The past couple of months I have been approached by several business owners looking to get QuickBooks. And some of the questions they always ask are “Why can’t I keep using excel?” or “Do you really think I need to get QuickBooks?” To which I always answer is “Um YES!”
Using an accounting software awards you many benefits that simply using Excel can’t. Now don’t get me wrong, I use Excel all the time. Especially for comparisons and analysis but not for knowing how much revenue I made in my business or tracking my expenses.
So this week, I am going to share with you five signs to pay attention to that will tell you that you are ready to upgrade to an accounting system.
- You have no idea how much money you are making. If the only way you can determine how much money you have earned is by looking at your bank statement, then it’s time for you to get an accounting system. Even though your bank account tells you what cash you have deposited, it does not tell you how much revenue your business has earned. Remember cash does not equal sales for most businesses. There are some industries such as hair stylist and mechanics who truly operate on a 100% cash sales model. But they could very well have some vendors whom they pay on account which will generate an accounts payable. So while they may be able to determine their sales, it would be a little more difficult to calculate their true profitability.
- You are struggling with cash flow management. Cash flow management is a key aspect of running a business that you absolutely must get a handle on. And the only way to get a handle on it is to know how much money flows through your business. You need to know if income comes in on time or late and even seasonally. You need to know which expenses are sucking the cash out of your business. As a business owner you naturally think you have this all under control in your head but more than likely you are off the mark. Once you are on an accounting system, you will be able to run reports that you can then analyze to determine the answers to these questions. Then and only then will you be able to get your cash flow under control.
- You’re leaving money on the table. Having clients lined up outside your door is great. But more clients mean you become more busy. Too busy to in fact bill your clients or collect payments. An accounting system can help you automate this process so that you can send out an invoice as soon as a project is completed. And even without going into the office if your system is in the cloud. It will also send out auto-reminders in the event that payments have not been received by the due date. Once you began using your accounting system, it was track how much money is due to you from customers so that you can better manage your cash flow (see #2 above).
- You desire to grow your business. There will inevitably come a point in time where you will want your business to grow. And in order to create a strategic plan on how to do that, you will need to know how well or poorly your business is performing. And you can’t possibly know that without an accounting system. An accounting system will allow you to run reports on various data points in your business so that you can determine what sales sources are generating the most income and which ones are not. And which aspects of your business are not profitable and you may need to let go.
- You are seeking funding. When you reach out to a bank or investor there are two key documents they ask for – a business plan and your financials. Without an accounting system it will take you lots and lots and lots of time to try and create them. An accounting system takes the data that you are inputting daily and in the back-end generates the financials for you as you go along. So the only extra step you have to take is to push a button.
What were you going through in your business when you realized you needed to get an accounting system?
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