cards, along with bank transfers (ACH payments). Accounting software companies offer access to services that handle these electronic transactions (though this sometimes involves fees).
Benefits: Accounting websites’ accounts receivable tools help you establish a steady stream of revenue that promotes positive cash flow and shows customers that you’re on top of their financial obligations.
5. Accounting Software Provides Detailed, Customizable Feedback
How do you gauge your cash flow if you’re doing your accounting manually? You can’t, at least not without an enormous amount of complex spreadsheets, time, and work. Even if you use accounting software, you can’t fix what’s wrong until you understand the problem. To help you out, accounting apps come with numerous preformatted report templates that you can customize to isolate the subset of data that you want.
Learning about your profitability is easy. Every accounting app, including the free version of Wave, has a Profit & Loss report (Income Statement) that lays it all out. Sage 50 Accounting, QuickBooks Online, and Zoho Books all have cash flow statements. And you can learn about the individual areas where your cash flow might be unbalanced through any accounting solution. Patriot Software, for example, has several reports that can provide insight, like Accounts Receivable Aging and Unpaid Invoices.
Benefits: Troubleshooting cash flow by creating reports helps you identify problems that require your attention. When your cash flow is running positive, you can freely purchase inventory, thus satisfying customers.
6. Accounting Software Helps You Determine What’s Selling—and What’s Not
Inventory management is a constant balancing act. You don’t want to tie up too much of your money in coffee cups, jewelry, or party favors you purchase from wholesalers. Nor do you ever want to run out of popular items that go out the door fast. Accounting applications help you avoid both predicaments in three ways. Some, like QuickBooks Online and Zoho Books, allow you to keep a running tally of available items in your product records and set reorder points so you won’t risk running out and losing customers to rivals. Xero has an add-on for advanced inventory management, too.
Accounting solutions also alert you to stock levels when you create invoices. And they offer specialized inventory reports that give you a quick but thorough overview of where you stand. Once you have that kind of insight, you know when to discount and discontinue an item or increase your order amounts—just as customers expect.
Benefits: The best accounting applications are proactive about balancing your inventory levels so you won’t experience sales slumps that negatively affect your cash flow. Customers appreciate it when they don’t have to deal with back orders and can get discounts on items you are planning to discontinue because of slow sales.
7. Accounting Software Automates and Improves Your Workflows
Using an accounting app makes your workflows faster, as well as much more organized and predictable. The time savings will free up hours that you can use for vital management tasks, such as ensuring that you’re on the right track with your finances, staying in touch with customers, strategizing, and troubleshooting. Your efficient handling of your company will be evident to your customers.
Benefits: A well-run business increases customers' confidence in you.
The Sooner You Switch, the Better
Your company’s cash flow and its relationships with customers tie closely into one another—and every other element of your financial data. Accounting software can go a long way toward improving both, in addition to all the other ways it can make your life easier and your business thrive.