What are the best free (or cost effective) accounting and bookkeeping solutions for your business?
Spoiler: it's not about doing the stuff in the photo above. Sorry.
Accounting is either your best friend or your worst enemy. As you start making and spending money you have to be on top of your accounts. They need to be organised and compliant with legislation. And they have to be accurate and true from the very first day of trading. You can't get this stuff wrong.
We've taken a look at some basic accounting systems that can actually save you money in the long run due to the fact that they don't cost much and still deliver huge results.
What’s the difference between accounting and bookkeeping?
But first, this classic question. It is a big distinction, and you’d be surprised how many first time business owners do not understand what the two entities are, and how they differ.
Bookkeeping is literally ‘keeping the books’. The daily financial transactions and expenses, as well as income, are kept ‘in the books’. Imagine you’re running a store and you have to keep a record of how many sales were made, as well as the cost of owning the business and hiring people to do jobs. All of that would be kept in an itemised from, either in a book or on a spreadsheet. A bookkeeper handles this professionally. Apart from counting up and itemising the inflow and outflow of money, the bookkeeper does little else. It is specialised, and purely for the purpose of keeping detailed records of what the business is doing on a financial level.
Bookkeepers maintain:
The recording of financial transactions
The production of invoices
The completion of payroll
The posting of debits and credits
Accountants work on a different level, and are there to look at the ongoing data that a bookkeeper will produce, the numbers he or she records. Then, the accountant steps in to create forecasts for growth, settle taxes, and, perhaps most importantly, help the business owner make decisions.
Accountants have responsibility for:
Preparing adjusting entries (recording expenses that have occurred but aren’t yet recorded in the bookkeeping process)
Preparing company financial statements
Analyzing costs of operations
Completing income tax returns
Aiding the business owner in understanding the impact of financial decisions
If you’re looking to manage any of these tasks yourself, think about the following services you can grab online.
Wave
A favourite for many small businesses and freelancers or consultants, Wave does pretty much everything you would want a small business bookkeeping/accounting system to do. And the best thing is it is incredibly easy to use. There is no intimidation here, just a clean, bright interface that walks you through anything remotely difficult.
If we were to choose one question every business should ask itself before it chooses an accounting system, we would say is it easy to use?
Everyone, from the guy who makes the tea to the entrepreneur behind the dream, can use Wave quickly and effectively. It has a ton of features and even allows you to run a decent sized payroll through it. And it’s free. And on top of that it has reminders, as well as integration with sites and services like PayPal.
Zoho Books
Zoho was never just about accounting, but ‘Books’ does have some excellent accounting services and apps. It’s data import facility is second to none, and the sheer number of features it has on top of basic bookkeeping is incredible. It’s not free though, and is arguably one of those systems that requires more than a small freelancer or entrepreneur to really make it worthwhile. But when it comes to details and features, like everything else Zoho does, Books is top quality stuff.
One other thing that Zoho Books has that places it above a lot of the competition is the customer care. The service you get when you ask for help is phenomenal. And the over 25 connected apps means that, as your business grows, your ability to keep tabs on projects and outcomes doesn’t suffer.
Xero
This is our final choice, and it is again not free. But we feel that this is not a problem, and should be expected with the quality of the support it gives to running accounts. Put it this way, it is connected to over 500 apps (if you can find yourself 500 apps to work with) so there is real ease of use here.
We liked the dashboard, because you can move it around (imagine a bunch of cards in front of you) so that it suits your needs. This allows for a decent level of customisation.
The big drawback is the lack of any opportunity to track billable hours. We are amazed that this is not included, and it immediately cuts off the freelancer market. You can work around this, but you will need a certain level of expertise to do so.
The verdict
While Wave doesn’t have all that Zoho Books has or the accessibility of aps that Xero does, the one thing it offers that places it above the other two is the fact it is 100% free. For a small business or an entrepreneur just starting out, it’s a no-brainer. Wave is our winner.
Bear in mind though, that none of these platforms replace the skills and insight a good accountant can bring to your financial affairs. These professionals cost money, but with the online economy (or ‘gig’ economy) you can probably find a good freelancer who will work on your books occasionally. With the big stuff, like forecasts and so on, we recommend a long term relationship with a good accountant.
But with these services, and especially with Wave, you can do the books pretty much all by yourself.
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