Keeping a meticulous record of all your financial transactions gives you a good picture of the state and health of your small business and makes life easier come tax time.
However, recording your daily financial transactions manually can be a very tedious and mistake-prone process.
This article will show you how to select the right bookkeeping app to help digitize and manage the entire process of financial record keeping and reporting more easily and accurately.
Let’s dive in.
TL;DR
- Bookkeeping apps are web-based tools designed to help track, classify, and record the financial transactions of a business.
- There is a wide variety of bookkeeping apps on the market today, and you must consider a range of factors to ensure you are choosing the platform that best fits the needs of your business.
- Opt for a bookkeeping software that has relevant bookkeeping features, intuitive interfaces, robust security measures, support for your current business software tools, and flexible pricing plans.
What is a Bookkeeping App?
A bookkeeping app (aka bookkeeping software) is designed to track, classify, and record the financial transactions of a business. It can also help automate financial tasks like payment processing, invoicing, payroll management, and much more.
It digitally replaces the old process of collecting customer receipts and manually recording revenue and expense figures by hand on a paper ledger or into an Excel spreadsheet.
Bookkeeping apps are web-based tools, and you can access your platform anytime and from any location provided you have an internet connection.
Being cloud-based allows you to sync your bookkeeping app with your bank accounts and other business management tools to generate real-time financial reports.
You will be able to view those reports and keep tabs on your business’ finances on-the-go using your provider’s mobile app.
What are the Benefits of Having a Bookkeeping App?
Real-time financial tracking
Like accounting software, a bookkeeping app automates the process of recording and analyzing financial data, which ensures you will always have an accurate snapshot of your financials and cash flow at any given point in time.
Such information will help you quickly identify emerging problem patterns in your finances and also thriving streams of income that present opportunities to boost profits.
Improved accuracy and reduced errors
Manually generating your cash flow reports, balance sheets, and profit and loss statements will involve significant number crunching and complex calculations.
Your bookkeeping app will do it for you digitally and record the data in an orderly and systematic manner, while eliminating the possibility of errors you could have made in the process.
Easy access to financial data
Bookkeeping software makes it seamless for you to pull financial information from the platform and share it with both internal and external users as well-packaged financial reports.
So whether you’re making financial decisions or convincing potential investors, bookkeeping apps can help with accurate and well-prepared financial information that’s up-to-date.
Automated invoicing and billing
Preparing paper invoices is already a time-consuming process. Keeping track of them and notifying customers to pay up adds even more stress.
Your bookkeeping app will help you generate beautiful invoices using pre-designed templates. It will also automate the process of sending them to customers and tracking payments.
Simplified tax preparation
The right software will provide you with in-built tools like a tax planner to help you organize and generate the necessary financial documents and statements.
This makes the process of tax preparation stress free and removes unnecessary complications during tax season.
Enhanced security for financial information
Storing your financial information with a reliable payment services provider through your software will give you peace of mind that your data is secure.
The very best bookkeeping software platforms use high-level encryptions to store your data and effect periodic data back-ups to secure servers to ensure your vital information is never lost.
Cost savings on manual bookkeeping
Bookkeeping software not only eliminates costs that would have been spent on additional staff, it also reduces the labor that would have been expended on administrative manual tasks like mailing invoices to clients.
You will be able to focus your energy on improving your business and satisfying the needs of your customers.
How to Select the Right Bookkeeping App for Your Business
There is a wide variety of accounting and bookkeeping apps on the market today, and trying to select the right tool for your business can become very confusing pretty quickly without the right information.
In this section, we share a step-by-step guide to help you evaluate your options, and ensure you are choosing the small business accounting software that best fits your needs.
Step 1: Understand your business needs
To make your search efficient and less time-consuming, start by identifying what you need to manage your business finances effectively.
Take a look at the size of your business and the volume of transactions you process each month.
For example, a sole proprietorship freelance business may not need more than a simple accounting system that provides online payments support, ledgers, invoicing, time tracking, payment reminders, bank connections, and tax tools.
In contrast, a larger brick-and-mortar business with multiple locations or even international customers will require an accounting app with additional features like inventory management, mileage tracking, payroll, multi-currency support, expense tracking, and more.
Not to mention, different industries have different financial requirements, and in fact, 50% of accounting consultants say complying with ever changing regulations is their biggest challenge.
You may be better off with a bookkeeping tool that is designed for businesses in your industry.
For example, there are bookkeeping apps designed specifically for businesses in the restaurant sector.
And there are also robust bookkeeping and accounting platforms designed to support manufacturing businesses with complex financial needs and international customers.
Also, if you are a new business owner or freelancer without the experience you need to identify key features required in your niche—reach out to veterans in your industry, and ask about what works for them and areas where they wish to make improvements.
Step 2: Outline the key features you want in a bookkeeping app
The good thing about taking the time to identify your core business requirements is that it makes it easier to find bookkeeping software that fits your business like a glove.
Features vary from one app to another (there are even slight differences between Android and iOS versions of the same app), but most accounting platforms are able to do the following:
- Track income and expenses
- Generate and organize receipts
- Provide seamless bank connections
- Generate accounts payable and receivable
- Track and manage business inventory
- Facilitate online invoicing and payments
- Send mobile notifications for overdue invoices
- Generate detailed financial statements
- Integrate seamlessly with third-party business management tools
- Generate in-depth business analytics reports
- Automated payroll management
- Support the creation and filing of 1099 forms for independent contractors
- Track sales tax
- Tax preparation and filling
- Support multiple users with different levels of access
Go through the list above to identify the features that matter most to the unique needs of your business.
Then use that custom list of features to compare your choices till you identify a few select bookkeeping apps that can meet your needs.
Step 3: Check for ease of use
All small business owners want a platform with a user-friendly and intuitive interface that is easy for them to navigate and understand.
One way to find out if the platform is intuitive is to try it out for free with a free trial plan. You will be able to run the app and check out the features to see if it’s the right fit for you.
You can check out online review online platforms to see what current and old users have to say about the platform. If the company has a good reputation and is highly rated, then you’re on the right track.
Also, bookkeeping and accounting software tools are designed for different skill levels. Some are very intuitive and simple enough for anyone to use, while others are more complicated to operate, and are better suited to accountants.
Step 4: Check for compatibility with your existing systems
The right bookkeeping software should integrate seamlessly with the other business management tools you currently use daily to run your business.
These third-party integrations include your eCommerce, POS, payment processing, payroll, inventory management, and tax preparation software platforms. A funky connection with your existing systems can lead to errors with data flow, which will affect the accuracy of your financial statements and reports.
That’s why your bookkeeping software platform should also be compatible with a wider variety of third party tools than what you currently use in your business.
As your company grows, you may have to migrate to more sophisticated tools for managing things like payroll and business inventory. Your accounting software’s third-party app support ecosystem must be broad enough to include such tools.
Step 5: Check for compliance with data security best practices and industry standards
Your bookkeeping software provider should be PCI DSS compliant. It is an information security standard designed to help protect credit card and other financial data.
A compliant software services provider will use 256-bit encoded bank level encryption to safeguard your data and ensure their servers are well protected physically and electronically.
Excellent data backup and recovery options are also a necessity.
Financial and tax regulations may demand that you store some financial data for years, and you must ensure that your bookkeeping software provider can safely categorize and secure your data for a long period and retrieve it anytime you need it.
Step 6: Check for customization and scalability
The bookkeeping needs and business management processes of each small business is unique, and you should be able to customize your platform to match your existing workflow.
There must be room to modify the invoice templates, inventory management reports, and financial reporting templates on your platform to match your current way of doing things.
Your software solution must also be able to support the current and future needs of your business.
As your business grows, you will need more sophisticated accounting features and customization options.
For example, a growing business with more physical store locations and more employees will require multi-user access and permissions.
So, your software must make it easy for you to give controlled access permissions to your accountant, bookkeepers, investors, and other collaborators.
Step 7: Check for adequate customer support and training resources
You may have questions or need help fixing issues with your bookkeeping app, and when that time comes, you want to have access to a capable support team that will help quickly and effectively.
Customer support comes in various forms, and most providers offer a combination of services. The types of customer services your provider can offer include:
- Live chat support
- Email support
- Social media support
- Telephone support
- Online knowledge base for self troubleshooting
Dependingon the provider, these things can be offered 24/7 or for limited periods each week.
We recommend going for a bookkeeping software vendor that offers these services 24/7, especially if you have multiple users on your bookkeeping platform.
Step 8: Compare pricing models
Budget is always a key concern, so it’s a must that we understand the pricing in the bookkeeping software market. Most modern bookkeeping apps operate on a SaaS model with subscription-based pricing.
Users typically choose from a number of pricing tiers based on factors like:
- The features they need
- The number of users
- The level of customer support required
- The storage capacity needed
Now, if you made it this far, you likely have a clear idea of your business requirements, and you may even know what price range to focus on. The next step is to research vendors that meet your needs and compare their pricing. Be sure to consider any hidden fees or additional costs that might arise, such as setup fees, extra charges for additional users, or premium support services.
Choosing the Right Bookkeeping App for Your Business
Managing the many other aspects of running a small business already demands a lot of your time and mental concentration.
Bookkeeping shouldn’t add to your list of core to-dos. That good news? A top-quality bookkeeping software can help. Use the step-by-step process we explored above to evaluate the many software options on the market and then select the best accounting software for your business needs.
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