Bookkeeping Resolutions #2: Use an Accounting Software

Now that you have set up your business account, how are you going to track all of your expenses and income? There are lots of options, including excel spreadsheets and even the dreaded shoebox.

However, in 2021, it is time to resolve to use an accounting software.

At one time, most small business owners only had one main choice: QuickBooks. And while QuickBooks remains the industry leader, a simple google search will turn up other options such as Xero, FreshBooks, and Wave. All of these options will offer the basics of tracking expenses, invoicing clients, and accepting credit card payments. However, there are some key differences between them all, and you may want to investigate them. A great article can be found here.

But why software? Doesn't an excel sheet do the same thing? I can type in all my expenses and add them up. 

Sure you can and with personal expenses, that is where we stop. We only need to know what was spent and where. For a business we are not just tracking, we are practicing accounting. And for accounting we need to be able to have good double-entry systems.

What?

Double-entry accounting is an ancient but also definitively modern way to account for the financial health of a business. The core concept is that every transaction impacts a company's finances in two ways. This can not be accounted for, with ease, in an excel sheet. Nor can the transactions be reconciled.

The ability to reconcile is fundamental to maintaining the integrity of your financial records. This process ensures accuracy and avoids over or under-reporting income. Most accounting software have a built-in reconciliation process.

Where to start? The first decision you may want to make is; Cloud or Desktop based software. While Cloud has quite a few options, Desktop will limit you.

Second, talk to your CPA. You may want to see what he/she recommends, or even if they are willing to work with a system other than their preferred. They may be able, if they are a wholesale seller of a program, to offer you a discount on the month-to-month subscription or software purchase.