Trees love cloud accounting.
No longer do you need to have file cabinets full of journal entries, notebooks and loose files. You don’t even need to mail or fax documents to an accountant or CPA to get their help.
Having a virtual accounting system for your business is now a reality, and hundreds of thousands of businesses are using this type of system to power their business and evolve from the paper-driven process bookkeeping and accounting for a small business once was. Here is what it takes to do your own accounting using the cloud, benefits, and things to consider.
What it Takes to DIY with Cloud Accounting Software
There are several cloud accounting options, including Xero, Quickbooks Online, and a few others. If looking for a full system, make sure to know the difference between software that is designed to only serve as invoicing and practice management software and full accounting and bookkeeping software. You will most likely need to pay a monthly subscription fee for the software, ranging from $10-50 a month to use it.
- Knowledge of the Technology
Accounting software, while becoming more versatile and easier to use, takes time to master. Even our trained accountants at Kahuna Accounting receive certifications in Xero software before working with clients. If you’re going to do it yourself, do it the right way and learn how to master the software you plan to use to manage your own books.
- Time & Scheduling
The biggest roadblock stopping entrepreneurs from mastering their own bookkeeping isn’t the difficulty of doing it, it’s time. Managing the financial side of your business take time, and since you most likely don’t have much extra time each day to keep track of transactions and put together financial documents, you need to be dedicated to scheduling enough time in your week to complete bookkeeping-related tasks.
- Understanding of Needed Tax Documents
If you want to cook a recipe, you have to know what ingredients you’ll need to cook with. Tax preparation software and online filing has improved drastically over the past decade and can help you avoid mistakes, but every business is different and you need to know exactly what you need to do in order to comply with federal and state laws and industry-related standards.
- Second Set of Eyes
After this article is drafted, it will be sent to a co-worker for review and then entered in grammar software to check for additional mistakes. Even experts need to be checked and reviewed to detect mistakes they may be prone to make. An honest bookkeeping mistake can lead to fees, inaccurate financial records, and eve fraud. Have someone who can check your books for accuracy and catch mistakes before it’s too late.
- Know What Metrics Impact Your Business and How to Utilize Them
Knowing even basic key performance indicators (KPI’s) can lead your business in the right direction when growing. Something as simple as your profit margin can identify opportunities to increase your profits and minimize expenses. Good small business bookkeepers know how to pull reports and track these indicators.
Controlling your own books and being able to access them (and allow others access) from anywhere gives you incredible versatility. You no longer have to find your log or receipts, you can capture and record transactions from your cellphone.
- Relatively inexpensive
Not considering your time, learning curve, or the risks of falling being, managing the finances of your business using cloud accounting software is affordable enough for any entrepreneur to take advantage of it.
- Not at-risk of being lost or stolen
Passwords can be recovered, but lost or stolen financial records are likely gone forever. Having everything in one place and stored in the cloud is very convenient.
The versatility of cloud accounting allows each partner, manager, or employee (depending on your preferences) to view and help maintain your financials. If something is wrong or missing, you will have several sets of eyes capable of catching it instead of just one.
You can also integrate online bank accounts, management software (like Clio practice management software for attorneys) and invoicing software. It still takes time, knowledge of the software, and knowledge of accounting, but it’s more versatile and easier to automate than standard DIY bookkeeping.
Additional Things to Consider
The top complaint we hear from entrepreneurs when looking for a bookkeeping solution is that they simply don’t have the time to manage it themselves. The convenience of having your system managed in the cloud and integrating your online accounts helps cut down the amount of required time you’ll need to spend, but there are still aspects of bookkeeping you can’t automate.
- Technology learning curve
Systems take time and training to learn. With cloud systems, there are often updates and changes that will require additional time and training.
- What software to go with?
You have several options to consider. Look at reviews and talk with businesses like yours to see what they use. We prefer Xero, but there are benefits to each cloud-based system.
- Will the software integrate with other parts of your business?
Our law firm clients love Xero because it integrates with a popular practice management tool called Clio. If you depend on software as an integral part of your business, do a little online research to see if it can easily integrate with a cloud accounting system.
This article is part of the Bookkeeping Options for Small Business Owners and Entrepreneurs series by Kahuna Accounting. For a summary of the six most popular options that entrepreneurs choose when handling their small business’ books, read the initial piece in the series here: Bookkeeping for Small Business: Six Options for Entrepreneurs.