It’s no secret that most businesses will fail in their first five years of business. And according to a study by U.S. Bank, 82% fail due to poor cash flow management.
If you’re hoping to be one of the outliers, keeping up with changes in accounting regulations and software is essential. Here are three things you need to know about accounting software this year:
Accounting software is starting to embrace AI
Increasingly, companies that offer accounting software are recognizing the power of leveraging automation.
QuickBooks is a good example of this. It offers multiple versions of its software, with a basic version that is geared towards small businesses and freelancers. It also recently added AI and enterprise features to appeal to larger businesses.
Here are a few other ways accounting software is getting more high-tech:
- Tax software: According to Accounting Today, the global market for accounting software will reach $11.8 billion by 2026. Certain tax software programs are also using AI to become more accurate and help businesses avoid tax penalties. For instance, TurboTax uses machine learning to recommend deductions to their users and provide a more streamlined experience. This saves businesses time and money.
- Cloud-based accounting: Businesses are increasingly recognizing the major benefit of cloud-based software: It can be accessed at any time. Software that isn’t cloud-based will be less secure and can become expensive to upgrade.
- Mobile accounting: Companies like Xero are beginning to provide mobile accounting apps. A mobile accounting app can send invoices, track receipts and create expense claims straight from a smartphone or tablet. This can also make it easier for accountants and their clients to work together virtually.
[For a everything you need to know about choosing an accounting software, check out our accounting software guide.]
Cash flow is a problem for most businesses, and even a small financial hiccup can make it difficult for some small business owners to make payroll.
Your software should project cash flow
Cash flow is a problem for most businesses, and even a small financial hiccup can make it difficult for some small business owners to make payroll.
A survey conducted by Kabbage found that 51% of small business owners actually put off paying themselves as a way to manage cash flow.
To help prevent the business owner from going without a salary, cash flow projections should be performed. Projections can show you areas where you can make improvements.
You can use the projected cash flow feature to help you predict both short-term (i.e., monthly) and long-term (i.e., yearly) expected cash flow, to help mitigate problems on a daily basis and also see where your business is headed.
Look for software that can automate tasks for you
To be truly beneficial, your accounting software should automate certain tasks that you would otherwise do manually. This will save you both time and money in the long run.
For instance, this financial product actually detects invoice fraud against small business. Here are a few examples of things you should look for:
- Tax withholding calculation: Your software should be able to automatically calculate how much you owe in taxes. And, taking it a step further, comprehensive software will create the forms you need for payroll tax filing.
- Creating templates for invoices: If you bill the same vendors every month, why would you create a new invoice each time? An invoice template will allow you to just make a few changes instead of starting from scratch every month.
- Real-time bank reconciliation: Your software should import your bank records and it should auto-match your bank and accounting records. You should also be able to easily split payments or perform other tricky transactions.
Finding the right accounting software won’t fix your financial problems overnight, but it can put you on a path toward managing your cash flow better.
Accounting software can help assess how profitable your business is, pay your employees and track what you owe in taxes. It can also create reports that will give you greater insight into your finances, products or services and customers.
CO— does not review or recommend products or services. For more information on choosing the best accounting software, visit our friends at business.com.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
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