Accounting Tools for Online Businesses

Business owners like to focus on providing the best product or service for the clients. Keeping track of expense accounts, chasing invoices, and making sure the paperwork is all there come tax time is the last thing on their mind. Larger companies can usually afford to have a specialist on staff that can keep track of these financial processes, but that will be a luxury for most.

Smaller companies, startups, and especially online businesses, are reliant on self-taught methods, spreadsheets, and the occasional help from an external accountancy and tax consultant.

This can be workable but considering the importance of accounting, not a structural solution. On top of that, accounting can be so much more than just balancing the books.

The financial data is crucial for business planning, cash flow calculations, and being able to act in the right manner at the right time. Online businesses can benefit significantly from finding the right accounting tool.

Making The Right Choice

A quick search online will show that there are a multitude of options, confusingly so. Essentially most accounting tools will have the basics in common, a place where you can track expenses and income, and will have the right options to deal with the tax submission. Beyond that, the possibilities widely vary.

At this point, the much-needed features and nice-to-have features of an accounting tool start to blend.

And for those who haven’t dealt with varying accounting related topics, it becomes hard to see what is needed and what’s not. This is why research or objective side-by-side comparisons are so important as most tools will require a monthly fee, and there will be a lock-in for a specified period. PieSync provides a comparison between two of the most popular accounting tools for small businesses and freelancers. These resources and a clear idea of what you need is vital to help you make the right decision.

The Many Faces Of An Accounting Tool

In a traditional sense, having an accounting tool can avoid a mad scramble when it’s time to file the taxes. Fines can be hefty when filing taxes late or improperly, so it’s of great importance the books are kept in order. Nowadays, an accounting system can be many things to different people.

General Ledger

Accounting usually refers to keeping track of expenses and income on (digital) paper. This is the traditional general ledger approach where you have a left and right side column to make sure you can balance everything at any given time. People can also expect the accounting tool to take care of invoices payable and received.

Invoices Payable & Receivable

This is the process of generating invoices for clients for the work done (or sometimes even quotes generated) and making sure those invoices are tracked for payment. This also includes the process of making sure payments to suppliers are registered and paid on time.

Payroll

The latter also can refer to payments made to internal stakeholders: employees. Payroll is an entirely different beast altogether, due to different employer-related charges and requirements, but not unimportant in the slightest.

Financial Administration

Speaking of charges, keeping track of VAT on invoices payable and receivable is another headache an accounting system can take care of. This also goes for keeping track of business expenses, especially for those companies where this type of decision is decentralized, and individual employees have discretionary ability to make purchases.

Payment Processes

It’s also not uncommon to have the accounting system extend to payment processes, where there is full integration with online payment systems (see also invoices receivable). It helps keep track of receivables and potentially reduce issues related to bad debtors.

Real-time Performance

And as sales data can be included, so can margin information. Especially for retailers, keeping track of financial performance per item can guide businesses in real-time in making stock decisions, especially those active on sales platforms such as Amazon, as the sale price can be altered on a daily basis.

Business Information

Beyond that, there is the option to take a business’ live financial data and input this to generate forecasts and scenario planning. Helping businesses make smarter decisions in the relevant context and at the right time. Some accounting tools will integrate with new business lead pipelines and can provide strategic insight into resource planning.

Deciding Who Is Involved

Knowing what you want to get out of the accounting tool will significantly help in creating a shortlist to narrow down the search. Another thing to consider is who will be using the tool. Freelancers obviously have only themselves to think of, but for small businesses, this gets a bit more complex.

C-suite users such as the Chief Financial Officer are usually interested in forecasting and cash flow questions. An operations planner is interested in the pipeline and future resource planning. Business buyers will be interested in revenue generated and the opportunity to make a more significant impact. HR will be interested in the payroll functionality.

Website developers want to know about the payment engine. A financial accounting system can impact an extensive network of skill sets. It could prove useful in considering all these roles and taking into account if the tool can provide access to multiple people in different roles.

Suitability For The Business

It’s also important to consider that there is no one-size-fits-all when it comes to accounting tools. Even a financial statement can differ from business to business. Most freelancers will provide a service, in which case there is plenty of common ground.

But as soon as the business is involved with a physical product being bought or leased, requirements will change. This also goes for online businesses.

Take a business that mediates and rents out cottages, for example, they would require specific elements related to occupancy and planning, also taking into account ongoing risk factors (and subsequent insurance payments). Or take the previously mentioned example of an online trading company that utilizes Amazon, supply and demand mechanisms, and price predictions are vital to get the maximum value from an accounting system.
Where some tools excel (and have real-life examples of implementations) in some industries, others will be better suited for other industries. Finding these examples or getting a tailored demonstration can provide critical information on how well a tool suits the business.

Connectivity

That’s not to say that everything has to be included in a single accounting tool. Consider the option to export data either via connectors or APIs. Flexible accounting tools will offer some form of connectivity to connect to other (legacy) systems. This can significantly increase the usability of the accounting tool.

If the tool itself does not have native solutions “baked-in,” look for either partnered connecter services or an API reference for developers. Being able to connect can significantly increase the value of an accounting tool.

Successful Implementation Equals Strong Support

An often overlooked factor in choosing the right accounting tool is support and training. Finding the right tool is a significant first step, but the implementation (and acceptance) will make or break the product. A tool that will provide great online support (FAQs, how-to guides, online chat, or call support) should be a plus.

Getting ‘as-is’ implementations usually prove themselves to be an expensive investment.

Tools to Consider

By now, you should have a clear understanding of how accounting tools can support your business’ financial success and what your business needs from a good accounting tool. There are a lot of accounting tools out there that are great contenders for most businesses, we have compiled a guide to the digital accounting tools that your business will most benefit from, why they might work for you and equally, why they might not.

Sage

Sage is considered one of the most robust accounting tools and for good reason. Offering options for customisation and an extensive set of financial tools, Sage is popular with all business types.

Pros

• Multiple subscription options
• Office 365 integration
• Comprehensive support
• Options for customisation
• Excellent inventory management

Cons

• No mobile app
• Poorly designed interface / No dashboard
• Does not offer time tracking
• Expensive subscriptions

Intuit QuickBooks

QuickBooks is another digital accounting tool that sits at the forefront. While it is one of the more expensive tools, it offers a lot of features to make accounting much easier. Giving users a lot of value for money.

Pros

• Well designed interface and ease of navigate
• Profit projection
• Customisable reports
• Thorough contact records and transactions forms
• Extensive payroll support
• New mileage tracking

Cons

• Poor online documentation
• Pricey subscriptions

FreshBooks

FreshBooks is popular amongst small businesses and freelancers. Its design is intuitive and offers a wide range of features.

Pros

• Time tracking
• Supports invoices, estimates and expenses
• Supports projects and proposals
• Overall very user friendly
• Mobile App
• Team collaboration tools
• Product and service records

Cons

• Limits to invoice customisation
• No quarterly tax estimates

Xero

Xero is celebrated for its affordability, making it an excellent option for those with smaller budgets, in particular, freelancers and small businesses.

Pros

• Affordable
• Online support
• Inventory management
• Custom report filters
• Reconciliation tools
• Integrates with payrolls software
• Expense tracking

Cons

• Mobile app needs improvement
• No phone and chat support

Zoho Books

If you’re looking for a good cloud based solution, Zoho Books is a strong contender. Great for small businesses, Zoho is also affordable and offers a range of financial tools but loses strength in its limited options for payroll.

Pros

• Well designed dashboard
• Payment gateway options
• Mobile app
• Price
• Extensive options records and translation forms

Cons

• To enable time tracking you must create a project
• The payroll feature is limited to California and Texas

In Conclusion

The monthly subscription price is a critical deciding factor and a logical starting point. However, there are other aspects that are equally as important, and in some cases more important, to consider before making a commitment:

1. What the system needs to do (e.g., accounting, invoices, payroll, payments, provide business intelligence)
2. If the system needs to provide access to multiple people in different roles
3. Suitability for the business (and proof of this)
4. Connectivity to other tools a business is already using
5. Great support and training options to maximize value

Taking these elements in mind will help businesses make smart choices when it comes to choosing the right accounting tool.

About the Author

Hugo Morris wasted no time to get into his role at Profit Engine after leaving full time education. He has spent a year in his role mastering the process of Content Creation. With a background in English language he has been able to use his skills to great effect to the point where he is the head of content creation at Profit Engine. For his pastimes, he is an avid lover of reading, music and travelling.