The Foundation Stones Of A New Business (Part 2) The Right Accounting Software
It’s exciting when you have that light bulb moment, that flash of brilliance and idea for your new business. It’s hard not to get carried away with the excitement but turning your idea into a business necessitates research, risk, passion and planning. There are very few shortcuts and no amount of enthusiasm, hard work or talent can guarantee your business success.
There are so many issues you need to consider before you can open your doors. You have to navigate your way through a maze of rules, registrations and regulations. Having mentored hundreds of business owners through the start-up phase we often say starting a business is like building a house. You need to plan the build and have solid foundations. In a business sense this means things like having the right business structure, branding, accounting software and insurances. You also need a financial budget and a marketing plan.
In this second instalment from our series of articles, we are going to identify the 7 foundation stones for a new business and the focus of this post is the right accounting and bookkeeping software.
Your accounting software should make it easy to complete your routine accounting tasks and help you see the big picture of how your business is performing.
Most business owners are great technicians but in the start-up phase you need to wear many ‘hats’. You might need to be acting CEO, receptionist, marketing manager and bookkeeper. While you could be an outstanding electrician, brilliant solicitor or master chef, bookkeeping is a key responsibility and while it’s not meant to be fun, it’s an essential part of running a business. Experience tells us that bookkeeping can be a good technician’s kryptonite.
In fact, poor record keeping is one of the biggest causes of business failure in this country and up to date, accurate financial records let you make informed business decisions. Your financial statements reflect your business performance and provide early warning signs that alerts you and your accountant that your business may be under performing. Also, third parties like banks, landlords, potential investors, trade creditors and the Tax Office also rely on your financial statements.
The right accounting software will make it easy to record your transactions and monitor the financial health of your business. They let you track the movement of money in and out of your bank accounts, create invoices, identify your debtors and generate customer statements. These programs let you generate a variety of reports that help you analyse your business from a variety of angles. If you sell goods they can help you manage your inventory or projects.
Choosing the Right Small Business Accounting Software
Make no mistake, the wrong choice of software can be catastrophic. All too often we find new business owners rush out and purchase accounting software off the shelf that is beyond their business needs and level of accounting skill. The net result is ‘computerised shoebox’ records that cause frustration and waste a lot of time. They also create additional accounting fees which conflicts with our mission of helping you slash the time and cost associated with bookkeeping and GST compliance.
It’s important to understand that not all accounting software packages are the same. They come with different features, functionality and pricing plans. While the majority of business start-ups usually only need basic bookkeeping functions like revenue and expense tracking, invoicing and financial reports, you also need to think about your future requirements. If your business sells more than just a few products, you might also want software that tracks your inventory, manages vendors and assists you with purchase ordering. If you have staff you will also need payroll functionality where the program calculates wages and PAYG tax plus records staff entitlements for annual and long service leave. They can also generate annual PAYG statements.
In summary, when recommending the most appropriate accounting software program for clients we always address these key issues:
What does your business need? Do you need both accounts receivable and accounts payable functions? Do you need to
track inventory and reorder products by automatically creating purchase orders when stock items fall below a certain level? If your
business provides services, do you want a program that makes it easy to track time and invoice billable hours.
- What is your level of accounting skill?
Do you want to use a cloud-based program or a desktop bookkeeping solution? You’ll find we support a range of different software programs, but we do have a preference for cloud-based solutions because of their flexibility and the fact that you can access your financial data via the internet and invite us or your bookkeeper to view your accounts at the same time.This means you can get bookkeeping support and valuable advice in real-time because you can log-in anytime, anywhere on your Mac, PC, tablet or smart phone to get a real-time view of your cash flow. Your data is automatically backed up and users have access to the latest version of your financial data plus you never need to worry about installing software or program updates.
Usability- how many users need to access the software? Most accounting software programs now allow you to invite other
users to use the program. You can control the data they can see and the tasks they can access. For example, you might want to give your
business partner and your accountant full access to the system but only allow your staff to use the system to produce customer invoices
and track their time on jobs.
- Price - The software can vary dramatically in price depending on the number of features included and the number of users supported. Most software vendors now offer cloud-based ‘software as a service’ (rather than a software license) and charge a monthly subscription fee. You can subscribe to basic packages from around $10 or $20 per month up to expensive high-end programs that include advanced features such as expense tracking, sales tracking, automatic past-due billing, payroll services, advanced reporting capabilities, inventory tracking and purchase ordering.
These programs also integrate with other programs and allow you to automatically share data between the systems in real time. Popular integrations include point of sale systems, payment processing, advanced inventory management, e-commerce, CRM, email marketing and Google apps.
Your accounting or bookkeeping system is like any other tool you use in your business, it needs to provide information to help you run your business and it must be simple enough for you to operate it. When selecting the most appropriate accounting software program for your business we always try and match your business needs with your level of accounting skill. We urge you to consult with us regarding your software selection.
If you are starting a business the evaluation and establishment phases can be periods of great anxiety due to a combination of excitement, uncertainty and financial risk. Over the years we have built a reputation as business start-up specialists and have put together a range of tools, templates and checklists to help you get your business off to a flying start. If you're contemplating starting a business talk to us today about our New Business Starter Kit that contains templates for a business plan, cash flow budget, profit and loss forecast together with our unique 82 step start-up checklist.
Stay tuned for the next instalment in this series that examines registrations for a new business.
This is general information only. It simply provides an overview of alternative business structures available at the date of publication. It does not serve as advice and no action should be taken on the information provided herein without consulting the relevant legislation or seeking professional advice from your accountant, solicitor or professional advisor. No responsibility for loss occasioned by any person acting on the material contained in this document can be accepted by the accounting firm.