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Rethinking Small Business Bookkeeping in the Age of Digital Banking

November 23rd, 2021Accounting & Bookkeeping

Small business owners spend too much time on their accounting and not enough growing their own businesses.

Part of the issue is that the accounting and bookkeeping methods we use today are archaic — literally. In 1458, Italian merchant Benedetto Cotrugli standardized the practice of bookkeeping and accounting with the use of paper journals and ledgers to track assets, receivables, inventories, liabilities, income, and expenses.

Nearly 600 years later, and despite that most of our transactions being cashless through digital banking, much of the technology we use today is still based on Cotrugli’s thinking and uses now unnecessary steps of the traditional accounting cycle. This process takes too long because most of the information is still manually entered, and the education required to use legacy platforms is extensive. It’s generally left to professional bookkeepers and accountants.

However, in today’s world of digital banking, bookkeeping doesn’t need to be that complicated.

Small businesses can save time and money by choosing a solution that is easy, adaptable, and gives them the information they need to make informed decisions.

Here are five key elements small business owners should look for when deciding what accounting/bookkeeping software to use:

1. A quick learning curve. No more long tutorials, please! There are small business solutions that require no accounting expertise. Enabling small business owners to quickly manage their books while getting unmatched real-time visibility of their finances allows for confident decision-making.

2. The ability to securely sync bank information and match categories to automate reconciliation. A cloud-based solution that syncs with your bank and credit card accounts reduces manual entry, reduces errors, and helps you keep up with your bookkeeping tasks on your mobile device.

3. Quick analysis. Viewing your bottom line in a matter of seconds is essential as our supply chains are being impacted on a regular basis. View cash balance, top expense categories, and total sales with a few taps. Look for a solution that automates essential accounting reports like P&Ls, cash flow statements, balance sheets, and expense reports. It also should include custom reports such as spending summaries, detailed tax categorization, and more.

4. KISS (Keep It Simple, Stupid). It’s a classic saying that still holds true today. A streamlined bookkeeping experience keeps things simple so owners don’t need a bookkeeper to run their books. Look for powerful mobile apps that allow you to keep business finances moving regardless of your location. Other capabilities to look for: ease of use, in-app guidance, and expert support when something gets out of rhythm.

5. Cloud storage for documents. Businesses still operate with too much paper. Look for software that turns your receipts, bank statements, invoices, and bills into digital, searchable documents and matches them with your banking data. Tax prep becomes faster and more accurate.

Using a bookkeeping product that allows small business owners the freedom to run their business and quickly look at their accounting to make tough or easy decisions can mean all the difference in the world.

This article was originally published in HOME BUSINESS Magazine ONLINE.  

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