Top tips on online accounting for small business
Books are migrating to e-readers, music is being streamed and accounting is now happening in the cloud. This is the quiet revolution that accountants whisper but dare not speak aloud. Accounting software is dead; it’s online and upwards to the clouds. Online accounting has arrived.
It may sound a touch over the top but it’s true. As a business, how you manage your books pretty much manages everything else. Your accounting is an important engine in your business. A well-oiled efficient system will reap rewards; a slow burner with too many miles will underperform and slow you down.
This is where online accounting in the cloud is so significant. Consigned to software history is the accounting package sold ‘out of a box’ installed onto your desktop, run on a local drive and perhaps backed up onto a different drive. It was fun while it lasted but now SMEs have multiple choices when it comes to doing their books.
And here lies the problem. Business owners are generally uncertain about how to choose an online accounting package that works for them. But help is at hand, outlined below are some helpful tips to help you decide on how to choose the best package.
Why choose online accounting?
It’s easy to say the future is online but what are the actual advantages?
- Firstly, you can access it anytime, anywhere and aren’t bound to the PC in your office and you don’t need to keep installing updates
- Being on the cloud means information can be easier to share as well
- It can save considerable time and keeps your records up to date
The question then is which online accounting package to choose? There are numerous packages you can subscribe to out there. Xero and Quickbooks are making inroads but there are lots of others too. There are well over thirty providers of online accounting, so choosing the right one for you can feel overwhelming. The best thing to do is to narrow your focus by asking yourself a few of the following questions:
- How long has the software been around? In other words, is it market tested?
- Is the software UK compatible? Can it deal with VAT? You will need a system that works effectively for VAT returns.
- Can it work with multi-currencies (if you need to trade overseas)?
- Can it integrate with other software easily (known as API) such as CRM or invoicing programmes?
- Will it securely connect into your bank account? This can be very helpful when it comes to bank reconciliation and looking at a live picture of the financial state of your business.
- What is the level of customer support? Are you able to call or use chat while online?
Having confidence in the provider you choose is important as they will be presenting all the data and running all the reports for you. Reports are your window into what’s happening with the numbers in your business, so it’s vital you can see what’s going on clearly. It’s best to see if your accounting software can run any of these types of reports clearly and effectively:
- Profit and Loss reports
- Balance Sheets (divided monthly)
- Company snapshots
- Debtors and Creditors
- Product and Inventory reports (if needed)
- Employee and payroll
Test, test, test
Most of the major online accounting platforms will give you a free trial. Riz Wasti from 2E Accountants and participant on the Innovating for Growth programme recommends you test the software first to see how it works for you. He suggests doing the following:
“Most online software offer 30 days trial period. That’s your opportunity to test the software before relying on it. Use your real transactions, bank payments & receipts, sales invoices, bills and expenses, etc. Softwares will also have a Demo Company setup with data already entered. That’s your opportunity to play with the software”.
Migration to your online platform
Once you’ve selected the best online accounting package for you, do allow for time and some cost to migrate across from an existing platform. As ever, the devil is in the detail (and the numbers). Riz advises that:
“Migrating data from an existing system can be complicated. It’s best to do it in stages, for example starting with sales invoices and bills in batches of months and reconcile bank statements for each month entered. The payment allocation process can be time consuming. Bank data can be uploaded in one go separately to sales and bills, but then bank payments need to match or be allocated.”
All the more reason to do all the research you can on finding the right online accounting package for you. The effort is sure to be well worthwhile in the medium to long term for your business.
If, like most business owners, you sometimes feel confused about your finances in the business, the Business & IP Centre has help available: from how-to guides on running your business, to workshops including “Get Cashflow Confident” with our ‘numbers coach’, Johnny Martin.
Jeremy O’Hare is a Relationship Manager for the British Library’s Innovating for Growth programme, which provides £10,000 of fully-funded and tailored advice for businesses looking to grow. Since joining the British Library in 2005 he has worked with countless businesses, facilitating advice and research as well as providing workshops and information advice for start-ups and established businesses.