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Is accounting software right for you?

Accounting software has the potential to change the way a small business operates, but it’s not for everyone. Here’s what you should consider.

How accounting software can be used

More and more small businesses are choosing to use accounting software, either on its own or to complement the services and advice of their accountant or bookkeeper.

Some people still prefer to use spreadsheets or desktop software, especially where there’s no reliable internet connection or when manual entry into ledgers makes more sense. But if you’re looking to save yourself some time and hassle, it’s a good idea to consider cloud-based accounting software - software that runs on the internet, instead of locally on your computer.

“One of the major benefits of cloud-based accounting software is the ability to access it anywhere, at any time,” says Nick Fletcher, MYOB Head of Clients and Partners. “For a business owner on the move, having a real-time view of their cashflow and the ability to collaborate with their accountant is invaluable.”

Software providers offer different packages at different prices, according to your needs. However, you can write off those fees as a business expense.

Software providers offer different packages at different prices, according to your needs. However, you can write off those fees as a business expense.

There are other advantages to using accounting software.

Better understand your finances. Many online accounting software packages have a dashboard as the opening screen, which summarises the most important information in a single page so you can easily see things like your account balances and the status of invoices.

Save you time.

  • Many packages offer a direct connection between your bank feeds and your accounting software. This eliminates the need for manual data entry and bank account reconciliation, saving you time.
  • In some packages, you can set up automatic coding of receipts, eg so receipts from stationery suppliers are automatically coded as office expenses.

“It means a small business can spend less time reconciling bank accounts and creating or coding invoices, and more time doing what they’re passionate about – running their business,” says Craig Hudson, Managing Director of Xero New Zealand and Pacific Islands.

Better manage your cash flow.

  • When your accounting software is connected to your bank you can see the money going in and out as it happens, and plan for any issues you may see ahead. 
  • One of the biggest cash flow problems facing small businesses is late payment of invoices. Many accounting software packages offer automated invoice reminders.
  • Online accounting software can be reconciled daily, which makes month end easier.

Allow access to multiple users at the same time. With many cloud-based accounting packages, you can grant access to your accountant or employees if you choose. This can save your accountant time, and enable them or another advisor to provide you with better advice. For this reason many accountancy firms now encourage their clients to use online accounting software.

A rich source of business intelligence. Ask the right questions of your accounting software and the answers may help you find more sales, avoid cost overruns and run a more profitable business.

Increased data security. Because the data is not stored only on your computer, it's also in the cloud.

More reliable than desktop software. If your computer crashes, the accounting data file isn’t affected. Backups, upgrades and bug fixes are handled automatically by the software company.

Easy to use across different devices. Whether Mac, PC, smartphone or tablet - because the software runs in the internet browser, rather than being dependent on the operating system.

Accounting software can help with tax compliance. More than 85,000 businesses now use online systems to file GST, and the new Accounting Income Method (AIM) of paying provisional tax requires accounting software.

Payday filing becomes compulsory for all employers from 1 April 2019.

Payday filing becomes compulsory for all employers from 1 April 2019.

You’ll also be able to use your payroll software as soon as your software provider is ready.

Payday filing: Your questions, answered

Where many businesses and their accountants currently record their activity in spreadsheets and then copy that information across to myIR to file their taxes, accounting software can make the calculations and send that information directly across to Inland Revenue.

There are a few things to consider when thinking about whether to use accounting software.

  • If you don’t have access to a reliable internet connection, cloud-based accounting software is probably not right for you.
  • There is a cost involved in using accounting software, usually a monthly fee. Software providers offer different packages at different prices, according to your needs. However, you can write off those fees as a business expense.
  • Most providers offer a free trial period so you can decide if the software is right for your business.
  • As your business grows, you want your accounting software to grow with it.
  • Remember that for tax purposes you still need to keep tax records for seven years, in digital or electronic form.
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