Accounting is a critical component of any business or organization. It is more than just documenting every financial transaction of your business. Accounting is not limited to compiling records of every purchase, payment, and gain your business has made. It allows you to see how financially sound your business organisation is.
Simply put, accounting is mainly cash flow management. This is important to note. According to a study by a US-based banking institution, 82% of small businesses fail because of cash flow mismanagement. For your business to succeed, you need to have some degree of accounting knowledge. Or you can opt to outsource all accounting tasks to a third-party.
Accounting helps you gather, manage and categorize all your financial information. It analyses all data to generate reliable reports, statements, and visualizations to help you get a clear picture of your business’ financial status. The insights you get will then aid you and those in the management to make better business decisions, remain compliant with prevailing regulations and policies, and develop more viable strategies so your business remains financially afloat for a long while.
Manual accounting is an exhaustive endeavour that is prone to human errors. The introduction of the accounting software dramatically simplified accounting and all its related processes, including payroll, tax calculations, budgeting, and more. The importance of accounting software in a business, regardless of any size, can never be overstated.
1) Work With Accurate Accounting Data
In an age where immediate access to accurate information is no longer just a privilege reserved for a few, but a fixed requirement, working with faulty and outdated accounting data can have catastrophic consequences.
Performance inefficiencies, stunted business growth, poor profitability, and even bankruptcy can result from clogged up cash flow, erroneous tax submissions, and other accounting processes that were based on faulty and out-of-date information.
Among the many features of accounting software is a centralized hub where all accounting information is stored. Every data is automatically updated and synchronized across all authorized systems and devices. This allows for better performance and output at individual and collective levels. Communication and collaboration are both improved, resulting in enhanced efficiencies.
Aside from centralizing accounting information, access to it can be managed and monitored. Authorization with certain permissions can be granted to employees, ensuring that they can only access and retrieve data they need based on their roles, projects, and tasks, among other parameters.
Departments involved in financial tasks and processes such as purchase/acquisitions, payroll, tax calculations, budgeting, revenue forecasting, and more are able to work at an optimum pace. This helps them be confident that their information is solid.
Regardless of your business size, you can make use of an accounting tool. For example, here is a ranking of accounting software systems for small businesses.
2) Boost Customer Loyalty
The need for accounting software also applies to banks, accounting firms, and other establishments that offer financial services such as loans, accounting, bookkeeping, taxation, and insurance. Accounting solutions make it easy for them to make accurate calculations, therefore providing topnotch services to their customers.
But aside from high-precision number crunching, accounting software makes it easy for banks and financial services providers improve customer loyalty by being highly transparent with their clients. You can create basic reports and charts to help you convey the information in a more straightforward approach.
Providing them with regular accounting reports and financial statements that are relevant to their operations helps them stay on top of their books. Thus, they remain in control over the finances, deadlines, accounts, and more. It streamlines their access to accurate information, allowing them to make strategic decisions and take decisive actions.
By delivering them significant and useful information, you strengthen your relationships with your clients, earning their trust and their business. This means more revenue and bigger growth for your firm.
3) Attract More Investors
Imagine this: your business is growing and the demand for your products and services is increasing. But you can’t expand if you can’t get investors to pour more funds into your business. An accounting software will definitely come in handy in such situations.
Whether you’re shopping for investors or someone has expressed interest to back your enterprise up financially, you need to have accurate financial statements at hand. With a comprehensive accounting platform, you can generate financial statements based on real-time information, which is a huge plus in the eyes of potential investors.
Financial statements are your business’s resume. Investors want to see how profitable your business is and will look at things like cash flow from operations, net income, return on investments, price to earnings, and liquidity, to mention a few.
Aside from providing financial statements, other uses of accounting software accounting include arming you with accurate data and actionable insights. These help you discuss with a solid conviction of how your enterprise can meet your potential investors’ expectations and deliver handsome returns.
Because you understand your data, you are more confident and more proactive with your prospective investors. When they see your data and reports along with your tenacious determination, you will likely make a positive impression and nab yourself a few investors.
4) Improve Marketing Performance and Budgeting
Your marketing strategies, efforts, and decisions are directly tied to your business’s financial performance and health. Thus, you can’t perform marketing tasks without solid information and insights provided by your accounting department. Accounting reports like financial statements, cash flow reports, and tax reports help create a clear picture of your business’s finances.
Given that marketing activities such as advertisements, sales promotions, and customer communications among others take a huge chunk of any organization’s budget, expenses for these activities are closely monitored and their performance scrutinously analyzed.
With the help of an accounting solution, accountants are able to identify which marketing activities are performing and adding value to the business and which ones are costing your business money with little returns. Sharing such information and insights with the marketing teams helps them build the most viable, high-performing marketing strategies as well as create an adequate budget to fund their activities.
5) A Growing Market
The growth of the accounting software business is a clear indication that more businesses in various sectors are now investing in accounting solutions. The global accounting software sector was valued at $11.070 million in 2018, according to a 2018 report by Fortune Business Insights. Using the data gathered from 2015 to 2017, the market is projected to grow to as much as $20.4 million by the end of 2026.
Accounting industry trends such as moving business operations to the cloud, outsourcing accounting tasks, and the rise of new types of business owners and accountants are among the factors that drive adoption and implementation of accounting software.
Traditional accounting software is designed for routine accounting tasks such as general ledger, payroll, accounts receivables, accounts payables, tax, and inventory. But as technology progresses, more businesses are now shifting from basic accounting software to modern systems that operate seamlessly with other business solutions like CRMs (customer relationship management systems), supply chain management systems, ERPs, and HRMs (human resources management systems).
Investing in accounting software in a modern business landscape is no longer a luxury. It is a must-have regardless of the size of your business and the scale of your operations.
