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One of the main reasons small businesses fail is because they don’t have good accounting systems to provide cashflow warning signs.
Small business owners can choose to set up a bookkeeping system manually with accounting books, electronically with spreadsheets or use accounting software.
Accounting software is more efficient than a manual set up or spreadsheets, particularly software that is cloud-based as it provides more visibility on cash position. It is also designed to make financial record keeping as easy as possible for small business owners with no need for accounting knowledge or experience.
The software costs a fraction of hiring an accountant and puts the business owner front and centre in managing their financial position at any moment simply by checking a smartphone or computer.
While accounting software won’t directly solve cash flow problems, it will give the small business owner a good idea of where to focus their attention.
How does it work?
Software run from your devices allows you to track ingoings and outgoings, automatically submit your BAS, generate invoices, link to your bank account so you can summarise your cash position, payroll and more with backups to the cloud, meaning a lost spreadsheet or receipts is no longer an issue.
With accounting software, you can invoice online immediately whenever you have completed a job or dispatched your goods. You can also schedule recurring invoices for regular customers. Another common feature is invoicing via email, which saves you time and the cost of sending paper bills.
Accounting software tracks who you owe, reminds you to take action as due dates approach and schedules payments. It has reporting tools that provide insight into regular costs, how they impact cash low and whether the business is spending too much.
Good accounting software can also assist with inventory management by:
- Reporting stock levels and their value
- Tracking stock items
- Identifying best sellers
- Identifying slow-moving items
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What to consider
- Does the system calculate all payroll requirements (PAYE, annual leave, long service leave etc)?
- Does the system track stock, work in progress, orders, jobs and other task management requirements?
- Will the system be able to handle multiple bank accounts?
- Does the system need to handle foreign currency?
- Does the system track separate financial records for each business or department within the business?
- Does the system allow for interface with other computer systems such as online payments?
- Does the system keep detailed records on customers including what they buy, how often they buy and when they buy?
Accounting software doesn’t have to be expensive to do a good job and starts at about $40 a month for a simple plan. There are also some free accounting software programs available. The software company’s quote will usually include the licensing fee but there are other costs you will need to factor in including software implementation, training, customisation for your devices, maintenance, cloud storage, upgrades and support.
Sign up free to the Sage Cash Flow Masterclass, and take your cash flow management to the next level.
5 more great cash flow articles for you to read:
1. The 7 worst cash flow mistakes
2. Cash flow problems and solutions
3. How to secure a small business grant
4. Small business = big economic impact
5. The 9 most popular sectors for start-ups