By Emily Coltman FCA, Chief Accountant to FreeAgent
If you run a small business you may be using an Excel spreadsheet to manage your accounts - either at the behest of your accountant or simply because because it appears to be a cost-effective way to keeping on top of the books.
But is the “spreadsheet method” actually the best or most effective way to do your bookkeeping - and does it help you make the most out of your business?
Here I will explain how an online (or “cloud”) accounting package could be a much better investment.
Save time and be more efficient
If you find yourself spending a lot of time wrestling with your spreadsheets, would you like to free up some of that time to do something else? Perhaps you could use it to try to find new customers and make more sales - or just get some important non-work-related stuff done?
A huge benefit of an online accounting system is that it makes the whole process of managing your books quicker and easier, which frees up more of your time. It’s easier to input financial information and forecast your tax than using a spreadsheet - and some systems will even enable you to automate the entry of your bank data and bank transactions directly to your accounts. You may even be able to photograph expense receipts on your smartphone and upload them directly to your online accounts - saving you the time and hassle of entering the information manually.
And it’s also much easier for your accountant to review the information and check it for errors. Instead of you having to email or send physical copies of your accounts to your accountant, you just provide them with their own login details for your online accounting system and let them check the figures remotely. It’s quicker for them to review your books, which means they’ll spend less billable hours on basic admin.
Access your financial information - anytime, anywhere
Spreadsheets can be very useful for small businesses, but they can also be quite limiting too. Unless you have an incredibly detailed template, it’s unlikely that you’ll see things like whether you’re charging your customers enough and whether particular costs look too high. Or be able to see how much tax you can expect to pay.
However, with many online accounting systems, all those details about your business’s profit and cash is all there at your fingertips to help you make timely decisions about your business’s future.
Because the software is online, you can also view this information wherever you are, provided you have access to the Internet. So that means, for example, you could look at your accounts on your iPhone when you’re en-route to a client meeting to check they’ve paid the most recent invoice you sent them.
Let the cloud the heavy lifting for you
If you make a single mistake in a formula when setting up your spreadsheet, that could cause your figures to be wildly inaccurate - and you may have to spend a lot of time correcting the mistake once you discover it.
However, with a cloud system the hard work is already done as many of those calculations can be done automatically for you. This minimises the risk of inaccuracies appearing in your accounts as - provided you have entered the right information - the figures should be correct.
Some online accounting packages also offer functionality to file tax documents online, such as VAT returns, RTI submissions and Self Assessment tax returns, with HMRC. And as these systems are web-based, any updates that are made by their development teams are automatically available - meaning you don’t necessarily need to be on alert for new accounting rules and legislation changes yourself.
Dazzle your clients
Many online accounting software systems offer templates that enable you to create professional-looking invoices to send to your customers. You may be able to turn these into recurring invoices if, for example, you charge the same customer for the same amount every month or every week - and you could even be able to send automatic emails to chase late payments.
Furthermore, many online systems enable you to send estimates to your contacts and create reports of the time you’ve spent - all at the click of a mouse, rather than hours of working with Excel.
It’ll be easier to collaborate with your accountant
Unlike with a spreadsheet - or a traditional desktop-based accounting software package - an online system means you and your accountant can both see your records in real time, at the same time, by each logging in from your own computer, iPad, or other device. That means that your accountant can offer timely, proactive advice, rather than having to wait until the end of the year to correct any mistakes or suggest that you should put your prices up, or where you could cut costs.
As your accountant is saving time when doing the basic number crunching, that also means they’re freed them up to provide wider, useful financial information about your business which could be invaluable for its future growth.
Using online accounting software helps you keep accurate, up-to-date records that provide you with crucial financial information about your business, and lets you work more effectively with your accountant and your clients. Why would you want to manage your accounts any other way?