During tough times you especially need to keep a handle on every single transaction in your business.
It took me six hours, but after going through my bank statements, sifting through my receipts, and classifying my expenses in an Excel spreadsheet, I was finally ready to send six months worth of information to my tax consultant.
But, I wondered:
- Had I classified my business expenses correctly?
- Did I miss something?
- Would I get back money from the tax man?
- Was I even doing this right?
Now, I get it: In lean times, small business owners should look long and hard at every subscription dollar. But it’s during those lean times that you especially need to keep a handle on every single transaction in your business. Accounting software is not the subscription to let slide.
Accounting Software: An Essential, Even in Lean Times
During lean times like these, you’re likely looking at every single subscription and weighing what’s a must have. This is absolutely the smart thing to do.
There are so many essential business areas you need to focus on — areas such as marketing, sales, and even customer service.
Plus, many feel Word and Excel can do the job of accounting software, right? Well not exactly…
Word and Excel Have Their Pitfalls
By only using Word and Excel for accounting, you’re not doing yourself any favors. You know what I’m talking about if you’ve ever found yourself:
- Going through the tedious process of re-opening invoices to fix common invoicing mistakes: Specifying the wrong date, excluding an invoice number or having the wrong invoice value
- Sifting through a myriad of folders to find that elusive invoices and documents
- Scrambling to find all that income and expense information you need to complete your tax return.
In fact, if you’re using Word and Excel, you may be leaving a lot of money on the table. Here are four compelling reasons why investing in cloud accounting actually costs you far less than doing it yourself.
4 Reasons to Keep Your Accounting Solution
1. You’ll Have More Time for Billable Work
Even when you’re not making any errors on your invoices, you’re spending an unnecessary amount of time on invoicing. Think about it for a second…
You first need to find your invoice template which can take a while as you sift through folders on your laptop. Once you have it, you now need to update the client information, work out the invoice value, open up your mail account, attach the invoice (that you had to save as a PDF), type an email with a subject line and hit send.
Over the course of a year and many invoices, those extra minutes add up. Thankfully, by using cloud accounting, you can speed up the entire invoicing and accounting process, and also prevent some of those common invoicing mistakes.
FreshBooks, for example, lets you create professional invoices in a matter of seconds. The software updates the dates and invoice numbers without you even having to lift a finger. The solution also does the calculations for you, so you don’t have to worry about the math.
Other time-saving features include the ability to:
- Set up recurring invoices that go out automatically each month, so you don’t have to worry about creating and updating a new invoice every time (ideal for those subscription-based clients)
- Track expenses by connecting your bank account, so your expenses update each day automatically
All these time-saving features translate into having more time to focus on billable work, other growth areas (e.g., marketing), and work you love.
Isn’t it funny how – in the long run – we actually spend more time on the things we hate because we don’t devote time to them right now? So, invest money in accounting right now and you’ll reap the benefits later.
2. You Won’t Leave Hard Earned Cash on the Table
The discomfort I experienced when filing my tax return was because I wasn’t prepared and organized. Instead, I rushed around at the last minute trying to get my income and expenses together. I compare it to piecing together a puzzle; only it was harder because all the pieces were scattered all over the place.
Approaching your taxes this way puts you under a lot of pressure and leads to mistakes. Mistakes that can cost you a lot of money.
You see, when you’re running your own business, many expenses are tax deductible. Think of travel expenses, data costs, the office space in your house (if you work from home) or even that online course you bought to improve your skills.
You can get back a part of that cost from the tax man. However, if you don’t accurately track, categorize and keep an organized record of all these business expenses, you’ll end up forking out more money than you should.
Luckily cloud accounting helps create this organized and secure record so that you’re prepared come tax time. You’re able to access all your expense and income records from one place and easily categorize expenses by assigning tax-friendly business categories.
How much easier is that than having to reconcile all your numbers from spreadsheets, receipts, and bank statements?
3. You Master Your Finances and Cash Flow
Have you ever found yourself struggling to pay bills at the end of the month due to poor cash flow? I’ve certainly experienced this and it’s a common problem for many small business owners.
Invariably, you’re left scrambling to get just enough money to cover costs, let alone grow your business. You may find yourself using your credit card to cover expenses. Maybe you’re asking family and friends for a loan? Or, perhaps, you’re lucky and a client payment arrives in the nick of time.
But this isn’t really how you want to run your business, right? I bet you’d want far less anxiety and more comfort month-to-month. The question is: How do you get this level of comfort?
You become a master of your cash flow by getting a firm handle on your income and costs. If you’re not tracking how much money is flowing in and out of your business each month, how do you expect to improve your cash flow? Think of it this way: You won’t know what to improve if you’re not tracking the variables (income and expenses) that affect your cash flow.
For example, if you monitor your income from month-to-month, you can pinpoint lower than usual income months and then identify why this is the case and look for solutions to fix it.
It may be that you don’t have enough clients – in which case you should spend more time marketing yourself. Or, perhaps you have too many late payers which mean you should either find better clients or speed up the collections process.
Regardless of your situation, an accounting solution will help. Cloud accounting helps you track income and expenses and does what a solution like Word and Excel cannot do. With cloud accounting you can:
- See how your business is doing thanks to automatic income and expense reports
- See what invoices are outstanding
- Set automatic late payment reminders that go out on a schedule for late payers
- Make it easy for clients to pay you online via credit card (yes, you don’t have to wait for a check which can take weeks, and in some cases, months to arrive)
4. You Feel Proud That You’re Doing It Right
An often overlooked benefit of using cloud accounting is the feeling you get from investing in a solution that actually helps your business succeed.
An investment in cloud accounting ensures that you’re putting your best foot forward for your business. Why? Because you’re using the right tools to grow your business without hacking together solutions that cost you time and money while also causing stress.
There’s something inherently rewarding about knowing that you’ve done your best to grow your business. Not only does it give you a massive sense of pride but it also makes you feel like a more “legit” business owner.
And in the end, there’s a lot to be said for seeing yourself as a serious business owner. Because let’s be honest, if you don’t, how can you expect clients to see you that way?
The Bottom Line
Accounting is part and parcel of running a successful business. So, don’t make it even harder for yourself by using solutions such as Word and Excel that only cause problems.
Instead, invest in cloud accounting software that will:
- Give you more time for billable work
- Prepare you for the tax season
- Help you become a master of cash flow
- Make you feel proud knowing that you’re doing everything in your power to grow your business
FreshBooks makes running your small business easy by ensuring you spend less time on accounting and more time on the work you love. Sign up for a free 30-day trial today.
This post was updated in April 2020.