When you run a small business, there’s always the question of whether you should perform your accounting yourself or hire an accounting firm. It often depends on the size of the company as to what option is chosen. There’s also a hybrid position where either the bookkeeping or complete accounts are completed on accounting software and then verified by an external accounting firm to save money. Now, let’s examine the reasons why small businesses should use accounting software solutions in-house rather than handing off the responsibility to a third-party.
Accounting Solutions Are Now Designed for Small Business Types
Gone are the days when there were only a handful of accounting software packages that were cumbersome and mostly designed for conglomerates to use. Now, the market has developed and matured to a point where there are solutions available that offer different options based on a smaller segment of the business market. They’re usually operating as a SaaS subscription model with a cloud facility often too.
For example, when looking through PieSync’s Wave vs QuickBooks guide to assess whether either of these software solutions would be ideal, the differences quickly become apparent: Wave from PieSync (a leading cloud syncing provider helping apps talk to one another) has features that support small entrepreneurs just starting out with a few employees, or to assist freelancers managing their financials. QuickBooks, on the other hand, is far more comprehensive, not aimed at freelancers, and can grow with a business over time.
The differentiation between software solutions in the accounting world means that when choosing the correct package for your situation, the business is helped (not hindered). The opposite is true when choosing poorly.
A Desire to Stay More in Control
When you’re someone who likes to be in control of all aspects of your business and has trouble letting go, then managing the accounts in-house is strongly favored. Knowing that you’re this type of person or entrepreneur means that you can make decisions that both acknowledge and reflect that reality.
In which case, hiring someone either part-time or full-time to manage the accounts internally using an accounting package makes sense. The financial commitment this requires is not insignificant, so it behooves the company to grow quickly enough or be funded well enough in the early days to support this additional expense.
To Simplify the Financial Management Process
When there’s a serious need to focus on the core aspects of the business to ensure its success, then running the accounting on the side is a distraction. Using an accounting solution that is made to simplify and minimize the time involved in managing the bookkeeping in order to produce basic reports and offer digitized billing reduces the processes involved. When the entrepreneur and their team are restricted to the time available in the business day and how many things they can pay attention to, streamlined accounting has much to recommend it.
This is why choosing an accounting solution like Wave knowingly restricts the options to reduce the complexity. Equally, QuickBooks is still designed to not overburden users unnecessarily compared to enterprise-oriented accounting solutions with many more bells and whistles.
Because Cashflow is King
The Cashflow Statement is a vital financial document that allows the business owner to understand how the money is flowing into and out of the business.
Not Every Financial Statement is as Useful
While cash-strapped business owners may look closely at the business checking account balance and all the pending transactions, this compares to entrepreneurs with a little more wriggle room who instead rely more on the Cash-flow Statement. The Balance Sheet and Profit & Loss Statement all have their place, but they don’t provide a meaningful way to monitor the monthly changes and trends over time in the same way.
Ramped Up Spending Requires Greater Monitoring Ability
As companies grow and invest in IT equipment, tools, or machinery – depending on the industry they operate in – the cash movements reflect differently than what’s observed on the other financial statements. Timely in-house access to cash-flow reporting proves useful to stay abreast of developments and avoid getting into an expected cash crunch.
Keep the Financials in a Format that is Readily Understood
It’s possible to hire an accounting firm that uses software and produces reports in a format that’s different from what you’re used to. While reports have similar information, the reporting isn’t a carbon copy between software packages. As such, if you’re familiar with the way one software package produces them and this marries up to how the financial data is entered, it ties neatly together in your mind. This lends greater clarity to the numbers and avoids any confusion.
However, with an unfamiliar accounting package, the results can cause unnecessary confusion. It’s simply easier to pick the software that provides intelligible reporting that doesn’t have the above issues. When you’re an entrepreneur who prefers to have up-to-the-minute financial information, more control, and fewer delays, then in-house accounting solutions are best.