Many new small businesses do most or all of their sales and communication with customers online. So it's only natural that they would gravitate towards online bookkeeping services that can automatically collect their financial data, organize it, and analyze it. Accounting software makes many things easier, and free online accounting fits perfectly for these types of businesses, but that doesn't mean it is exhaustive in its ability to meet all of a small business' accounting needs. For the sake of convenience, organization, and the ability to ensure data accuracy, most small businesses should use both online and paper accounting strategies in unison.
The first part of this idea is obvious. Save time, get better accounting reports than you could produce on your own, and avoid basic math mistakes by using automated online accounting software that pulls transaction data from your online bank and credit card statements. It's fast, easy, and powerful. No small business should ignore tools like Outright unless they've outsources every bit of their bookkeeping and accounting (bad idea by the way).
The other half of the picture is not so obvious. But there are a number of reasons why a paper accounting system ends up being necessary for most businesses. The first point to remember is that the point isn't to create unnecessary or artificial redundancy, but rather to be willing to also use paper bookkeeping when the situation makes it necessary instead of fighting to completely avoid paper. You'll still buy stuff for your business with cash. That means paper receipts and needing to keep some record of the expense until you can manually enter it into the accounting software. If you are prepared for this and have a filing system in place that allows you to organize paper records and transfer such payment data at pre-set times, usually weekly or monthly, you'll decrease overall bookkeeping workload and minimize the chances of an expense not getting recorded.
The second reason is account reconciliation. At the end of each month you should check your credit card and checking account statements to make sure your accounting books and accounts match. Paper transaction records need to be part of the process for it to be effective because they are the originals, the proof you'd have to show to the IRS in the case of an audit. But you can't use them if you refuse to keep them around and attempt to force everything digital.
Accounting software is great. It's often more efficient, more powerful, and easier to use than traditional pen and paper bookkeeping strategies. But if you're unwilling to handle paper accounting when it's the easiest and most efficient way to record certain transactions, you'll be making more work for yourself when you should be merging the two approaches.
Online Accounting Software Is Awesome. But Sometimes You Can't Escape the Paper. So Don't Fight It. Combine Paper Accounting and Online Accounting at http://www.outright.com
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