Everybody knows that keeping on top of money matters is crucial when you run a business, but it can be confusing. Dealing with your own personal budget is hard enough and a lot of new entrepreneurs really struggle when it comes to handling business finances. A lot of people will tell you that accounting software is the answer here. Why mess around with outdated spreadsheets or pay somebody to handle your accounts when you’ve got some amazing tech tools to do it all for you?
In some cases, accounting software is the right option and there are some great pieces of software out there that can help you keep track of all of your money, manage payroll, and plan for the financial future of your business. The thing is, accounting software isn’t some magic wand that solves all of your money problems with a single click. Although it can be very useful sometimes, there are a lot of potential downsides you need to think about. Often, business owners realize that they’re in over their head with accounting software and they would actually be better off doing things the old-fashioned way and outsourcing to a bookkeeping service. These are some of the reasons why you should think twice about using accounting software for your business.
The whole reason you are considering accounting software in the first place is that you want to manage your money better. But paying for applications could land you in more financial trouble because accounting software can get pretty expensive. If you shop around, you can find affordable packages but the cost of the software itself isn’t the only expense involved. Advanced software has specific hardware requirements so if you’re running a business from your living room with an old laptop, you’ll probably have to spend money upgrading your computer before you can actually run the software in the first place. It’s important to store a backup of your financial information too, and the data from accounting software requires more space. That means upgrading your physical storage if you’re working out of an office or paying for a cloud storage service.
If you’re not particularly good with technology, you might need to pay a consultant to set it all up and make sure it’s working properly. Tech support often comes at an added cost too, so if you’re constantly calling the software provider for help, you’ll soon rack up a big bill. So, before you rush into anything, think about the actual cost of using accounting software and consider whether you can really afford it or not.
Good Tools Don’t Make You An Expert
Buying expensive power tools doesn’t make you an expert at DIY. They can help you improve the quality of work if you already know what you’re doing, but they are not a substitute for expertise, and the same is true of accounting software. It’s a great tool that helps to streamline a lot of the accounting jobs you need to do, but it’s only useful if you know what you are doing. There is a steep learning curve involved and teaching yourself how to use the software can be difficult, especially when you run a business and you have a million other things on your to-do list. Often, business owners pay for software but they don’t really get much out of it because they don’t know how to use most of the advanced features. They also don’t know how to analyze the information that they get from the software, meaning that they are unable to make sensible financial decisions. If you work with professional bookkeepers, they will be able to make sense of your finances and provide you with in-depth reports about the state of your business. You can then work with them to make strategic decisions and improve the financial health of the business.
If you are willing to put the time into learning the software and developing your accounting skills, this is something that you can do on your own. However, juggling that with the rest of your business duties can be tough.
Technology Isn’t Always Reliable
Technology is great and it’s revolutionized the business world in a lot of ways, but it isn’t always reliable. When your accounting software is working perfectly, it makes a lot of the time-consuming jobs much quicker and as long as you learn all of the features, you can manage your finances sensibly. But what happens when the software crashes or some of the features stop working as they should? When you are completely reliant on accounting software to do everything for you, this leaves you in a tricky situation. If you’re using the software to manage payroll, for example, you’re going to have a lot of angry employees on your hands if they don’t get paid on time. Most problems can be fixed easily, but if you can’t get your accounting software back online for a while, it can disrupt things in a big way. But if you’re using a much simpler accounting system, the potential for problems is much lower. You won’t need to worry about this issue at all if you work with an outsourced accounting company because they will have a backup in place and if software does go wrong, they can still manage your finances properly.
Software Quickly Becomes Obsolete
Technology moves quickly and applications soon become obsolete if you don’t update them. New versions are released all the time with added features and improved performance. If you fail to keep up with these updates, your accounting software will not work as it should. You may also find that when you update your computers, old software no longer functions properly on them. You also have the opposite problem if you’re using old computers that won’t run the latest version of the software. That means you have to regularly update your hardware and software if you want to keep things running smoothly and that comes at an added cost. If you operate a bring your own device policy, you may run into other problems if employees are using devices that are not compatible with your current accounting software.
Software becoming obsolete isn’t your only issue either, you also have to tackle integration problems. Even if your accounting software works seamlessly on your computers, how well does it work with other applications you rely on? When you integrate accounting software with sales, payment, and inventory management applications, for example, it’s so much easier to track your income and outgoings in real time and collate all of that information in one place. But you need to think about this when choosing software and make sure that they are all working together properly, which can be difficult without expert advice. In the future, when you start updating certain applications, you might find that they are no longer compatible with your accounting software, so everything needs to be upgraded at the same time. People often decide that it’s more hassle than it’s worth to keep on top of software updates and integration when using accounting software.
Accounting software does have its benefits and when used correctly, it can automate a lot of the boring, time-consuming bookkeeping tasks, giving you more time to focus on different areas of the business. However, it’s not always the best choice for small businesses because it is often more trouble than it’s worth if you don’t have an experienced accountant on board. So, before you start spending a lot of money on accounting software, you should consider working with an outsourced accounting service instead.