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Do I Need Accounting Software for My New Small Business?

Do I Need Accounting Software for My New Small Business?

Answer: Like a lot of questions in life, it depends!

Advantages of Accounting Software

There are many advantages to having accounting software for your business, which can be of huge assistance to you as you grow your business, such as:

  • Saving time on processes, for example, automatic bank feeds.
  • Improving accuracy and minimising manual errors.
  • Standard reports, which are usually very helpful eg. Who owes money?
  • Templates for key documents such as sales quotations, invoices, statements & more!
  • Easy connection to payment platforms – easy for customers to pay you.
  • Step towards ‘paperless’ office – documents stored as PDF attachments.
  • Assuming cloud based software, access to records can be achieved from any device & any location (assuming internet access) which can be very convenient for busy business owners on the run!
Entrepreneur on the run

Disadvantages of Accounting Software

  • Cost
  • Training needed in new & potentially scary tech!

There are many very good and affordable accounting softwares out there, aimed specifically at the new and small business model. At Adept Accounting, we use Xero for many of our bookkeeping clients, which offers great flexibility to connect with other business apps.

When should I start using accounting software?

For some, it may make sense to keep your books on accounting software from the very beginning of your new business journey, for many of the reasons listed above.

And for others, there can be trigger moments, which catapult the need for a move away from manual records towards computerised records, such as…

VAT Registration

VAT Registration

For many small businesses, the trigger for ‘going computerised’ is usually VAT registration. Most sole traders in a service based industry, will only be obliged to register for VAT when annual sales exceed €37,500.

Once VAT registered, bookkeeping becomes a more complex process, as the VAT element need to be separately identified on every transaction, and a VAT return submitted to Revenue, probably every 2 months. This is where accounting software can really make your life easier, as the VAT reports can be generated at the push of a button!

However, if your business is not required to be VAT registered, and if other advantages listed above are not of huge concern, then there is no issue in keeping your records in a more manual way, eg. on paper or on an Excel spreadsheet.

As long as the records are organised and allow for information to be extracted for your Income Tax return, that is all that the Revenue Commissioners require. Oh, and those records need to be kept for 6 years, in case Revenue have a late question or 2!

Know Your Business Numbers

However, I believe that your business numbers should not just be done to keep the taxman happy. These numbers should be much, much more – they should be also working for you, and helping you to make keys decisions about your business and its future.

No matter which system you use, be it software, Excel or paper, you should be able to extract information and answer key questions regularly, such as:

  • What was my best sales month this year?
  • What was my worst sales month this year?
  • Can I explain why?
  • What can I learn from these past financial successes/errors to help me make the necessary changes in my business to:
    • make more profit
    • reduce my personal financial stress
    • work the hours I want
    • have more time to serve my clients better
    • have more relaxation/family time
Accounts done early – more time for dog walking

If you would like help in getting the most out of your Xero computerised system, we are available for one to one training sessions.

Alternatively, if you are not yet ready for a computerised accounting system, but would like some guidance on how best to keep records on Excel, consider our upcoming course ‘Bookkeeping for New Businesses’ which breaks down the record keeping to 3 key Excel spreadsheets. Templates are provided, explained in detail and all questions answered over the course duration.