Managing the books may not be one of your favorite business tasks but it’s essential. A bookkeeping app can help streamline your accounting system if you’re still doing the books the old-fashioned way. Not sure whether switching to an app is the right move? Here are 5 signs that it’s time to upgrade.
1. Basic Accounting Tasks Are Time-Consuming
Ideally, you should spend more time focusing on growing your business than handling the books. If you find yourself investing more and more hours in adding up expenses, running payroll, and creating invoices, that’s a red flag that your bookkeeping system is inefficient.
It can suggest 1 of 2 things. First, your current bookkeeping system may be disorganized, which means more drag on your time. On the flip side, spending more time on accounting could also signal that your business is expanding at a steady pace, which is a good thing. In either case, using a bookkeeping app could allow you to shift your attention back to high-ROI tasks that help you grow instead of spending hours crunching numbers.
2. Past Due Invoices Have Become the Norm
Late payments are the bane of a business owner’s existence. When a customer or client doesn’t pay in a timely manner, it becomes that much harder for you to manage your cash flow, cover business expenses, and plan for the future.
One side effect of a bogged-down bookkeeping system is that you may find yourself with more receivables outstanding simply because you’re not keeping track of when invoices are sent. Or worse, you’re behind on invoicing your customers and clients altogether. A bookkeeping app can help solve those problems.
You can schedule invoices and payment reminders to be sent out automatically so you don’t have to waste time chasing down payments. As an added benefit, you could offer incentives to get customers to pay on time, such as discounting invoices for prompt or early payments.
3. You Have No Idea What You’re Spending
Tracking expenses in your business is important for 2 reasons. First, it’s helpful for monitoring cash flow to see what’s going out of the business versus what’s coming in. When you have a solid understanding of what you’re spending and where, you can better manage costs to ensure that you’re staying in the black. For example, there may be expenses that aren’t critical to your operations that you can eliminate from your business budget altogether.
Knowing what you’re spending also matters at tax time. As a small business owner, you may be able to claim a number of deductions to help reduce your tax bill for the year. But that only works if you have receipts or documentation to show the IRS that back up your spending. With a bookkeeping app, you can link your bank accounts and credit card accounts to automatically record expenses throughout the year, easing your stress when it’s time to file taxes. No more scrambling to find receipts, since you can access everything you need through the app.
4. Refunds Are Complicated
Refunding money to your customers is something you want to do as infrequently as possible. A refund can mean that for whatever reason, a customer wasn’t fully satisfied with your products or services and wants their money back. If you do have to issue refunds from time to time, then you want to that process to go smoothly, both for yourself and your customers.
If your current bookkeeping system makes refunding money to your customers clunky and time-consuming, that’s a good reason to choose an app to manage the books instead. With a digital bookkeeping system, it can be much faster and easier to process refunds or returns without them becoming a major distraction. You can get money back to your customers without lengthy delays on your end or theirs.
5. You Don’t Maintain Accurate Financial Reports
Creating financial statements, such as a profit and loss statement or balance sheet, is a good way to keep a finger on the pulse of your business’s financial health. Regularly updating the numbers can tell you how your business is progressing over time and which areas may need your attention. Making sure those statements are accurate can be challenging when your bookkeeping system isn’t centralized. That’s something a bookkeeping app can help with.
When you have all of your expenses and invoices tracked together in one place, it’s much easier to run key financial reports for your business. You can generate tax summaries, balance sheets, cash flow statements—everything you need to review your business’s financials at a glance.
If you’ve been using old school methods to manage your business’s books, take time to weigh what a bookkeeping app can do for you. When your business is forward-thinking, your accounting software should be, too.