Despite today's day and age of technology advances, it is amazing to see how many small businesses still do their accounting manually. In fact, many small business owners equate automating their accounting to recording their transactions on Excel spreadsheet packages.
What many entrepreneurs don't realize is the vast quantity of benefits which comes from using a dedicated accounting package and just how simple and inexpensive accounting basic packages can be. This is one of the many places their accountants comes in to add value - by introducing them to a few simple steps on an accounting software package, their accountant can save the business owner a lot of time and frustration at the end of the year.
According to studies conducted by Intuit, a leading provider of accounting software, 800,000 Canadian businesses are using accounting software but there are still 1.6 million businesses who are not. "One of the key issues for small business owners is having enough information to make quick and informed financial decisions with confidence", says Chris Davey, senior manager, Intuit Canada. "Accounting packages like Quickbooks give users the ability to easily track finances in real-time and present critical details in a single dashboard. It also streamlines time consuming tasks like payroll and invoicing. In the end, small business owners make money, save money and can re-direct accounting time toward doing more of what they love."
Sage Software, the other major player in the industry, with its Simply Accounting package, echoes its comments. "Small businesses today have to do more with less, which makes fast and easy-to-use tools key to their success" said Jamie Sutherland, vice president and general manager, Simply Accounting. "Simply Accounting is built for both simplicity and speed, managing financial and operational needs and providing a complete scalable accounting solution."
Many accountants are familiar with the large software packages, such as SAP and Oracle, but do not realize just how effective the small business packages have become. Although both companies update their software each year in accordance with user feedback, the packages are so strong that the 2010 updates can be seen as merely minor fine-tuning already effective software. If accountants can convince their clients to use these packages, they can spend their time helping their customers with more valuable services, such as business planning and tax advice, services for which they can charge a premium price.
The biggest benefit of a dedicated accounting package is the ease of use and its ability to minimize the risk of error. If used properly, accounting software packages can remove hours of frustration of manually tracking accounting transactions. Unlike Excel spreadsheets which require users to build in formulas and create reports, all standard features and reports are already preprogrammed.
Some of the many benefits of packages include a number of control features built in to categorize expenses into accounts, ensure that debits equal credits in any transaction (a fundamental feature of accounting) and also store important information on customers, vendors, employees, and inventory in databases. When it comes to preparing invoices or creating cheques, the procedure involves little more than a few keystrokes to update all relevant information. The packages will also highlight when there isn't enough cash in the bank to cover all outstanding cheques. Packages now also can take the place of expensive payroll processing providers by automating payroll processing, including calculating and withholding payroll taxes and creating T4s at the end of the year.
A small business owner can therefore perform some of the more routine accounting functions on their own instead of outsourcing it to accountants. In contrast, in a spreadsheet, a user must create a number of formulas to add up several items on a spreadsheet. All spreadsheet users know how time consuming this process is and how easy it is to pick up a wrong cell in a formula. Using an accounting package can save a small business hundreds or even thousands of dollars in professional accounting fees.
This doesn't mean accountants will go out of business; quite the contrary, as business owners take on more of these tasks in-house, they turn to their accountant for strategic business advice which adds value directly to their company's bottom line. "I prefer managing my own bookkeeping because I know day to day how I am doing but I will never call myself an accountant and I still rely heavily on my accountant for financial advice." says Lisa Turk, Sales Operations Manager of Jasper Design and a small business owner.
The two most popular accounting packages for small and medium-sized enterprises are Quickbooks and Simply Accounting. Buying an accounting package is almost like buying a car - there are a few competing products in the marketplace and the top companies jockey for the position of market leader, each year introducing new features which they hope will provide them with a competitive advantage over their rival - that is until the following year when their competitor copies them and adopts the same functionality.
Both packages have very similar functionalities and differ most in terms of their user interface. Quickbooks presents information very much in layman's terms; it uses terminology such as "customer invoices" and "vendor bills" rather than "accounts receivable" and "accounts payable". This is well received by most business owners who are not financial people by nature.
Sofia Mintz, CMA and public accountant says "As an accountant, I would prefer to work with software which uses the accounting terminology I'm familiar with. However, most of my clients won't use software if they can't understand it and a simple user interface makes it easy for my clients to do most of the upfront bookkeeping before I start reviewing their books." Simply Accounting, on the other hand, has a greater appeal to accountants because it has an option of using accounting terminology in its user interface. Of course, for the small business owner who wants to stay as far from financial terms as possible, Simply Accounting also has a layman's interface as well.
Buying an accounting package can be quite inexpensive, beginning at $49 for the simplest version to over $3000 for the multiple-user version with many bells and whistles. Pricing for both packages is extremely comparable and the decision most often boils down to which tool is easiest to use. It's almost like test-driving a new car. As such, both of the companies allow trial versions to be downloaded from their websites to be tested. Different users appreciate different features and the decision for the business owner really relates to buying the package they are most comfortable using. There is one thing that is sure and certain - once a business owner adopts an accounting package and sees how the software essentially pays for itself, they're unlikely to return to Excel spreadsheets.
Submitted by Karine Benzacar, MBA, CMA, CPA (Del.)
Managing Director of Knowledge Plus Corporation.
Email: karine@knowledgeplus.ca or connect with Karine on LinkedIn
Karine Benzacar is managing director of Knowledge Plus Corp., a business consulting
and training firm www.knowledgeplus.ca. Karine Benzacar’s works have been published in well known publications such as the Financial Post, the Bottom Line, and the CMA Management Magazine, and has written “Closing the GAAP” featured in The IFRS Zeitgeist.
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