The use of accounting software is an important aspect of effective business management as companies, organisations, and businesses in all industries are legally required to maintain proper accounting and bookkeeping standards.
Table of Contents
Key Points
- Accounting software streamlines billing and invoicing, reducing human errors and enhancing efficiency, while also enabling businesses to track outstanding payments and speed up the payment recovery process.
- Utilising accounting software is cost-effective, saving businesses from hiring large accounting teams and reducing the margin of error in complex calculations and reporting.
- Automated tax calculation features in accounting software can help businesses maintain tax obligations and avoid penalties, making the tax reporting process easier and more accurate.
- Cloud-based accounting software offers enhanced accessibility, security, and data backup options, enabling real-time decision-making and reducing the need for extensive manual bookkeeping.
- Accounting software also facilitates effective inventory management by providing real-time tracking of orders and stock levels, and can even automate re-ordering processes to enhance customer satisfaction.
The accounting process is an integral business function because it helps keep track of money coming in and money going out. Without set accounting standards, it would become extremely challenging for businesses to track and maintain a proper record of debtors, creditors, and cash balances.
The Power of Data Analysis
Efficient accounting also enables businesses to analyse their financial data and make subsequent predictions through interpretation of that data. Shareholders and managers use accounting statements to keep a check on the business’s profitability. Financial statements also help in conducting comparisons and competitive analyses with other companies.
However, some businesses rely on manual, laborious methods of bookkeeping instead of adapting to modern standards. In today’s age, this is obviously both a shocker and an area of concern.
Manual accounting has several disadvantages the likelihood of human errors, misreporting, and being generally time-consuming. To avoid these problems, businesses should consider using accounting software to make the process more efficient and accurate.
Accounting Software Simplifies Billing and Invoicing
Every business has to deal with billing and invoicing. They form an integral part of any business model. Furthermore, preparing invoices and billing documents is also a legal requirement. Not adhering to the proper standards of this process can result in penalties during an audit.
Companies often hire several employees to take care of these processes as they are tedious and time-consuming tasks. However, doing the process manually increases the financial risk because humans are always prone to error.
An alternative approach is to use third party accounting services, which may be a self employed accountant for tax reporting and accounting, or a larger accountancy firm, depending on the size of your business.
Using software that generates invoices and bills, and sends them out to concerned individuals can improve the efficiency of the accounting processes but while software can replace the need for multiple people involved in manual labor at different points, a qualified accountant will always be needed in a supervisory role.
For this, you can always consider encouraging an employee to enroll in an MBA with accounting concentration online and skill up to fill the position.
Track Outstanding Payments and Invoices
The process of collecting payments once invoices are dispatched tends to be a task more painful than invoicing. Clients that delay payments habitually and require periodic reminders can make matters worse by affecting the business’s cash flow. Relying on conventional modes of payment, such as cheques or cash, can cause delays due to the time taken by banks. However, employing proper accounting software can fix the problem.
Accounting software can link with online payment gateways. It means that when accountants dispatch invoices, clients have the option to make swift payments against those invoices through utilising online channels. Bank transfers, debit cards, and credit card payments can now make international payments in every imaginable currency.
The software can also be programmed to send out reminders for clients who are past their payment deadlines. Therefore, business owners can take advantage of digital finance and speed up their payment recovery process.
Accounting software is Cost Effective
Maintaining proper accounting standards can be a cumbersome process. Businesses often have entire teams dedicated to doing tedious calculations required for reporting. Instead, employing accounting software can save companies from spending excess amounts on an army of accountants.
A software will always be quicker in doing complex calculations, analyzing transactions, retrieving past data, and sharing it with the relevant stakeholders. Moreover, the margin of error for computer software is infinitesimal, especially when compared to human errors and the cost they carry.
Accounting software can also seamlessly integrate with multiple accounts (income, expense, liability) and produce accurate yet customisable reports. The cost for purchasing accounting software tends to be remarkably low compared to the cost-savings a business can achieve by using one – or the cost it can incur by not using one at all.
Also, the hours that human resources save by employing software can increase productivity in other business operations.
Maintaining Tax Obligations and Rrporting
Compiling documents and receipts for taxation can be a gruelling process for both business owners and accountants. Scavenging through small pieces of paper and recording them in ledgers can be a long and tiring process.
On the other hand, accounting software not only makes recording all this information easy, but it also automates tax calculations. When required, the software can export all essential information through excel sheets for easy filing. This can save businesses from future penalties, fines, or legal issues that often arise due to misrepresenting information in a tax return.
Using Cloud Based Accounting Software
Cloud computing has revolutionised conventional business processes. Automation and digitisation are significant contributors to the mass scaling of companies. Cloud computing has made everything faster, easily accessible, and more secure. The reason being, companies can now access their accounting (or other data) with a few clicks from anywhere in the world. All one needs is a stable internet connection.
Using cloud based software also diminishes the risk of losing crucial data as everything can be backed up or stored on the cloud.
Cloud accounting can be a game-changer for all businesses. It can help reduce time-lags between processes and decision-making since data is available 24/7. Moreover, incorporating machine learning in the mix can also reduce the need for having accountants and bookkeepers.
Accountants can then take a more advisory role for improved financial management and business growth.
Managing Inventory Effectively
Even businesses that operate outside the digital world and are involved in the trade of tangible goods can reap significant benefits from utilising accounting software. Streamlining operations and efficient inventory management are importantl if a business intends to provide the highest customer satisfaction by minimum delays in delivering orders.
Accounting software can assist in real-time tracking of orders, goods in stock, and invoices sent out. It can also be programmed to re-order inventory when it falls below the minimum level. The software provides a one-window solution that can track orders, send out automated emails, re-order stock, and generate inventory-specific reports.
Final Word
Efficient management of cash, revenues, expenses, and liabilities is key to staying liquid. Moreover, maintaining proper invoicing and receiving timely payments against them is what keeps businesses afloat. Accounting software can take care of all the tedious tasks in a jiffy.
Time is money, and entrepreneurs can save countless hours by allowing technology to solve their accounting problems. It isn’t just more cost-effective but also more secure, accurate, and dependable.