Sure you use your accounting software to pay bills, invoice your customers, balance your bank statement and give everything to your accountant to prepare your taxes. Now it’s time to see how you can make your accounting a profit center instead of a cost of doing business.
Most small business owners have and have used a variety of accounting systems run by bookkeepers and accountants over the years at considerable cost and have viewed these activities as a necessary evil.
In the past few years, products such as Xero, FreshBooks and QuickBooks Online have completely turned this upside down by looking at how accounting software can be reinvented to provide real-time information, reduce costs and increase profits.
Here are 5 tips to use your software to make money:
1 – Improve Your Decision Making
One of the major benefits of online accounting is that the information is much more current than it used to be. Traditionally, the business owner would need to wait 30-45 days after month end to review the results of the operations. The problem is that by that time any information was ancient history.
Today’s tools update records daily and allow you to compare results to prior periods or budgets at will from remote locations. You can even run analysis by exporting data to Excel.
Having timely information surely helps make better business decisions.
2 – Speed Up Collections
Cash flow is EVERYTHING. So being able to collect customer invoices more timely is a tremendous tool that just a few years ago most small businesses did not have.
Most businesses prepared an invoice and mailed it to their customers and hoped to be paid within 30 days.
With current tools, invoices can be emailed along with supporting documents saving days of time by mail and eliminating the “I did not receive it” excuse. You are also able to tell when your customer looked at the invoice!
Increasing your cash flow enables you to reduce costs related to collection activities and to use the funds to grow your business.
3 – Avoid Employee Theft
For most small business owners, their bookkeeper has access to almost all of their financial records and too many times, when you add motive and lack of supervision to this equation, you wind up with trusted employees stealing money right under your nose.
The newest version of the major accounting programs allow add-on programs to enhance their features. You are able to have approval levels formerly available to only the large companies. You can review and approve invoices on the go from your phone and other mobile devices. This means NOTHING goes out without your approval.
Adding additional controls avoids employee theft and loss of profit.
4 – Avoid Sales Tax Audits
Sales tax laws are THE most complex of anything tax related. Not only do you have to know what is and what is not taxable, you need to know where your customers are, comply with complex exemption laws, understand that each county and/or municipality may have additional taxes due and know what to do when selling to someone not in your state.
The problem plain and simple is that most accounting programs are not equipped to handle all of these situations. When the sales tax auditor comes knocking they are usually looking at several years of transactions, and the likelihood that they will find something is usually significant–resulting in LARGE tax liabilities.
Using third-party software to eliminate the risk of a costly sales tax audit can avoid a huge amount of taxes due that most bookkeepers and accountants do not keep on top of on a local, state and national basis.
5 – Automate Transaction Entry
Yes, I have spoken of this in the past, but I need to make sure you know how important this is. Why in the world would anyone want to hire someone to enter transactions and hope that they are right and wait a long time to find out? This is the most critically fundamental flaw in most small businesses. Generally, the lowest cost person in their organization is managing their finances!
Using new automation technologies means that all data is accurately included in your accounting software every single day! Your books reflect exactly what the bank and your credit card companies have on a daily basis. Because most of our transactions are to the same vendors, the process can be automated and only exceptions are dealt with.
Get your CPA to set these up once for you and then have your staff or CPA quickly address any exceptions so that you can reassign your employees to tasks that make your company money!