This is a terrific question and one we get asked a lot, particularly by people starting up a business for the first time.
The quick answer: No! (But maybe: Yes!)
It depends on your business and your own comfort level, but for most small businesses chances are you really don’t need an accounting package.
Here’s what happens with a lot of people when they’re launching their small business: they’re getting themselves all hooked up with their office equipment, so they’ll pop into their local electronics superstore, buy a PC or Mac and a printer, get their copy of Microsoft Office, and throw in a shrink-wrapped “easy” accounting package, thinking they’ll be all set. How hard can it be?
Truth is: that accounting package is probably going to be complete overkill for the majority of small businesses. In fact, I’d go so far as to say that the entire concept of general ledger accounting is completely unnecessary in many businesses in their early stages.
The key question would be: do you want to learn how to be an accountant, or do you just want to generate bills, keep track of who owes you money, and make sure your books are in good order for tax time?
It’s all a matter of focus.
FreshBooks is built to handle the day-to-day transactions of a business without requiring sophisticated accounting knowledge. We designed it to be simple, accurate and very fast.
Our focus is on getting you paid for the work you do. So we make it darn easy to generate bills, follow up with clients, allow them to pay easily by a variety of methods, track who owes you money, and run reports to keep tabs on how your business is doing.
Accounting products, even the simplified ones, start from an entirely different point of view. Their entire vocabulary, their context is completely different. Almost all accounting systems are going to be built around all of that double ledger, cash- or accrual-based bean-counting, balance sheets and income statements an actual accountant needs.
You’re just getting your business off the ground. You’re an expert at what you do. Do you really want to learn how to do all this other “accounting” stuff yourself?
I had this conversation with a potential client earlier this week and my point, in essence, was: while you’re busy building your contracting business, you’re probably going to hand over your books to an actual accountant once year (or maybe more often) anyway.
Your accountant will need your opening and closing bank balances, by month, and will then need a bunch of other info in order to do full “reconciliations” and ensure your books are all in order for tax and general reporting purposes.
In my experience (disclaimer: I’m not an accountant, so I may well be missing stuff here) an accountant needs:
- Profit/loss statement
- Revenue by Client
- Item/service Sales
- Expenses by Category
- Summary of taxes charged
ALL of those reports are produced as standard by FreshBooks. The missing bit – monthly bank reconciliations – is the kind of info it takes me about 10 minutes to pull down from my online banking in a neat little Excel spreadsheet.
As your business blossoms and grows, it’s entirely likely you’re going to reach the point where you need something bigger. We hope that you’re successful enough that you’ll get to the point where you want to hire your accountant on fulltime as your CFO.
At that stage, you might decide you do need an accounting system that’s more complex than what we offer. When that happens, we’ll celebrate your “graduation” and you’ll be happy knowing you can export everything you need from FreshBooks. We have a lot of customers who continue to run FreshBooks in tandem with an accounting package too – that’s a great option for many people.
We like accounting packages. In fact, we integrate with a whole bunch of them. We just don’t think everyone necessarily needs one right out of the gate.
In short: it’s a really wise move to have a good accountant among your business advisors but do you really want to be one yourself?