Is Accounting Software Enough for a Small Business? The Value Add of Outsourcing Accounting
If you’re a startup or a small business with a tight business budget, you’ve probably been advised to save money on accounting by simply buying accounting software. And why not when even the most basic, and often free of cost, accounting software these days covers a huge chunk of your everyday accounting needs? Sounds more convenient and pocket-friendly than hiring an accountant, right?
But here’s the truth: accounting software is not a replacement for a real, professional accountant. Whether such software will work for your business depends on factors such as size, complexity, budget, transaction volumes, and many others.
What Accounting Software Offers a Small Business
In this age of digitization, globalization, and speed, having accounting software has become more of a need and norm than a choice. Manual record-keeping and accounting just cannot keep up with the pace of business transactions. This has created a need to automate routine tasks such as tracking bills and expenses, generating invoices, and monitoring cash flow and revenue. This can be done by basic accounting software.
Advanced software can fulfil complex tasks, including:
- Real-time tracking and categorization of expenses
- Automated data entry using Optical Character Recognition (OCR) and Artificial Intelligence (AI) that can capture and extract data from invoices, receipts, bank statements, and other documents
- Automatic generation and sending of invoices and payment reminders for delayed payments
- Predictive analysis using past and current data to forecast future cash flow fluctuations
- Tracking sales and revenue, identifying trends and patterns, and compiling insightful reports to better support financial planning and business decision-making, while also identifying upcoming opportunities
- Detecting discrepancies in financial transactions to reduce the risk of scams and fraud
- Enhance data security and backup by limiting employee access to information, encrypting data, and using cloud storage.
- Enhance business and tax compliance
Accounting software is quick, convenient, and easily accessible from anywhere, enabling real-time recordkeeping. However, software has its limitations. It can analyze and provide insights from the data it is fed. If the data is inaccurate or insufficient, it will impact insights and analyses, which, in turn, will lead to serious misjudgments in business decisions and compliance issues. This can prove to be extremely costly for your small business in the long term.
This is where outsourcing to a professional accounting firm is more reliable.
Outsourcing Accounting Vs. Accounting Software
With accounting software, the job of feeding data and setting up the system correctly is your responsibility. But when you outsource your accounting needs to a professional accounting firm, all this is handled by the firm itself. Here’s what the accounting firm can do for your small business:
Managing Current (and Past) Data
Accounting software, while great for tracking, recording, and categorizing real-time transactions, does not work as well for past data. Thus, purchasing software at the end of a financial year to sort out your books of accounts wouldn’t help much. But an accounting firm can do the needful within the stipulated time and in compliance, ensuring you are ready to report your business finances without much stress.
Reviewing Accounting Software
Accounting software is only as effective as the data it’s fed. Thus, the real task lies in correctly setting up the software. This requires software knowledge as well as an understanding of your business’s accounting needs. A professional accounting firm has the experience and knowledge required for this. In fact, they are already equipped with state-of-the-art software and provide a complete package of technical and accounting know-how. This can reduce the cost of buying advanced, expensive software separately while providing a more reliable solution to your accounting problems.
Training Staff to Use Software
Purchasing accounting software entails training your staff on how to use it, which can be both costly and time-consuming. Even after training, there will be a need for constant monitoring to ensure they use it diligently and correctly, which will distract you from more important matters. However, a professional accounting firm needs no such training and can handle all aspects of your business accounting without slowing down your daily operations or increasing costs.
Resolving Reconciliation Issues
Incorrect data and missing transactions in software can lead to major losses and even penalties. On the other hand, a professional accountant can cross-check entries across your financial documents and rectify them immediately, reducing the risk of errors or oversight and protecting your business from legal or financial troubles. The accounting firm ensures that the data fed into the software is complete, accurate, and that no transactions are missed.
Adapting to Changing Tax Regulations and Business Needs
Tax regulations and the Canada Revenue Agency’s (CRA) compliance rules keep changing. Moreover, most rules are not straightforward and need reasoning. Non-compliance can put your business in a fix and lead to penalties. Professional accounting firms are well-versed in these regulations and stay up to date on any changes to the CRA’s compliance requirements. This helps keep your books of account in compliance and saves you a lot of stress during tax season.
The Value Add of Outsourcing Accounting
If software gives your business accounting speed and accessibility, professional accountants can give it better financial insights, compliance guidance, and risk management. From simple tasks such as recording transactions and compiling reports to more complex ones, including cash flow management, growth planning, payroll management, taxation advice, and audit support, a professional accountancy firm can be more effective than software.
Does Your Business Need an Accounting Firm?
If your business has high transaction volumes, international connections, and is fast-growing, outsourcing your accounting needs to professionals is advisable. Their knowledge, innovativeness, and adaptability – combined with the technological support they provide – can give your small business the boost it needs to attain its financial goals while also enhancing security, operational capacity, resource optimization, and compliance.
Accounting software and professional accountants are not mutually exclusive. Each has its own advantages. It all boils down to your requirements and financial ambitions; choosing what works best for you is your prerogative. While one is simply a tool that automates to improve efficiency, the other brings experience, adaptability, and knowledge to the table.
If budget is a constraint, you can start with accounting software and outsource accounting later when the budget allows. If you are already well-versed in accounting standards and compliance, then the software makes more sense. However, a growing business will demand your time in planning and strategizing more than accounting.
Contact Edelkoort Smethurst CPAs LLP in Halton Region to Help You with Your Accounting Needs
Talk to a professional accountant to help you set up your accounting software, manage accounts, and stay compliant. At Edelkoort Smethurst CPAs LLP, our accountants and bookkeepers can provide services such as automating recordkeeping, reviewing accounting software, and preparing financial statements. To learn more about how Edelkoort Smethurst CPAs LLP can provide you with the best accounting and bookkeeping services, contact us online or by telephone at 905-517-2297.
