Cloud-Based Accounting Software (Part I)
40 to 46 percent of small business owners and executives consider bookkeeping and taxes the least enjoyable part of running a business. Bookkeeping (day-to-day financial tracking) and accounting (building financial statements and drawing insights) can be expensive, complex, time-consuming, and the source of countless administrative headaches. Despite the cost and frustration of traditional bookkeeping methods, some studies conclude that small businesses have been more hesitant to move to cloud-based solutions for accounting, than for any other business operation. This guide will help you understand existing solutions and decide whether cloud-based accounting software could make your business more efficient.
The bookkeeping/accounting solutions landscape
As a small business owner, you have several options for handling your bookkeeping:
|By hand||Traditional desktop solutions||Part-time local bookkeeper|
|With Excel Spreadsheet||Cloud-based software||Part-time cloud based bookkeeper (Ex: Bench)|
|In-house bookkeeper or accountant|
With a 46 percent usage rate, traditional desktop software dominates in the small business sphere. One fifth of small business owners still rely on manual methods.
Accountants and software: A match made in heaven
Business owners tend to value their accountants highly. Entrepreneur.com ranks accounting/taxes as the #1 task entrepreneurs should outsource to professionals. Business owners and executives agree that accountants are the most important professionals for small businesses, superseding attorneys and bankers. So does cloud-based software threaten the role of accountants? Quite the opposite. In fact, accountants play such a large role in encouraging small businesses to adopt cloud software, that software companies often market directly to accountants.
Why have accountants championed cloud-based software? They list not worrying about software updates/maintenance, business continuity/quick disaster recovery, and improved productivity among the biggest benefits. Replacing the drudgery of data entry and manual reporting with automated solutions and real-time collaboration, lets accountants focus on giving sound business advice to their clients. Cloud-based bookkeeping gives business owners more of the control and flexibility they seek, and gives accountants the freedom to do more satisfying, higher-level work.
What exactly is cloud-based accounting software?
If you use your bank’s online banking platform or store files on Google Drive, you’re already familiar with the cloud. It is a system that enables the storage of data and software online, rather than in your computer’s hard drive.
Many cloud-based accounting solutions are designed for non-accounting professionals. To get started, all you need is a few days, at most, to familiarize yourself with the system. The more experience you have with websites and Internet-based software, the less time it will take you to master the system.
What cloud-based accounting software does
Like desktop accounting software, cloud-based software handles your basic bookkeeping and accounting functions. While there are many options on the market, the main players all perform the same basic functions: tracking accounts payable and receivable, invoicing, customer and vendor profiles, bank synchronization and reconciliation, bill management, financial reporting, and cash flow snapshots. Many also offer payroll, inventory, quotes, and other services as an add-on, or as part of the package.
What accounting software options are out there
The most talked-about cloud-based accounting solutions are Intuit QuickBooks Online, Xero, and Wave. Each option has a different pricing model and feature set, that makes it appropriate for some businesses, but not others. This explains why ratings for all three tend to be inconsistent, across various reviewers. Competitors include FreshBooks (which focuses on invoicing and is very popular among freelancers and sole proprietors), Zoho Books (lacks payroll integration), KashFlow, NutCache, and FreeAgent. More advanced and expensive solutions include Intacct, NetSuite, Financial Force, and Sellsy.
Intuit QuickBooks Online commands 89 percent of traffic, with Xero and Wave at almost 5 and 4 percent, respectively.
Which solution is right for you?
As long as you choose an option that suits your business, switching to cloud-based software should make the financial management of your business much easier. Some questions to ask yourself as you compare alternatives include:
- What is your budget for accounting?
- How many invoices do you create every month?
- Does the software need to scale with your business?
- How many users need to access the system?
- What reports do you need, and to what degree will customization be required?
- Do you need payroll services? How many employees do you have?
- Do you want inventory solutions within your accounting solution?
- What other software are you already using that you’ll need to integrate with?
- Do you use a smartphone for business?
Once you know which features are most important to you, shop around. (We’ve done the research on the three most common options for you.) Then give the most promising contender a free trial run. Your accountant and your schedule will thank you.
More from the Resource Center: A Beginner’s Guide to Cloud-Based Accounting Software (II)
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