6 Reasons to Swap Spreadsheets for Cloud Accounting Software
Many small business owners have been using spreadsheets to do their accounting for years now. Whilst spreadsheets may seem like a convenient and cost-effective way of managing your finances, advances in cloud accounting software mean that your business could most likely benefit from an upgrade. Let’s take a look at why you should swap your spreadsheets for cloud accounting software and how to make the transition smoothly.
1. Data Entry
Not only is manual data entry mind-numbing, but it also makes it very easy to make mistakes. Just one typo could lead to major errors, including mistakes on your tax return, resulting in missed deductions or penalties.
However, cloud accounting software allows you to upload your receipts and invoices directly and keep accurate records, removing the need for double data entry and reducing the likelihood of mistakes.
2. Lost Data
The larger a spreadsheet becomes, the more likely it is to either crash or corrupt, resulting in lost data. However, your records don’t cease to matter once your tax return is filed. It’s important to keep your records for audits and to track the company’s progress over time. Leaving your data in a spreadsheet leaves it vulnerable, whereas cloud-based accounting software provides multiple layers of protection to keep your information safe.
3. Integration
Spreadsheets don’t tend to integrate well, leading to a lot of stress and wasted person-hours. Saving a spreadsheet in a new location can corrupt files and break links, causing countless problems. However, cloud accounting software automatically syncs your data across various devices and is designed to integrate well with other software, permitting seamless sharing and collaboration.
4. Audit Trail
Spreadsheets don’t create a clear audit trail in the same way that accounting software does. For example, you may see that something was changed but be unable to identify the exact details. It’s important to keep a step-by-step record to keep your company safe and your records accurate. Accounting software allows you to easily keep a log of all changes made to your files, dating right back to the moment they were initially created.
5. Time
Spreadsheets tend to be much more time-consuming than cloud accounting software, especially if you’re working with a high volume of data. Using spreadsheets requires you to spend a lot of time on data entry, preparing reports, and verifying information. This could cost you days’ worth of person-hours! With cloud accounting software, on the other hand, these processes take mere minutes to complete.
6. Collaboration
The sharing functionality of traditional spreadsheets tends to be slow and can become confusing when multiple people try to work on a document at once. Cloud accounting software is designed to be collaborative and, as mentioned previously, automatically syncs across all devices, permitting seamless sharing and creating an accurate audit trail.
How to Choose the Right Cloud Accounting Software
The right cloud accounting software for your small business will depend on your particular requirements, and it’s worth asking your bookkeeper for recommendations. We recommend considering the following:
- Which systems do you want to integrate the software with?
- How many people will use the software?
- Which functions are most important to your business?
- What is the upfront cost or subscription fee?
- How much training is required?
- What support is provided?
- Is the software scalable as your business evolves?
Summary
If you’re still using spreadsheets for your small business accounting, then it’s most definitely time for an upgrade. In fact, using spreadsheets is almost as outdated as working with pen and paper! Cloud accounting software can save you a huge amount of time and money, as well as protecting your data and maintaining more accurate records. For a relatively small investment, it offers a very large return.
Top Seven Tips for Accurate Cash Flow Forecasting
Do you want to know how your business will fare in the future? Apply the following methods to improve your cash flow forecasting.
Forecasting your company’s cash flow helps minimize potential risks and can indicate if the company is in a position to grow.
Proper cash flow management is a given. But monitoring all the money coming and going doesn’t always provide all the vital information you need to make accurate predictions.
The following tips and areas of focus should contribute to a better strategy for your forecasting.
Tip #1 – Estimate Future Sales
The accuracy of cash flow forecasting relies on multiple variables, of which arguably none is as important as the sales forecasts.
To improve accuracy, the estimate should depend on the following series of factors:
- Market share
- Resources
- Competition
- Pricing
Tip #2 - Estimate Profit and Loss
After your sales projections, you need to factor in the projected costs, too. This gives you more information about your profitability.
Of course, you have to know both the expected revenue and the cost of sales to estimate projected gross and net profits.
Tip #3 – Perform Monthly Sales Estimates
Some businesses don’t turn out enough data in a single week to make accurate projections. This happens because customers sometimes delay payments. Or, the money simply doesn’t come through in time to match the daily revenue on the books.
For that reason, it’s important to stick to monthly estimates with consideration to any known delays.
Tip #4 – Include Payments Due
Sometimes a business might have to pay for expenses, services, or purchases. And those types of payments usually find their way on P&L statements.
In some cases, however, a registered payment does not mean that the money is to leave right now. That money could leave the account only in the next month, for example.
Hence, you have to include projected payments in the cash flow forecast to further improve its accuracy.
The following are examples of payments due worth considering:
- Sales taxes
- Interest rates on loans
- Utilities
- Payroll deductions & taxes
Tip #5 – Compare with Current Cash Flow
One of the causes of inaccurate forecasting is unrealistic expectations.
It’s always important to check the forecast versus the current cash flow statement. Large discrepancies that no one can back up with facts may signal missing variables in the equation.
Tip #6 – Make Consistent Predictions
Doing a cash flow forecast once may not give you a degree of accuracy that small business owners hope to achieve.
One of the best ways to improve the accuracy of cash flow forecasts is to make it a habit. Updating your forecast as often as possible with new information can drastically improve its accuracy.
Furthermore, forecasting over long periods of time helps uncover certain trends. Again, it’s all data that can help improve future predictions.
Tip #7 – Account for Variable Costs
Payroll taxes and interest rates are unlikely to change from month to month. But other costs may change depending on the weather, season, and other exterior factors.
So when calculating costs, it’s critical to allow some wiggle room for the variable costs. Those are costs that may vary from month to month – utility costs, for one, and perhaps the phone bill.
Accuracy Comes from Good Data
It’s nearly impossible to create a realistic forecast without using all the right information. This is especially true when many things can happen in the future that will be out of your control.
But, using as much data as possible can only lead to more accurate forecasts. So keep collecting the right data and use it well.