Accounting software starts your business out on the right foot.
When you’re starting a small business, there are a lot of costs to consider. From the tools of your trade to marketing tools (like a website), and software to technology, the costs can be overwhelming. Accounting software often isn’t on the priority list.
Not to mention: A lot of this expenditure is required before you’ve even launched, gained clients, or established a steady income.
It’s only natural (and indeed, sensible) to try to defer some of those early startup costs. “I’ll do that once I have money coming in!” or “I’ll invest in that when things really start to ramp up!” or “That will be my number 1 priority when I’m profitable.”
Essential: Accounting Software to Manage Your Money
Accounting software is an easy investment to put on the long finger. Why? Because you can simply make do with Word and Excel until you have so much money flowing that you need a better tool. Right?
I’m here to tell you that this reasoning, while understandable, is a mistake. Here are some reasons why you should prioritize accounting tools just as much as the other tools of your trade when you’re starting a small business:
1. You Want to Give Yourself the Best Odds of Success
It’s the stark, harsh fact about small businesses: Many fail. Indeed, one-third fail in their first 2 years. And in lean times like these, those odds get more startling.
It may be that too little money comes in, or that too much is drained away by out-of-control expenses. It may be that clients ditch them before paying up. Or that scope creep turns good projects into unprofitable ones.
If you start out in control of your revenue and costs, you stand a way better chance of NOT being one of that 33%. Invest in the right accounting software and you’ll easily:
- Stay on top of invoicing in a timely, accurate fashion
- Easily collect payments online so you don’t have to deal with “checks in the mail”
- Track and categorize expense receipts as you go, so you know exactly how much is going out
2. Your Clients Will Thank You for Making Life Easier
My dog walker uses cloud accounting software. Every month, I get an invoice in my inbox clearly breaking down the number of walks we’ve had. My credit card information is saved, so all I have to do is click a “Pay Now” button.
This is so much easier for me than writing checks or leaving envelopes of cash on the kitchen table. What’s more: It makes me feel that she’s got her act together, is on top of her business, and is considering what’s easiest for me.
It also makes me trust her more. I feel like she’s running a legit business and that my beloved pooch is in safe hands.
Small business owners often have challenges establishing trust with clients. So why not present yourself in a way that will make you seem more professional than the rest!?
But at the end of the day, I don’t expect she’s even really doing it for me. In fact, I expect she’s doing it to get paid faster. So really, it’s a win-win.
3. With the Right Accounting Software, You’ll Quickly Master Cash Flow
Cash flow drama is probably the most familiar and visceral experience for small business owners. Heck, I have a steady salary and even I can relate to that feeling of sometimes wondering if there’s enough income to cover costs.
And then there are those rainy-day scenarios that keep me up at night: What if I need to hop on a plane for a family emergency? What if I get sick? I can only imagine what it’s like for a small business owner dealing with a variable income.
To grow your business, you first need to master cash flow. And it’s hard to master what you can’t measure. If you’re not tracking your income and your costs, you’re just looking at a bank balance teetering between the black and the red—with no insight into how to control it.
Accounting software gives you control over your cash flow. You can easily track and measure income and costs. It’ll even help you problem solve in the moment, for example:
- Falling short one month? It’s time to hustle and get more clients.
- Seeing too much money draining out? Time to look hard at where it’s going and cut some costs.
But if you can’t track it, you can’t change it.
4. Accounting Software Will Force You to Be Objective
Being a small business owner is a passion project. You love what you do. Odds are, you dreamed about this for a long time before making the leap.
But that passion can sometimes cloud your judgement. You may favor work you enjoy over work that is profitable. Or simply live in denial about the realities of your income and expenditure.
Part of becoming a mature business owner is learning how to look at your business performance without bias. Let the facts speak for themselves.
Again, accounting software like FreshBooks will do just this. You’ll see what services are bringing in the most money. And you’ll be able to see where you’re spending (and perhaps wasting) time.
But accounting software may not always be a party pooper!
- You may see that your favorite clients are also your most profitable, allowing you to build on those relationships
- You may discover that the work that looked like a “quick buck” is the work that resulted in the most scope creep and be able to justify kicking it to the curb
Learning to view things objectively is a valuable perspective to gain. But odds are you won’t get there without a tool that gives you easy, immediate, and accurate feedback.
5. Choose Accounting Software You Can Grow With
Sure, you can start out with Word and Excel. I did when I had a small business…so I know how far you can go using these simple and accessible tools.
Here’s the problem: You’ll reach a point where they no longer work. You’ll have too many invoices to send and track, and the whole system will implode. Then, at a time when you’re too busy and stressed, you’ll be faced with a difficult decision: Which software should I use?
I don’t know about you, but I detest making decisions with a gun to my head. I’d much rather do my homework and invest in software that’s a constant and reliable tool for me during those busy times.
I want to make choices that serve me both today and tomorrow. And that’s why I think it’s a mistake not to prioritize a cloud accounting solution from the very start.
You already love what you do. I don’t need to convince you to become more passionate about photography, writing, business consulting, or whatever the service you offer is.
But to be a successful small business owner, you also need to train yourself to be passionate about managing your money. Managing your finances really doesn’t have to be this unnatural “other” thing you do.
Here are the ways to make it come easier:
- Invest early in the right tools
- Commit to using them correctly
- Get hooked on seeing those graphs go up and to the right
If you do this from the start, it will become second nature. And your business will thank you for it.
You know the way most people hate exercise until they find a gym or class they love and start to see those results? It’s the same with managing finances. Find a tool like FreshBooks that’s built to make you feel at home and at ease, and you’ll be a lean, mean small business machine.
This post was updated in April 2020.
Written by Jane Flanagan, Senior Director, Content & Creative Services, FreshBooks
Posted on May 21, 2020